Budget `Firewalls' Lock in Old Priorities

THERE is a dirty little secret about the way in which the 1990 Budget Agreement fundamentally changed the way budget priorities are debated in Congress. I am not referring to the much touted shift away from a focus on budget deficits. What I am referring to is the way the 1990 Budget Agreement locked in the high levels of defense spending that were the hallmark of the Reagan ``revolution.''

At the end of October last year, budget negotiators arrived at an odd compromise that divides and caps government spending in five large areas of the budget - each to be handled as a totally separate account.

Unfortunately, for no good reason, under this arrangement savings in one account cannot be transferred to another. The ``firewalls'' that exist between these accounts - payments of interest on the debt, entitlements, domestic discretionary spending, foreign assistance, and defense spending - are completely impenetrable. To put it succinctly, the ``guns versus butter'' paradigm has been put to rest.

Spending is controlled through this arrangement by what is known as the pay-as-you-go principle. No spending can exceed a predetermined spending cap without requiring a commensurate reduction in other programs within that same account.

This requirement ties the hands of Congress because the pay-as-you-go principle applies only within accounts rather than between accounts. This means that even if we should identify an increased need for funding, a corresponding cut will have to be made in similar programs.

For example, any increase in veterans benefits will be paid for by farmers and Medicare recipients. To borrow an old expression, this is ``robbing Peter to pay Paul.'' There is no logical reason that the ``firewalls'' constructed in the 1990 Budget Deal should make it impossible to transfer savings in defense spending to the domestic account.

Furthermore, pay-as-you-go in this budget preserves roughly the same percentage of discretionary spending for domestic programs and defense that existed during the military buildup begun in the late 1970s. In 1982, the military budget was roughly 23 percent of all federal spending. For 1992, the administration has recently proposed a defense budget that could be trimmed.

In the best of all worlds, these savings in defense could serve as a down payment on repairs to the nation's infrastructure, compensation for the current recession, or to help our troops returning from the Middle East. However, the 1990 Budget Agreement proscribes, by law, these types of choices.

The 1990 Budget Agreement locks in a lapsed set of national priorities. While defense or domestic discretionary spending can be cut, there is no way to fundamentally reconfigure the budget without raising taxes.

There is no good reason that, without increasing the deficit or raising taxes, we cannot transfer savings in defense to other areas of the budget. The pay-as-you-go principle should be applied to the budget as a whole.

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