When gridlock can be a friend

Don't fall off your chair when you read this ... but the United States Congress is heading toward greater fiscal responsibility. As things look now, it will have to operate with $7 billion less than anticipated in recent budget resolution talks for fiscal 2005.

And to what do we owe such restraint: Bipartisan agreement? Statesmanship?

No. Stalemate.

The political impasse is keeping legislators from aiming to spend even more money and draws new attention to an idea that used to work relatively well in the nation's capital: pay-as-you-go rules. The outcome of the situation may determine whether that budget tool gets revived intact or dulled.

The current stalemate involves the Senate. The conservative Republican leadership has not been able to reach a deal with four moderate GOP senators on a resolution that would set spending levels and "pay-as-you-go" rules for fiscal 2005. The leadership wants to make President Bush's tax cuts permanent and enact more tax cuts. The four moderates want to avoid deepening the already huge deficit.

Their votes, combined with that of Democratic senators, can block any budget resolution they consider damaging.

"There is gridlock," says Robert Bixby, executive director of the Concord Coalition, a budget watchdog group. "I'm not sure it will prevent deficits from going up. But it's important that Congress is aware that it has to take steps. The deficit is not going away by itself."

Without a Senate budget resolution deal, a House-Senate conference committee cannot come up with a budget reconciliation bill that, under Senate procedures, would need only 50 votes (plus Vice President Cheney) to pass. Instead, any new tax cuts or moves to make provisions of the 2001 and 2003 tax cuts permanent will need, under Senate rules, at least 60 votes to avoid a filibuster.

All this means that the Senate will operate on the basis of last year's budget resolution. It has a cap on spending of $814 billion, a bit lower than the $821.2 billion under the budget resolution that the House-Senate conferees were discussing.

Now, when considering the 13 appropriation bills Congress passes each year, any increase in costs in one area covered by each bill will need to be offset within the 13 appropriations subcommittees by a cut in another area covered by that bill, says Richard Kogan, an expert at the Center on Budget and Policy Priorities, a nonpartisan Washington think tank.

The Senate, in effect, would go back to using budget rules that governed it for 185 years prior to passage of the Congressional Budget Act in 1975.

That bit of fiscal discipline could last awhile. Probably no budget agreement for 2005 will get passed until after the November election, if then. In general, politicians hate making tough decisions about cutting programs or raising taxes just before voters go to the polls.

"It's not the end of the world if we don't have [a resolution] this year," Mr. Bixby says.

But the congressional standstill on a budget has a cost. "One of the problems with a big deficit is it has its biggest impact on the most vulnerable programs," Bixby adds.

These tend to be programs without the backing of powerful lobbyists and campaign contributors. That is, domestic "discretionary" programs that tend to benefit the poor and the middle class. These get trimmed while Congress favors more powerful lobbying groups.

The House, for example, voted last week on legislation providing corporate tax breaks that would add an estimated $278 billion to the deficit over the next decade. That's somewhat more than the $270 billion in corporate tax concessions approved by the Senate in May, reckons Citizens for Tax Justice, a Washington research group. The bills include measures that will offset most of the revenue losses from the tax "giveaways." But these "shouldn't be taken very seriously," holds Bob McIntyre, director of CTJ.

Deficits do concern Federal Reserve Chairman Alan Greenspan. During his confirmation hearing in the Senate Banking Committee last week, for a fifth term, Mr. Greenspan repeatedly called for Congress to restore a "pay-as-you-go" budget procedure as it existed prior to 2002. That rule required any new spending or tax-cut proposal to be revenue neutral. A tax cut in one area, for example, would have to be offset by an equal hike in taxes elsewhere or spending cuts.

As usual, senators of both parties were trying to press the famed central banker for a statement favoring their particular position. Democrats were pleased that Mr. Greenspan urged a "symmetrical" pay-as-you-go rule - one that applied to both spending and tax decisions as well as "triggers" that would end some tax cuts in a time of bad deficits.

They were less happy that Greenspan also spoke of "discretionary spending caps" that, Mr. Kogan and others note, could hit Social Security, Medicare, veterans disability compensation, the Supplemental Security Income program for the elderly and disabled poor, health and retirement programs for federal civilian and military personnel, and ultimately Medicaid and some other entitlement programs.

One immediate problem of the stalemate is the pressing need to raise the statutory limit on public debt. This is supposed to put a ceiling on the amount of bonds, bills, and other debts the Treasury can sell to the public to get the revenue necessary to pay the bills tax revenues fail to cover. That ceiling will soon be reached, and Congress may have to scramble to avoid a government shutdown.

But for the moment, the extreme level of partisanship in Congress means its members cannot hammer out a compromise budget. This, oddly, is helping to keep federal spending down. As one analyst puts it: "Gridlock is your friend."

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