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Taking the Easy Way Out:

Looking To 1984, Congress And Reagan Duck The Deficit Problem

Time cover

(TIME, September 26, 1983) -- Trust the approach of a presidential election to concentrate politicians' minds on the gravest threats facing the nation. After many months of bitter wrangling, for example, Congress and the Reagan Administration have at last reached a tacit understanding about what they will do between now and November 1984 to reduce those gargantuan $ 200 billion budget deficits. In a word, nothing.

What is more, there is impressive bipartisan agreement on the reasons for this course. The deficits may choke off the budding economic recovery, all right, but they may not do it -- or at any rate, the damage may not be noticeable -- until 1985. Meanwhile, there is no great public clamor for action. So with any luck, both tax increases and cuts in Government spending that might offend powerful groups of voters can be put off until after the elections. And if that turns out to be too late? Well . . . er . . . uh . . .

If all that sounds excessively cynical, it is not much more than a paraphrase of what political powers on both sides are saying. For the Administration, one senior official concedes: "We're done on the policy side. We're out of business. We're waiting for the election." In Congress, the Senators and Representatives who reconvened last week are likely to ignore their own command, expressed in the budget resolution they passed in June, to raise $ 73 billion in new revenue during the next three fiscal years. Any bill to increase taxes, says Tip O'Neill. Speaker of the Democratic-controlled House, "would have to come from the President or the Republican Party." As O'Neill well knows, the chances of that are zero. "Tip's point is that if the President is not willing to deal with this, he -- Tip -- isn't going to put Democratic heads on the block," explains a House Democratic leader. "That may be good politics, but it's bad economics."

As to spending, both houses last week passed a bill authorizing $ 187.5 billion in military expenditures in fiscal 1984, which begins Oct. 1. While that is $ 10.5 billion below Reagan's initial request, it still marks a 5% increase in outlays, after adjustment for inflation, over the fiscal year that ends a week from Friday. On the civilian side, the House voted to reverse some of the cuts in future spending on a variety of social programs that were made at Reagan's demand in 1981. The House added $ 1.6 billion to the total to be paid out beginning next fiscal year.

Once again, Congress has lagged so badly on passing actual appropriations bills, even for defense, that it will have to pass a "continuing resolution" to fund major portions of the Government in the new fiscal year. Almost certainly, such a stopgap measure would provide for spending higher than Reagan wants. That, in turn, would set the stage for a dismal charade: first a presidential veto, threatening theoretically to put the Government out of business, then anguished negotiations, and finally, a compromise maintaining spending at levels a bit higher than currently scheduled. What makes these prospects especially depressing is that there is strong bipartisan agreement on what should be done: a deal wherein the White House would swallow tax increases and a slowdown in defense spending, and Congress would quit opposing cuts in social spending.

Some formulas for such a trade exist. One is "the 3% solution" embodied in a bill sponsored by two Republican Senators and one Democrat. Under this plan, automatic increases in "entitlement" programs, such as pensions, welfare and veterans' benefits, would be held down to a figure three percentage points below the rise in the Consumer Price Index. Thus if prices rose, say, 5%, spending on these programs would be increased only 2%. Similarly, the indexing of income tax brackets scheduled to take effect in 1985 would be modified. Under present law, if prices rise 5%, a taxpayer's income woudl have to rise more than 5% before he was pushed into a higher tax bracket. Under the bipartisan bills even a 2% increase would cause many to pay more tax.

To put such a bargain into effect, however, would probably require a summit conference among Reagan. O'Neill and other congressional leaders. At present there is no push for one. Says California Democratic Congressman Leon Panetta: "The public does not translate the deficit into something that really bites them. We are going to have to get public support for action on the deficit."

Can anything break the impasse? Yes, say congressional leaders: an early fizzling out of the recovery, with a threat of new recession and another rise in unemployment, or a reignition of inflation, could build public pressure to force the Administration and Congress into quick action (i.e., before the election). Which amounts to saying that the economy will be saved from a long-range threat only if it stumbles into immediate disaster. Which is a strange way to run a country.





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