AN UGLY FACT is slowly dawning on Congress: Gramm-Rudman-Hollings takes the fun out of being a legislator.
The new era of budget austerity poses obvious problems for 535 people who derived much of their political sustenance, until recently, from using the public's money to shower the landscape with highways, dams, missiles and other goodies.
Austerity reduces their legislative opportunities, and perhaps also their reelection prospects. As they enter the new era, activist members of Congress face the grim prospect of becoming what former Senate Majority Leader Howard H. Baker described as 18th Century "citizen-legislators," who need only spend a few months of the year in Washington doing the equivalent of legislative gardening.
Human nature -- and Congress -- being what they are, congressmen and senators will not willingly accept such a passive role. I venture a prediction: Unable to use the budget to make its influence felt, Congress will rediscover some recently discarded tools and pick up some new ones. Specifically, Congress will:
*Move back into the regulation business from which it has been withdrawing;
*Increase the use of the tax code to accomplish social goals -- negating one of the ends of tax reform even before the new tax law is enacted;
*Touch the untouchable and require means tests for entitlement programs such as Medicare and Social Security, and,
*Move to reduce defense spending by finally cutting the number of American troops in Europe.
The underlying reason for this redirection of Congressional attention is the growing, inexorable loss of discretion in the federal budget that has been building for several years. The Reagan-era deficits have made it far worse. Regardless of how we deal with the deficits in the near future, whether by Gramm-Rudman automatic spending cuts, inaction or other alternatives, the problem will grow for the next several years.
As our political leaders have focused on the immediate problem, the here-and-now of deficit reduction, they have tended to ignore the forest for the trees. The forest is shaped by one simple fact: Three basic items account for 85 percent of the federal budget -- direct benefit payments to individuals, defense and interest on the debt -- and they're all growing. Everything else in government, what we can call discretionary domestic spending -- from the FBI to food stamps and farm programs, from bridges and dams to air traffic control and the White House -- accounts for only 15 percent of the budget and is shrinking.
As a result, Congress has less flexibility and freedom to legislate. Benefit payments, or entitlements as we commonly call them, are relatively fixed; they are formula programs with monthly checks. Interest payments are beyond the direct control of government, short of default. And, despite the talk about the "defense pork barrel," very little in the defense budget can be easily manipulated by Congress to benefit particular districts the way public works projects can. Weapons system subcontracts tend to be arranged and distributed by contractors, not by congressional subcommittees.
By the same token pressure is growing to cut or eliminate military bases, another time-honored vehicle for funneling money to particular localities.
What is left, the discretionary domestic component (a good deal of it, from the FBI and Coast Guard to air traffic control or the IRS is not really discretionary at all) is the government's main route to solving or coping with problems. It is the life's blood of Congress -- and it is being drained away.
The problem has been germinating for several years, as we have directly and indirectly, intentionally and unintentionally, altered the nature of the budget. The changes have come in several seminal stages:
*The Johnson Era: Guns and Butter. In the heyday of the Great Society, 1967, discretionary spending was maintained at about one quarter of the budget, roughly the same as entitlement programs; meanwhile, in the midst of Vietnam, defense was a staggering 43 percent of the budget.
*The Nixon/Ford Years: Down With Defense, Up With Entitlements. After Vietnam, the federal response was to rein back defense's share of the budget -- from the Johnson high to one-third of the total by 1972, and barely more than one-fifth five years later. At the same time, the budget slack created was more than taken up by entitlement programs like Social Security.
Entitlements jumped in two waves: first, in the late 1960s and early 1970s, through massive annual increases voted for Social Security, as entitlements rose from 26 percent of the budget in 1967 to nearly 39 percent by 1972. Alarmed at their own largesse, Congress and the president reacted by insulating the programs from further direct political pressure through the well-intentioned reform of indexing entitlement payments to inflation. That led, ironically, to the second wave of growth: Fueled by inflation, entitlements skyrocketed to 46 percent of the budget by 1977.
*The Carter Years: Growing Interest. The Carter White House stabilized defense and entitlements. But largely because of soaring interest rates federal interest payments, which had been between 6 and 7 percent of the budget for decades, jumped to nearly 10 percent by 1981 -- again coming at the expense of discretionary spending.
*The Reagan Era: Discretion Disappears. The policy and budget changes of the previous two decades set the stage for Reagan-era budgets. The steep increase in defense spending to redress the military cutbacks of the '70s have moved defense back up to a higher cut of the budget pie. The defense hike, though, has not been accompanied by a corresponding decline in entitlements; they have stayed roughly stable at 45 percent of the budget. Meanwhile, the largest deficits in history have caused interest payments to increase sharply as a proportion of the budget. The victim of sharp increases in defense and interest costs combined with no change in entitlements -- once again, discretionary domestic spending.
For the next couple of years, Congress will be preoccupied, to say the least, with the problems of the moment, including simply keeping government afloat and the heart of key programs alive. But before too long -- say, by the next presidential inauguration -- the broader problem of bare pockets will begin to loom over lawmakers looking for something to do. The next major era of policy-making will begin.
