Because of an editing error, the fiscal 1991 budget deficit target set by the Gramm-Rudman-Hollings law was misstated Sunday. The target is $64 billion. (Published 7/10/90)
White House and congressional budget negotiators return to the bargaining table Tuesday hoping to reach in a few weeks an agreement to reduce the federal deficit.
But the difficult choices they face in deciding how to raise revenue and slash spending could transform the hoped-for sprint into a grueling marathon that stretches for months.
After long repudiating tax increases, President Bush's declaration last month that higher tax revenue is necessary energized the talks briefly. But the congressional recess suspended the negotiations.
Now, as the talks resume, the scheduled re-estimate of the deficit for fiscal 1991, which begins Oct. 1, may give negotiators a fresh prod.
Early next week, the White House Office of Budget and Management will produce a fresh estimate based on the latest economic data. In late May, OMB projected the shortfall for fiscal 1991 could be as high as $205.8 billion. That would be far higher than $131.8 billion deficit target specified in the Gramm-Rudman-Hollings budget law. If the deficit exceeds the Gramm-Rudman target, across-the-board spending cuts would be required.
To avoid triggering a recession by too great a cut in the deficit, bargainers have agreed to reduce the imbalance between revenue and spending by between $50 billion and $60 billion. Because that will not reduce the deficit enough, the $131.8 billion Gramm-Rudman target will have to be revised too.
That could happen as part of legislation raising the federal debt ceiling from its current level of $3.12 trillion. Lawmakers must increase the amount of borrowing the government can have outstanding before they leave for the month-long August recess or the government will default on its debt obligations.
Because measures to raise the debt ceiling must be enacted to avert such a default -- and because they symbolize the nation's fiscal woes -- they are magnets for amendments. It was a 1985 move to raise the debt ceiling above $2 trillion that was the vehicle by which Gramm-Rudman-Hollings was enacted.
To avoid a prolonged struggle over the debt ceiling this summer, budget negotiators hope to achieve at least the broad outlines of an agreement in the next few weeks.
"Everybody wants to get it done in time for the debt ceiling so they can get it passed," said Senate Budget Committee Chairman Jim Sasser (D-Tenn.). They also would like to get any tough deficit-reducing measures enacted as far in advance of the fall elections as possible.
"There's increasing pressure to produce something by mid- to the latter part of July," said House Budget Committee Chairman Leon E. Panetta (D-Calif.).
But other participants privately said politically tough choices could prolong the process. The effort is not made any easier by outside pressure groups that already have begun mobilizing opposition to options reportedly under consideration -- such as raising energy taxes -- even though some of them have not yet been discussed by bargainers.
Negotiators are determined, though, to reach agreement. "Not doing it poses more problems than doing it," said Rep. Bill Frenzel (R-Minn.), the ranking minority member of the House Budget Committee.
But Senate Minority Leader Robert J. Dole (R-Kan.) warned that it will be easier for negotiators to cut a deal than for the deal to be enacted by Congress. "It's going to be tough to pass," he said.
"The negotiations are much more serious" in the wake of Bush's tax statement, Panetta said. "Before that, everybody was still in the trenches waiting to see who would climb out first and get shot at."
The day after the president changed his approach, Democrats reciprocated by bringing up ways of finding savings in such programs as Social Security and Medicare, which have been viewed as under their party's watch and ward.
So far, nothing has been ruled out as part of a possible deal. "We've sworn in blood and stood and died to have everything on the table," Frenzel said. "It doesn't mean we're going to bless them. We're going to leave a lot of things on the table."
The most contentious areas will be taxes and cutting entitlement spending, where formulas in the law determine how much will be spent, according to bargainers. Entitlement programs, which include Social Security and Medicare, benefit everyone who meets certain qualifications.
On taxes, Democrats insist the resulting plan neither increases the burden on the middle class nor eases it on the wealthy. Republicans are adamant that personal income tax rates not go up.
Although taxes have not yet been discussed in detail around the bargaining table, House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) has held lengthy discussions with Treasury Secretary Nicholas F. Brady and OMB Director Richard G. Darman during breaks in the talks, according to participants.
The obstacles to reaching an agreement on a package of tax increases were evident last week. Energy trade groups continued their effort to block a broad-based energy tax and brewers began mobilizing opposition to an increase in the excise tax on beer.
On Thursday, the stock and bond markets slumped after the Wall Street Journal reported the administration was considering a tax on the sale of securities as a way of taxing the wealthy, even though the option has never been raised in the talks.
Reaction from senior-citizen groups has been just as negative to proposals to pare cost-of-living increases in the Social Security program and to find savings in the Medicare program.
As an alternative to a cut in the Social Security program, bargainers brought up the possibility of raising taxes on the Social Security benefits of upper-income taxpayers. Officials of some senior-citizens groups said that could be an equitable way of having the elderly share the burden of deficit reduction.
The annual convention of the National Council of Senior Citizens is to vote on the issue, which may give lawmakers an indication of how feasible it will be.
Some lawmakers do not expect a budget plan to be in place by the Oct. 15 Gramm-Rudman-Hollings deadline and still others predict a lame-duck session after the elections to deal with it.