Congress Tries (Again) to Cap Federal Budget

This could be the month a constitutional amendment to balance the budget of the United States finally passes Congress - radically reshaping how government works.

After nearly two decades of debate, supporters believe they are on the cusp of having the needed two-thirds votes to push the proposal through both chambers and send it on to the states for ratification.

Passage could ultimately lead to huge cuts in "discretionary" spending - in such areas as education, the environment, or national parks - and serious reform of entitlement programs such as Medicare and Social Security. But it would also reduce the billions of dollars the US spends each year on interest on the national debt.

Though Congress and the president are working on taming the federal deficit now, balancing the books under the amendment would no longer be a political choice but a legal mandate.

"It seems to me that only the balanced-budget amendment can save this country from being swallowed in debt," says Sen. Orrin Hatch (R) of Utah, in a preview of the kind of rhetoric to come.

Senate backers now believe they have 68 votes, one more than the two-thirds needed. The calculation in the House is less certain, though members say they're within a handful of votes of victory.

An early test of sentiment will come today as the Senate begins debate on the issue. Last session, a balanced-budget amendment passed the House but failed in the Senate by one vote. This time the Senate is going first, perhaps to give a boost to supporters in the lower chamber, where turnover of about 20 supporters has complicated chances of passage.

The bill's success pivots in part on an arcane accounting procedure - whether to include the Social Security Trust Fund in budget-balancing calculations.

At issue is the way Congress and the White House use Social Security moneys to "mask the true size of the deficit," in the words of Rep. Mark Neumann (R) of Wisconsin, and whether it is better to have Social Security on or off budget.

President Clinton, who cannot veto the amendment, cites Social Security in his jawboning against the measure.

Congressional stances on the proposal generally fall into three camps:

* Those who support it, a majority in both houses, including all 55 Senate Republicans and Democrats such as Sen. Carol Mosley-Braun of Illinois and Rep. Joseph Kennedy of Massachusetts;

* Those who support it only if Social Security is exempted, including a group of Senate Democrats who have introduced an alternative amendment and a group of 35 House Republicans who advocate a similar measure;

* Those who oppose it outright, mostly liberal Democrats.

Opponents say balancing the budget doesn't require a constitutional amendment. But supporters reply that Congress will not do so without it. They argue that lawmakers have balanced the books but once in the last 36 years (1969) and that laws mandating balance have been routinely ignored. They worry about the share of the federal budget eaten up by payments on the growing $5.3 trillion national debt. That share has increased from 7 percent 20 years ago to 15 percent today.

Those who want Social Security exempted say it's time Congress stopped using Social Security funds to lower the deficit. Their alternative "will require the fiscal discipline that is needed in this country, but it will not misuse Social Security Trust Funds to pretend the budget is in balance when it is not," says Sen. Byron Dorgan (D) of North Dakota.

The Social Security Trust Fund is somewhat fictional. The government invests its surplus in Treasury bonds, loaning the money to the general fund to be spent as the government sees fit. Conservatives and others who object to this say the trust fund contains only IOUs, which the government will have to begin redeeming out of the general fund in 2012, or whenever payments exceed payroll-tax income. Since Congress would probably fund Social Security out of general funds if necessary, the retirement program would squeeze discretionary spending, which could lead to calls for Social Security cuts.

With Social Security excluded, the deficit picture changes markedly. The 1996 deficit of $107 billion would be $172 billion if the $65 billion in Social Security funds were excluded from the budget, Representative Neumann says.

Senate majority leader Trent Lott of Mississippi says the Social Security argument is "strictly a political maneuver to try to find a way to give senators or congressmen a way to vote against something they know the American people support overwhelmingly."

Amendment opponents say that in a recession, the government would not be able to cut taxes and raise spending, actions that have been used since the 1930s to tame the business cycle. Sen. Robert Byrd (D) last week released a list of more than 1,000 economists, including 11 Nobel laureates, who oppose the amendment as bad public policy that could seriously damage the economy.

"To keep the budget balanced every year would aggravate recessions," the economists said in a joint statement.

The Constitution is not the place to decide fiscal policy, opponents say. "The Balanced Budget Amendment is a spineless dodge," Senator Byrd says. "It is purely politically motivated fiscal nonpolicy that trivializes our Constitution and endangers our system of checks and balances and separation of powers."

The Senate will debate the measure for several weeks, while the House plans to vote on Feb. 26. Should it pass, 38 states must ratify it within seven years.

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