The government as we know it will survive the mandatory spending cuts ordered by the new Balanced Budget and Emergency Deficit Control Act of 1985 in this, the first fiscal year it applies. But all hell will break loose next year.
That is the opinion of departmental budget officers, congressional staffers and lobbyists who have been trying to figure out what Congress and President Reagan have wrought with their new statute, also known as Gramm-Rudman-Hollings, or Gramm-Rudman for short.
Further, they agree that everything from air traffic controllers to toxic dump cleanups to AIDS research to securities fraud investigations to national park maintenance could be severely cut in fiscal 1987 because agencies that do those things do not have exemptions from automatic across-the-board trimming.
Unless Congress voluntarily approves budgets and/or tax increases that dramatically close the annual budget deficit beginning next year, the automatic knife will slice deeply, line item by line item, without regard to priorities, through fiscal 1991, until the annual budget deficit is, by law, reduced to zero. To budget experts, that process is known, inelegantly, as sequestration. But even if Congress reduces the deficit voluntarily to avoid the automatic knife, the consequences are likely to be devastating for many programs and agencies.
In fiscal 1987 Congress and the White House can avoid the automatic knife by reaching agreement on a budget that would meet the requirements of the new act, with a deficit not to exceed $144 billion.
The White House is already trying to meet the goal as it prepares its fiscal 1987 budget. President Reagan said yesterday at a ceremony to celebrate the signing of the new law, "We will meet the Gramm-Rudman-Hollings targets in the budgets that we submit to Congress and we'll do it the right way -- by cutting or eliminating wasteful and unnecessary programs."
Leaks so far indicate predictable proposed cuts: elimination of federal grants for Amtrak and mass transit, including Washington Metro construction; elimination of the Interstate Commerce Commission; a 25 percent cut in the Job Corps; a major reduction in health research grants; cuts in Pell grants for low-income college students, student loans, and aid to the handicapped.
Regulatory agencies such as the Securities and Exchange Commission or the Consumer Product Safety Commission or the Federal Trade Commission, whose services are largely unseen by the public but also largely assumed to be effective, seem certain to take heavy budget cuts. That will translate into less enforcement because the only thing that can be cut is people.
Many agencies are projecting reductions in force (rifs) or furloughs. Loretta Ucelli, a spokesman for the American Federation of Government Employes, said that "Americans will get government by chance, not by responsible choice." Some federal employee unions are estimating that employment could be cut as much as 200,000 (from about 2 million civilians) through 1991 with the possibility of 30 to 50 federal programs being eliminated.
Cities and states, which have watched federal aid diminish steadily under the Reagan administration, will see that process continue. Grants for sewage treatment plants, roads and transit are among the areas certain to be cut.
"This is a final washing of the hands, in terms of saying there are no national policies that you as the federal government administer to local government," John J. Gunther, executive director of the U.S. Conference of Mayors, said.
Thomas L. Joseph, a lobbyist for the National Association of Counties, said, "With Gramm-Rudman in concert with the possible elimination of general revenue sharing, a lot of county officials are feeling that most of the services are being left in their laps and the federal government is taking a walk."
The cuts will be heavier in these discretionary spending programs because Gramm-Rudman protects the so-called big entitlement programs: Social Security, Aid to Families with Dependent Children, Medicaid and Supplemental Security Income, for the aged, blind and disabled. As those programs grow, the money to pay for them will have to come from other programs that are not protected.
Some early estimates suggest that the exemptions protect so much of the total budget that the unprotected sections will have to take cuts as high as 18 percent to meet the Gramm-Rudman targets. That assumes a $50 billion spending cut in fiscal 1987, but administration sources said they don't think the '87 cut will have to be that large.
Stephen Moore, a policy analyst for the conservative Heritage Foundation, said it is unfortunate that Gramm-Rudman contains those exemptions. "As far as I'm concerned everything should be on the table, Social Security as well as defense. That would be fairest," he said.
Nevertheless, Moore supports Gramm-Rudman because, he said, "It really changes the congressional budget process in a way I think will gear congressmen's thinking more to budget cuts . . . . Now, when congressmen introduce new spending, they will have to raise new revenue or reduce spending in another area. Instead of logrolling you have congressmen's pet programs competing against each other."
For Gramm-Rudman to work, however, Moore said, "You have to avoid the sequestration process." In other words, Congress and the White House have to agree on deficit-reducing measures before the knife automatically goes into action.
What if they don't?
