New Congress May Go For Balanced Budget, But Will Idea Work?

GOP readies New(t) Deal, but White House and Democrats doubt it'll be great for society

CONGRESS was thinking about a balanced-budget amendment even before House Speaker-to-be Newt Gingrich was born (since 1936, to be exact).

Now the moment for this historic proposal may have arrived - with potentially dramatic effects in every corner of the United States.

Congressman Gingrich says when the new Republican House votes on the amendment, probably around Jan. 19, it will be ``our first smashing victory.'' Republicans have put the amendment at the top of their list of priorities.

Critics say clamping a lid on federal spending would be an economic disaster for the US. And White House chief of staff Leon Panetta expresses skepticism that House Republicans can make the $1 trillion in spending cuts he says would be needed if they want to reach all of their major goals - balancing the budget, cutting taxes, and boosting defense spending.

Will Congress really slash spending and eliminate programs popular with voters and business? Will three-fourths of state legislatures really be willing to approve the measure, as required for a constitutional amendment, knowing that it would likely mean a huge cut in federal money to states?

Activists on both sides of the debate are sharpening their rhetorical swords.

``A balanced budget can be done,'' says Pete Sepp, spokesman for the National Taxpayers Union. ``People underestimate the willingness of both parties to address entitlements.''

In congressional testimony last summer, the group's executive vice president, David Keating, argued that controlling spending now would mean that drastic measures could be avoided later. ``If we wait until disaster strikes from programs that have grown out of control,'' he said, ``the pain caused by changes will be far worse.''

American Enterprise Institute scholar Norman Ornstein sees two possible outcomes from a balanced-budget amendment, both of them leading to disaster. If Congress adheres to it, and balances the budget by early next century, what he calls ``mindlessly rigid fiscal policy'' would inevitably lead to economic catastrophe. If the amendment failed to balance the budget, Mr. Ornstein continues, then public cynicism over government would only deepen.

Over the years, Congress has considered various versions of the balanced-budget amendment. In the Republicans' Contract With America, the amendment requires ``that total outlays for any fiscal year do not exceed total receipts for that year.''

Deficit exceptions

A deficit may be incurred under the GOP plan if three-fifths of each house of Congress voted to approve it, if a declared war is in effect, or if the US is under a serious threat to its national security. The balanced-budget requirement would take effect in fiscal year 2002 or the second fiscal year after it is ratified, whichever comes later.

Under President Clinton, the deficit has fallen substantially, from $300 billion in fiscal year '92 to $255 billion in FY '93 to $203 billion in FY '94. Economists predict, however, that entitlements will still send the deficit skyrocketing next century if dramatic measures aren't taken.

The closest the Senate came to approving a balanced-budget amendment was in 1986, when it came within one vote of the two-thirds majority needed.

Last March, in its most recent vote, the Senate failed by four votes to pass the amendment. President Clinton opposes the measure, but as a constitutional amendment, it does not require his signature.

For members of Congress, voting for the amendment is the safe move; voting against requires an explanation that voters may not hear. Some senators vote for the amendment during years in which they face reelection, only to vote against it when their next election is years away.

Polls consistently show large majorities of the public favoring a balanced-budget amendment. But, says Martin Corry, director of federal affairs for the American Association of Retired Persons, when respondents are asked specifically if they would favor an amendment if it meant cuts in Social Security, Medicare, farm supports, and education programs, 70 to 90 percent reject it, across all age groups.

Possible spending cuts

The Contract With America does not spell out the spending cuts, but other groups have made suggestions. Last summer, Mr. Keating of the National Taxpayers Union said that a comprehensive package that would eventually eliminate all business and special-interest subsidies ought to be considered.

Keating proposed a list of 30 options for cuts, such as elimination of federal crop and dairy subsidies (at a savings in 1999 of $9 billion), an end to community development block grants ($4.8 billion in savings), and elimination of federal operating assistance funding for mass transit and reduction of capital grants.

Despite the tough talk about the deficit, the just-concluded election campaign has made it all the harder for Congress to make spending cuts, as members have sought to reassure voters they would not reduce favored programs.

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