This year`s battle of the budget has ended with both sides the worse for wear, the deficit as big as ever, and next year`s struggle, which promises to make the current one look like a picnic, only two months away.
The agreement reached between the Democratic-controlled Congress and the Republican White House is touted as reducing the fiscal 1990 deficit by $17.8 billion, though everyone acknowledges that about $3 billion is nothing more than accounting tricks. A more accurate savings figure is about $14.8 billion. And that includes $1.7 billion achieved by moving the Postal Service`s losses ”off-budget” so they don`t count.
But this package is better than some earlier versions, partly because of automatic spending cuts that were kicked into effect by the Gramm-Rudman-Hollings deficit-reduction law. Those cuts will remain in effect until early February, saving $4.6 billion. The problem with them, however, is that they are symbolic of the inability of Congress and the President to come to grips with the deficit problem. In the end, the tough choices that led to real reductions were made automatically by a law they all claim to hate because it`s government by robot.
The new agreement allegedly will bring the deficit down to the law`s $100 billion target for 1990. In reality, it`s about twice as high. Congress and the White House conspired to shove some current expenditures back into fiscal 1989-which ended Sept. 30-and push others into the limbo they call ”off-budget.” This is what happened to the $50 billion savings-and-loan bailout.
An Oct. 1 military payday was moved up to Sept. 29, saving this fiscal year a total of $3 billion in paychecks. Since the `89 deficit target already had been met-through similar shell games, of course-Congress and the Bush administration could pretend that this did not violate the Gramm-Rudman-Hollings law.
The biggest budget scam of all involves the Social Security Trust Fund. Its surplus totals about $60 billion and is growing rapidly. All of that money will be needed when the baby boom generation retires. But the federal government spends it as fast as it comes in to pay for regular operating expenses, writing IOUs to the fund. By the end of this fiscal year, the IOUs in the Social Security Trust Fund will total $223 billion.
It took great effort over the better part of the year to produce this puny budget package. What are Congress and the President going to do next year, when they will have to knock an additional $40 billion off the deficit to meet the Gramm-Rudman-Hollings target?
The same partisan positions that caused trouble this year are not going to go away. President Bush shows no signs of easing up on his ”read-my-lips- no-new-taxes” campaign pledge, which is looking more and more like the ideological underpinning of his administration. At the same time, Democrats were emboldened by being able to block, at least for the moment, a reduction in the capital gains tax that would help lower our high cost of investment money and bring long-range benefits to the economy.
Bush is determined to win the capital gains cut, which has passed the House. A vote in the Senate showed a majority agree with him, but Senate Democrats continue to oppose the legislation and have enough votes to stop it. The capital gains question will have to be settled before much of anything else is done about the budget next year. Washington keeps hoping there will be a ”grand deal” to reduce the deficit. A deal in which the Democrats give on a capital gains tax cut and the President relents on a tax increase would be a good place to start.