Isabel Sawhill, an economist with the Urban Institute, has this scenario:
"If you had to come up with all of it out of spending cuts, with no increase in taxes, you really are going to see all the middle-class programs that were targeted last year, and more, put on the chopping block. It's pretty obvious that the Congress is once more going to reject deep cutbacks and terminations in programs that serve the middle class, so we're back to the same stalemate and the need to forge some kind of compromise package that involves some tax increases.
"My view is that the most likely tax increases to be proposed by the Congress would be a value added tax [sort of a national sales tax called VAT] or perhaps an excise tax on energy, but I also predict that the president will not go along, as he has not in the past, and at that point it would look like the automatic provisions would go into effect."
Once the word gets out about what that will mean, Sawhill said, "There will be some revolt against it and some attempt to come up with a last-minute compromise." If that fails, "then this horrible thing would go into effect. It really is a straitjacket, the wrong way to govern the country."
In the past, federal agencies have protected their budgets by playing the Washington Monument Game. It goes like this: if you threaten to cut the National Park Service's budget, it will threaten to close the Washington Monument on July 4 because there's no money for overtime. Congress will respond, find the money, and the monument will remain open.
Gramm-Rudman changes the rules. No matter how well agencies play the Washington Monument Game, the balanced budget act is so designed that many government programs are destined to be cut deeply.
There are new games available, however, and Washington sharpies are trying to find the rules. Suppose a congressional leader or appropriations committee chairman cares only about the Defense and Agriculture Departments. He can allow defense and farm appropriations bills to go forward for fiscal 1987 with some increases from 1986, then block action on bills for the departments of Health and Human Services, Labor, Transportation or Energy.
When the "sequester" comes it would be applied against the pumped-up figures for defense and farm spending and the straight-line figures for the other departments that were not lucky enough to get their own appropriations bill.
If defense and agriculture each got a 12 percent appropriations increase for fiscal 1987 over fiscal 1986, but all other departments were stuck with continuing resolutions that had no increases and the automatic cut was 10 percent, defense and agriculture would end up with a small increase but all other progams would be cut 10 percent.
It is impossible to project exactly what will happen now with a budget process so young. Everybody is doing back-of-the-envelope work, however, and here is a sampling from several departments of what could happen:
*Defense -- Secretary Caspar W. Weinberger, in a rare split with Reagan, opposed the antideficit legislation and has not come to terms with it. He has directed the military services to prepare fiscal 1987 budgets on the assumption Congress will approve a 3 percent real increase over the figure he hopes Congress will approve for the current fiscal year, $302 billion. Such a budget, according to many lawmakers, would be dead on arrival.
One rough Pentagon estimate is that it would take a $20 billion cut in the Defense Department's budget authority -- money available to obligate over several years -- to reduce spending next year by $5 billion. The ratio of money voted as budget authority to money actually spent on a weapon in a given year is about 4 to 1.
*Health and Human Services -- After exempt programs such as Social Security are excluded, the department has a budget of about $20 billion to $22 billion from which Gramm-Rudman cuts could be made, officials estimate.
The majority of cuts would have to come from the Public Health Service, including the major domestic discretionary health programs, such as the National Institutes of Health (NIH); the Alcohol, Drug Abuse and Mental Health Administration; the Food and Drug Administration, the Centers for Disease Control, the Health Services Administration, and the Health Resources Administration. NIH funds 6,100 research grants, so a cutback of 10 percent could mean 610 fewer grants.
*State -- Foreign aid is expected to bear the brunt of the new law. About $11 billion of the $15 billion program has been formally committed either by the administration or by Congress to specific countries for foreign policy reasons: to Israel, Egypt, Central America and South Korea, for example. The department also will have to trim its $3 billion operating budget, which maintains embassies, consulates and communications overseas.
*Labor -- The deepest cut in the $9 billion Labor Department budget could be a reduction of roughly 25 percent for the Job Corps, the residential job-training program that is highly regarded for its placement rate but criticized for its high per capita cost of roughly $15,000 a year. That would force the phasing out of some of the 107 residential training centers and a reduction in the 40,000 trainees it accommodates a year.
*Interior -- Budget officials assume that the president's Office of Management and Budget will first cut "lump money" items such as land acquisition for parks and refuges, a goal the administration has pursued unsuccessfully for five years. Next cuts would fall in the areas of research and construction, where the most vulnerable target appears to be the Bureau of Reclamation and western water projects.
*Education -- The most likely targets are Pell grants, guaranteed student loans, Chapter I aid for the disadvantaged, vocational education, aid to magnet schools, aid to the handicapped and migrant education programs.