Budget Deal Forces Congress Into Real Cuts

THE rubber is starting to meet the road on the five-year budget deal struck last October. So far, the spending limits intended to force difficult choices on politicians appear to be holding fast as a few key Capitol Hill subcommittees begin assigning dollars to programs.

Less apparent to budget-watchers here is whether the limits are tight enough to bring federal deficits under control - the aim of the budget deal. The estimated budget deficit for fiscal 1991, which ends Sept. 30, is close to $300 billion.

The agonized five-month series of budget summits last year between Bush administration officials and congressional leaders saw President Bush swallow his no-new-taxes pledge and brought public confidence in government to a low ebb.

This month Congress has reached the no-nonsense phase where subcommittees of the House Appropriations Committee have been handed their dollar figures - $721.6 billion overall - to divvy up under the restrictions of last year's deal.

The process, still under way, has been difficult. ``I've never heard the folks on Appropriations Committees moan and groan the way they are this year,'' says Carol Cox, director of the Committee for a Responsible Federal Budget. ``Gramm-Rudman [the old deficit-cutting law] never ever made these folks make hard choices the way this does.''

Perhaps the most dramatic step taken under the new rules was a decision by the Veterans, HUD, and Independent Agencies Subcommittee of the House Appropriations Committee. Faced with tightly capped spending for veterans, housing, and other agencies, the panel eliminated the National Aeronautics and Space Administration's space-station project, saving $2 billion.

The space station is a high priority for the Bush administration, and the full House had approved full funding for the project only two weeks earlier; but the subcommittee had to make the dollar-for-dollar tradeoffs. The space station may yet be salvaged on the House floor, but it is in jeopardy.

The greatest change from the budget-business-as-usual of recent years is that Congress is barred from raiding the defense budget to fund domestic programs. From 1985 to 1991, Congress cut presidential defense requests by $152 billion, according to Ms. Cox. Most of that money went to domestic programs.

Now, discretionary spending is divided into three categories - defense, domestic, and international. Each category has its own spending cap. Funds can be traded only within a category.

As a result, says federal budget expert Allen Schick of the University of Maryland, ``there's almost a moratorium on new programs.''

``This is the first recession in my memory where we haven't had a single antirecession measure,'' notes Rudolf Penner, former director of the Congressional Budget Office and now an Urban Institute scholar. (Economist differ on when recession will end. Story, Page 4.)

Even those most skeptical of the budget deal say that the spending caps are likely to hold this year, and perhaps through the 1992 presidential plan, before it is re-opened for revision.

``It would be too embarrassing to both the president and the Congress after all the sweat they put into this to bust the limits so soon,'' says Stephen Moore, a budget analyst at the Cato Institute, a libertarian think tank.

Many skeptics point out, however, that no one should believe that federal spending is shrinking, even under the spending caps. The budget now being hashed out within the Appropriations Committee is not the first under the budget deal. The first budget-deal budget is that of the current fiscal year, 1991, which represents a 12.6 percent increase over 1990, an increase twice the rate of inflation.

The increases allowed in the 1992 budget are far more modest. But, says Robert Shapiro, an economist with the Progressive Policy Institute, a moderate Democratic think tank, ``we start with quite a stacked deck.''

``What's going on this year, and you're beginning to see some grumbling by the special interests, is that the increase in discretionary spending this year is not nearly as big this year as last year,'' says Dan Mitchell, a budget analyst with the conservative Heritage Foundation.

One weakness of the caps is that they deal only with discretionary spending. Leaving out defense, discretionary spending makes up less than one-fifth of the federal budget. The bigger and faster-growing portions of the budget are interest payments on the federal debt and entitlements, the so-called mandatory spending programs such as Medicare and welfare. The budget deal had slight impact on slowing such spending.

A potential loophole is the use by Congress or the administration of emergency supplemental funding to skirt spending caps. The major example so far is Operation Desert Storm, much of which will be paid for by allies.