Pay-as-You-Go Pact Keeps Congress’ Agenda in a Box

WASHINGTON —  By the middle of the month, the Second Harvest Food Bank in Watsonville, Calif., is inundated with frantic phone calls from poor families with small children. They have already exhausted their food stamps and they need emergency donations to make it to the next allotment.

“I get a box of food from the food bank, and that gets me through to the beginning of the next month,” says Lisa Doughty, a single mother of two. “If I didn’t have the box of food, we’d only make it about two weeks out of the month on food stamps.”

Rep. Leon E. Panetta (D-Carmel Valley) thinks he knows why: The government has not updated food stamp benefits to keep pace with inflation. Panetta is sponsoring legislation to raise spending for food stamps by $5.3 billion over five years so Americans like Doughty can cope.

But as chairman of the House Budget Committee, Panetta also knows that his food-stamp bill is not going to get any attention in Congress until he finds a way to pay for it--thanks to the stringent discipline of last autumn’s budget agreement, which he helped to craft.

Under the accord, all new spending proposals that Congress enacts must be offset by reductions elsewhere or new taxes to help pay for them. “It’s frustrating, but when you try to do something new, you run smack dab into the budget agreement,” Panetta says.

Panetta’s food-stamp bill is just one of dozens of new spending initiatives languishing in Congress this year, thanks to the massive federal deficits that led to the budget accord that forced a fiscal straitjacket onto Washington.

On issues ranging from health care to unemployment benefits to child nutrition, lawmakers are finding it nearly impossible to dole out new money to help address the nation’s most urgent problems.

As a result, Congress--and especially its Democratic leadership--finds itself virtually paralyzed.

“This place lives and breathes on new initiatives,” Panetta says. “Before (the budget agreement) you didn’t have to figure out how to pay for those initiatives. But now the budget agreement is really biting.”

Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, agrees. “When you have a pay-as-you-go system, it kind of dampens the appetite for new programs,” he says.

But the impact goes beyond mere budgetary infighting. Because there is no money available, Democrats in Washington are finding it virtually impossible to develop an economic program of their own this year--despite a lingering recession and White House inaction on economic policy.

That, in turn, is crippling their party’s ability to move beyond mere rhetoric to mount a serious legislative campaign to aid the working poor and the middle class--and to develop an agenda that could be used to paint George Bush by contrast as the protector of the rich.

And even though the Democrats are grumbling about the budget accord, most party leaders say they would strongly oppose any attempt to water down last autumn’s pact, for fear that Republicans would resurrect the charge that they cannot control spending.

Senior Bush Administration policy-makers can barely conceal their glee over the box Democrats find themselves in on spending. “That was the point of the budget agreement,” Michael J. Boskin, President Bush’s chief economic adviser, says with a smile.

Still, it was a box of the Democrats’ own making.

Frustrated with the fiscal chaos bred by the Gramm-Rudman law--which contained incentives for both Congress and the White House to juggle the deficit figures--Democrats were willing last fall to chuck the measure and develop a more effective budget-cutting process.

Under the new system, Congress just ignores the size of the budget deficit and sets five-year targets for the amount of spending cuts on which Capitol Hill and the White House can actually agree. That makes fudging far more difficult.

To hold spending in check, the accord sets separate caps on each major spending category, and prohibits lawmakers from shifting funds from one section to another. Any new initiatives must be offset by reductions elsewhere--or new taxes--so they do not increase the deficit.

What’s more, new taxes can be raised only to finance improvements in mandatory domestic spending programs--such as Medicare, food stamps or aid to dependent children. They cannot be voted in to provide funds either for “optional” domestic programs or for the Pentagon.

But the White House and many Democrats are opposed to any tax hikes this year, making it nearly impossible for Congress to enhance the mandatory “entitlement” programs.

Rep. Thomas J. Downey (D-N. Y.), another Ways and Means Committee member, is finding that out the hard way. After introducing an anti-recession bill that would extend unemployment benefits an extra 13 weeks, Downey was told he had to find a way to pay for the new “entitlement.”

His solution was a provision calling for a virtual doubling of the employer-paid payroll tax that finances the unemployment trust fund. But Downey admits that the need to underwrite the bill with a new tax hike virtually kills any chance that his measure will pass.

Almost every new idea coming out of Congress is running into a fiscal stone wall.

That has not stopped leading Democrats--including several potential presidential contenders--from lining up to offer new economic policy initiatives, with “tax fairness” and recession-fighting as their rallying cries.

Sen. Albert Gore Jr. (D-Tenn.) was first to offer such a plan this spring. A potential presidential candidate for 1992, Gore proposed a broad program to cut taxes for the middle class--offset by higher taxes for the rich.

His hope is to revive the class-based issue of “tax fairness” that the Democrats tried--unsuccessfully--to seize last year when they proposed a higher tax rate for millionaires. “This is one of the best things the country could do to help families,” Gore contends.

A few days later, Democratic congressional leaders announced a new economic initiative designed to counter what they charged was the failure of the White House to deal with the economic slump.

But their plan was short on specifics, instead merely outlining broad areas such as medical care, education, tax relief and unemployment benefits that Democrats want addressed before the 1992 campaign. It smacked more of presidential politics than of a serious legislative effort.

But even leading Democrats quietly acknowledge that their plans do not have much chance of passage this year--which will make it all the more difficult for them to claim credit for stimulating the economy and pulling the nation out of recession.

And Rostenkowski, for one, is openly criticizing the leadership’s vague initiative, insisting that he warned the others not to announce the new plan when they recognize that it does not have a chance of getting through the budget-strapped Congress.

The Ways and Means Committee chairman contends that such promises only reinforce the public image that the Democrats are not fiscally responsible. Instead, he says, the leadership should have saved the rhetoric for next year’s Democratic Party platform.

“We in the Democratic Party have been promising more than we can deliver,” Rostenkowski complains. “With the budget agreement, the candy has been taken away. So now (the Democratic leadership) is switching to artificial sweeteners.”