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Deficit Reduction? No, Just Blather


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DEFICIT REDUCTION? NO, JUST BLATHER

The convoluted federal budget process, Office of Management & Budget Director Leon E. Panetta says, "gives the American people the impression more of anarchy than of logical decision-making." It's not hard to see why. Just look at the grab bag of budget-cutting schemes Congress and the White House are about to implement.

Desperate to show that they're tough on the deficit and bound to live up to the President's August promise for further spending cuts, Democrats have hit upon a series of gimmicks: a new package of modest spending recisions, a town meeting, a deficit trust fund, and that old chestnut, the balanced-budget amendment. None is the answer. "People in government keep insisting that if they just tinker a little bit with the process, the whole problem can be fixed, but that's not true," says Stanley Collender, a budget expert at Price Waterhouse.

RUSES AND RHETORIC. With the fiscal year just weeks old, the White House is busily looking for spending cuts. But the Administration is aiming low, seeking perhaps $10 billion in cuts this year--and using outdated spending projections to exaggerate the savings. Both the Administration and Congress, meanwhile, are avoiding hard decisions, all the while hoping the public will buy their hard-line rhetoric.

Consider the town meeting Clinton promised Representative Marjorie Margolies-Mezvinsky (D-Pa.) so that she would cast the deciding vote that enabled Clinton's budget to squeak by the House in August. The President, with Cabinet officials in tow, will visit her largely Republican suburban Philadelphia district on Dec. 13. The topic for the meeting: the need to cut entitlement spending, which now comprises about 50% of the entire federal budget and provides a blank check to anyone who fits the age, income, and employment criteria. Lost amid the hot air will be the reality: Trimming entitlement spending means making hard cuts affecting millions of people.

Nor should the public be shocked to learn that Clinton's new Deficit Reduction Fund is worthless. As the 1994 fiscal year began, Panetta directed Treasury Secretary Lloyd M. Bentsen to squirrel away $46.8 billion in a special account to be used to buy back some of the $4.4 trillion national debt. Trouble is, with the federal government running a $253 billion operating deficit this year, Treasury will have to reborrow the $46.8 billion from the public to fill the budget void created by the new fund. It's like paying off your MasterCard bill with Visa. Net savings: zero. But there may be a cost for policymakers once voters figure out they've been had again. "People in Washington always seem to focus on the low repute in which politicians are held, but they seldom consider the reason--that they try to deceive the public," complains Carol Cox Wait, president of the nonpartisan Committee for a Responsible Federal Budget.

CAVEATS. Another hoax, the balanced-budget amendment--is also back. This time, it may actually pass. Senator Paul Simon (D-Ill.) says he has all but lined up the necessary two-thirds of the Senate for a vote on the measure as early as late October. The House is considered a slam-dunk.

Sounds good, sure. But such an amendment is unlikely to work. Dozens of state legislatures now backing the measure are likely to rescind their support when they realize that federal aid to states will be cut first. Moreover, some legal scholars consider the amendment unenforceable.

The Clinton Administration is managing to restrain the deficit in the near term through tax increases and spending cuts. But the long-term problem remains (chart). Meanwhile, the fancy constructs appear never-ending, the creativity of the political process boundless, the ability to borrow bottomless. The real trick would be to exhaust the gimmickry before we run out of credit.Paul Magnusson


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