Amid all of the uncertainties of a slumping economy and the possibility of war in the Persian Gulf, Congress will be advised next week that it must consider whether to abandon spending limitations contained in the $492 billion, five-year budget-reduction package it adopted after strenuous debate last year.
Congressional Budget Office director Robert Reischauer, according to sources, will release a budget-office forecast next Thursday that will indicate the nation's economy entered a recession last October and that it will continue at least through March of this year.
Reischauer would not comment yesterday, but under the terms of the budget agreement, a CBO forecast of two consecutive quarters of declining economic activity -- the shorthand definition of recession -- is one of the automatic triggers for congressional reconsideration of the budget pact's limitations for the current year and the next fiscal year.
In the budget agreement reached last year, Congress and the administration included an "escape clause" from restrictive spending limits in the case of war, or in the event of an economic slowdown. Costs for Operation Desert Shield are exempt from the limitations of the budget package, however.
As adopted in October, the legislation requires the CBO director and the director of the Office of Management and Budget to inform the Senate majority leader when their forecasts predict two consecutive quarters of economic contraction.
At that point, the Senate majority leader is required to introduce a resolution suspending the budget act for the rest of the current fiscal year and the next fiscal year. The law, however, only mandates consideration of aborting the budget package, not the actual scrapping of it.
The House majority leader may introduce such a resolution, but is not required to do so. If he does, it must be reported out of the Budget Committee within five days and go to floor of the House within five additional days.
Administration officials indicated yesterday they would oppose any change in the budget package.
Capitol Hill sources said Congress would hesitate to junk the accord unless the pace of the recession accelerates, but the congressional debate mandated by the legislation could afford lawmakers an opportunity to vent frustration over the state of the economy and the limits the accord places on anti-recession legislation.
Some legislators are expected to seize the opportunity to charge that the Federal Reserve Board has not been aggressive enough in its monetary policy to counteract the economic decline and to suggest that Congress push through job-creation spending programs or lower taxes.
Earlier, Michael J. Boskin, chairman of the President's Council of Economic Advisers, had said the economy probably had slipped into recession with a significant fourth-quarter decline, which he said was likely to be the sharpest drop of the downturn.
Although it's required to introduce a resolution for reconsidering the budget package, once the CBO provides the "trigger," Senate Majority Leader George Mitchell is expected to oppose suspension of deficit-reduction measures. Moreover, it is unlikely that President Bush would approve such legislation, if it came to him.
Originally, Reischauer was to have made his forecast on Thursday at a Senate Banking Committee hearing called to discuss "the impact of the gulf crisis on the economic and fiscal outlook."
But on Jan. 3, at the request of the administration, the committee notified witnesses scheduled to testify that the hearing would be postponed until Jan. 17. On Jan. 7, the committee altered the topic to a less-specific "economic and fiscal outlook" for the nation.
Sources say the Bush administration apparently wanted to avoid any discussion of the nation's economic readiness for war as it began sparring with Congress over its desire for a resolution authorizing the president to use force in the Persian Gulf.