Reagan’s fail-safe was designed to automatically trigger sharp cuts in government spending if massive deficits continued to spin out of control. But politicians couldn’t keep their hands off the fail-safe, adjusting it when precious programs were threatened, and ultimately they killed the provision. The cuts were “too enormous to be politically tolerable,” said Rudolph Penner, who at the time was head of the nonpartisan Congressional Budget Office.
Now a similar fail-safe is a hallmark of President Obama’s plan, one of several proposals that might be more unrealistic than the president acknowledged in his speech, outside analysts and economists said in interviews Thursday.
In the speech, which outlined a plan to reduce deficits by $4 trillion in 12 years, Obama called for cutting domestic and defense spending, raising taxes on the rich and boosting savings in government health insurance programs. The fail-safe would kick in if he and Congress don’t act, hiking taxes and cutting the budget but sparing Medicare, Medicaid, Social Security and poverty programs.
Some experts lauded Obama for suggesting serious steps to try to rein in the debt and said on the whole he provided a balanced approach. But they said not all his ideas are achievable in areas including health savings, taxes and cuts to defense and mandatory spending.
A tool to ‘focus’ parties
In the mid-1980s, Washington was consumed by fears that government spending was increasing far too fast.
A fight in Congress produced a landmark piece of legislation called the Gramm-Rudman-Hollings Act that required automatic cuts if the government didn’t reduce spending enough. It had prominent opponents, including then-Speaker Tip O’Neill (D-Mass.), who denounced it as “a gimmick” and “a disgraceful measure to subvert the Constitution.”
In an ironic twist, O’Neill’s principal domestic policy adviser at the time was a young staffer named Jack Lew, now Obama’s chief budget adviser.
But the fail-safe proposal was attractive to other Democrats, and it passed in 1985. It was eliminated a few years later when the economy went south and necessary cuts were bigger than anticipated.
James C. Miller III, who was head of the Office of Management and Budget under Reagan, said fail-safes work “until you pull the plug,” adding that in the current debate, “Congress and the president have their hands on the plug.”
Lew, for one, said times have changed.
“We had a challenge then, but it was nothing compared to the challenge we face here going forward,” he said in an interview Thursday. The fail-safe is “a tool that would focus the minds of all parties in the policy process to make sure that we don’t get to the point where the trigger needs to be pulled.”