Stop the Deficit Dodge
WHEN Congress revised the Gramm-Rudman-Hollings law in 1986, it made a deal with American taxpayers to whittle away at the embarrassing federal budget deficit until it is eliminated in 1993. Yet some politicians want to scrap Gramm-Rudman, welsh on their deal with taxpayers, and start from scratch. The argument for repeal is that Gramm-Rudman has weakened the budget process by encouraging accounting gimmickry and ``short-term thinking.'' This is certainly true to some extent; last year, for example, when the Postal Service account was in the red $1.8 billion, budget negotiators decided simply to move it ``off-budget'' and take credit for ``saving'' $1.8 billion.
But there is another side to Gramm-Rudman: It has constrained excessive spending and put a spotlight on Congress's tax and spending decisions. In all likelihood, the real problem for politicians is not that Gramm-Rudman isn't working, but rather that it is working much better than they would like.
Since the original enactment of Gramm-Rudman in 1985, Congress has grudgingly lowered the budget deficit from $212.3 billion to an estimated $123.8 billion this year.
Eliminating Gramm-Rudman because of the manipulations that accompany deficit reduction would be like throwing the baby out with the bath water. If reforms are necessary, Congress should concentrate on making it harder to circumvent the deficit-reduction legislation.
Meanwhile, Gramm-Rudman provides an attractive alternative to budgetary gimmicks. Its sequestration provision mandates across-the-board spending restraints if Congress fails to reduce the deficit to specified levels. In the past policymakers have balked at implementing sequestration because half the spending restraints were assigned to defense spending.
But with bipartisan consensus that defense spending can be lowered, policymakers have indicated they may be willing to rely on sequestration. By doing so, they will ensure permanent deficit reduction while making sure any defense savings are used to help lower the deficit.
The Bush administration displayed its willingness to use this power by ordering a temporary sequester that lowered last year's deficit $3 billion. Unfortunately, Mr. Bush did not leave the sequester in place for the whole year. If he had, it could have supplanted the accounting gimmicks and tax increases that plagued last year's deficit-reduction bill.
Many politicians hope to embark upon a new spending spree before the government's fiscal house is put back in order by the Gramm-Rudman law, and the expectation of a ``peace dividend'' only fuels their spending desires.
Sequestration provides the best hope that a peace dividend won't be wasted. If politicians boost spending but can't decide how to reduce the deficit from $100.5 billion to $64 billion by October, automatic, across-the-board spending restraints will do the job for them.
The period following the Vietnam war demonstrates what could happen to savings from reduced defense spending without a control mechanism like Gramm-Rudman. Between 1969 and 1976, defense spending plummeted from $243.4 billion to $153.6 billion, adjusted for inflation. But Congress spent these savings and more, increasing overall inflation-adjusted federal spending by $99.4 billion. The budget went from a $9 billion surplus to a $120.9 billion deficit.
If politicians do decide to change Gramm-Rudman, the only thing they should consider is strengthening it. One way they might do so would be to add a second sequester ``trigger'' that Congress would face in the middle of the year.
Under current law the deficit target must be met each October, as fiscal year begins. After that point, there is no restriction on spending. Adding a second date at which targets must be met would make it harder for politicians to avoid deficit limits.
Without a more potent spending-control device, such as a balanced-budget amendment to the Constitution, we shouldn't retreat from the Gramm-Rudman process that has gotten us halfway to a balanced budget.