Why Can't Those Deficit-Reduction Plans Reduce the Deficit?

March 14, 1993|By GILBERT A. LEWTHWAITE

WASHINGTON — Washington. -- "Balancing the budget," according to Ronald Reagan, that sage of the homespun one-liner, "is a little like protecting your virtue: You just have to learn to say 'No'."

But it seems that being so negative doesn't come naturally to either presidents or national politicians. So, even as Congress wields the budget knife with more vigor than President Bill Clinton dared to suggest, one has to wonder just how successful the latest attempt to cut the deficit will be.

A little history: The last time the federal budget was balanced was in 1969. Each decade since then, the federal deficit -- the excess of government outlays over receipts -- has grown. In the 1960s it was 0.5 percent of gross national product, the total value of goods and services produced in the nation. In the 1970s, 2.1 percent, in the 1980s 4.3 percent, and in the first two years of this decade it has been running at 5.3 percent.

There is a gathering momentum here that will take some stopping. Mr. Clinton is not the first modern president to dedicate himself to the Sisyphean task.

President Jimmy Carter was there before him, but ran up the national debt by a total of $227 billion between 1977 and 1980. The first term of President Reagan, committed to balancing the budget, reducing taxes and building up defenses all at the same time, added another $600 billion, and the second term $739 billion more. Under George Bush, one-time critic of Mr. Reagan's "voodoo economics," the nation's overspending got even worse, for a deficit total of $934 billion during his stewardship.

Now comes Mr. Clinton with the firm commitment to cut the deficit by $145 billion in fiscal 1997. His original figures turned out to be miscalculated, and Democrats in Congress have had come up with $67 billion in new cuts over the next five years to make an honest man of him and show their budgetary zeal in a period of public parsimony.

The bottom line is this: Under the current Clinton plan, even though the deficit should be cut increasingly each year through fiscal 1997, it will still actually grow by a cumulative $1041.4 billion, the highest four-year increase ever.

Why?

Why is the government so incapable of getting its books balanced? Why, despite all the good intentions of capping spending, cost containment, and improving efficiency, does the federal deficit keep on growing?

Historically, there have been obvious explanations for short-term debt: wars when the fighting machine has to be financed; recessions when government revenues fall and outlays on social programs increase.

But what has been happening over recent decades appears more persistent, less attributable to events than to process.

One theory is that the national purse strings are now held by so many committees in Congress that it's impossible to get them all pulled tight at the same time.

In a recent study for the Hoover Institution at Stanford University, John F. Cogan, deputy director of the Office of Management and Budget in the late 1980s, wrote: "As the committees observe one another dipping deeper and deeper into the pool of money they all must share, they begin to see the futility of practicing fiscal restraint and the wisdom of raising expenditures on programs within their jurisdiction.

"The result is each committee reaps the full political rewards of higher expenditures on its programs but bears only a portion of the adverse political consequences of financing higher expenditures. In the end, the available revenue pool is exhausted and the government must resort to borrowing from the public."

Studying the nation's budget over the past two centuries, Mr. Cogan found that the more tightly centralized spending jurisdiction in Congress, the smaller the deficit was likely to be. In the period 1790-1835, when single committees in both the House and Senate were responsible for appropriations, budget surpluses were the order of the day. Recession in the early 1840s produced a string of deficits before the nation returned to surpluses in the 1850s. The Civil War brought new spending pressures, but these were matched by fiscal restraint.

Then, in 1877, came a politico-economic watershed.

The House started stripping the Appropriations Committee of its central control, transferring the spending authority to individual standing committees. The Senate eventually did the same.

In 1885, during a debate on the dispersal of spending authority, Samuel Randall, who had been both Speaker of the House and chairman of the Appropriations Committee, uttered this prescient warning: "If you undertake to divide all these appropriations and have many committees where there ought to be but one, you will enter upon a path of extravagance you cannot foresee the length of or the depth of until we find the Treasury of the country bankrupt."

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