In stark terms, Congress will face two choices. One is to embrace Howard Baker's vision: become "citizen legislators," with entitlements on automatic pilot and most key defense decisions made for the next generation, and preside passively as part-time caretakers over government.
That alternative hardly seems likely. Legislators of every political stripe see their role as making policy, responding to problems, influencing American life. Consider, for example the Conservative Opportunity Society, the "New Wave" Republicans led by Rep. Newt Gingrich (R-Ga.). As Gingrich has articulated the conservative credo, the federal government shouldn't become impotent or inactive. Instead it should redirect its activity away from unproductive social services and income maintenance, and toward growth-oriented, investment spending -- like space stations, scientific research and new infrastructure.
Add Gingrich and his colleagues to activist liberals and to centrists of both parties, and you have an overwhelming consensus in Congress for an active, discretionary, problem-solving role for the federal government.
Given its desire to do something and no money to spend, Congress will move on multiple fronts to find more routes to action.
The first and most obvious is regulation. With less and less money to spend, the natural impulse is to regulate what is left more and more carefully. In many areas, from health and safety to the economy and the environment, regulation can be a substitute for direct expenditures. Instead of appropriating public funds to clean up the environment, for example, Congress can direct private industry to stop polluting.
Second, we will see growing pressures to use the tax system to shape social policy. This impulse definitely is not new -- but the whole thrust of tax reform has been to neutralize the tax code as a shaper of social policy, by reducing marginal rates and eliminating tax preferences. By the 101st Congress in 1989-90, I expect that thrust to be reversed. Democrats and Republicans alike, from Rep. Dan Rostenkowski (D-Ill.) to Sen. Bob Packwood (R-Ore.) have spoken out for the efficiency of the tax system as a vehicle to shape such policies as health benefits and capital formation.
Thus, even before tax reform has been passed and implemented, the pressure is building for new tax policies and more creative tax preferences. An end to inflation indexing of taxes -- and thus a return to an inflation premium for lawmakers in tax revenues -- will also be pressed.
The third route to finding new discretion is to find ways to reduce the big-ticket items that remain, and to use the savings for more discretionary spending. That means serious and sustained attempts in the coming decade to reduce entitlements and defense. The entitlement issue of the 1990s will be means-testing -- i.e., tailoring direct benefits like Social Security and Medicare to need.
For most lawmakers, the issue now is a no-no -- a direct assault on motherhood and apple pie. But already, such politicians as Gov. Bruce Babbitt (D) of Arizona are talking directly about means-testing. Babbitt and others will bring the issue to the surface in the 1988 campaign. As lawmakers come to realize that, down the road, tinkering with cost of living allowances (COLAs) won't do the trick, means-testing will emerge as a full-blown policy option soon thereafter.
We are already seeing pressure to cut back defense, but substantial real growth has been built in by the decisions made in the Reagan term so far. Finding a substantial target that can pare the defense budget to free money for other things will require moving beyond the relatively low-yield areas of waste, fraud and abuse and procurement reform. Practically speaking, that will leave only one inviting option: reducing our presence in Europe.
Forty years after the war, the United States maintains 326,000 troops in Europe, along with roughly 200,000 civilians in support. For several years, dating back to Mike Mansfield's tenure as Senate Majority Leader in the mid-'70s, the pressure to reduce our presence in Europe has been there, albeit with the purpose in part of convincing our allies to pay a fairer share of their own defenses. In recent years, Sen. Sam Nunn (D-Ga.), the most respected defense analyst in Congress, has led the charge with a bill to cut our forces in Europe sharply (by up to 90,000) unless the Europeans agree to carry a heavier share of the burden.
The direct personnel cost of maintaining all these people in Europe is roughly $20 billion; the indirect cost, including personnel and support back home is more than double that. If we cut our troop commitment by, say, a third and phased those troop and personnel cuts out of the service entirely, eliminating as many job slots as possible, the savings would be at least $10 to $15 billion. "That would still leave us with a trip-wire to deter the Soviets from invading," says one knowledgeable proponent.
Whatever the merits of the case, the incentive to free up money from defense to serve other legislative objectives is certain to add new supporters to those that now exist -- and they are already a substantial number. Despite strong European opposition, I expect the drumbeat for a cutback in Europe to build -- and increasingly to move away from the connection to spending by our allies.
None of these policy changes or directions will come smoothly or easily. But the pressures toward them will increase as the realization builds in Congress of its growing inability to respond to public demands for action in domestic policy, whether it is concern about educational standards, flying safety, the threat of terrorism, toxic wastes and acid rain, drug use and abuse, a natural disaster, or any of a thousand other problems that can and will arise. The response to those pressures -- the counter to the Reagan Revolution -- will soon be upon us.
The next president, whoever that may be, will have to cope with an era of re-regulation, aggressive, social-oriented tax policy, and new, and very different approaches to both entitlement programs and defense -- unless he can convince 535 disbelievers to agree with Howard Baker.