Counting on Pizza Lovers : Deficit Cutting an Exercise in Gimmickry and Illusion

WASHINGTON — In the endless struggle against the federal budget deficit, Congress is counting on pizza lovers to do their part.

Last month, the House approved a plan to require frozen pizza makers to tell consumers when they use imitation cheese. That is supposed to encourage buyers to demand pizzas with real cheese--thereby reducing the need for the federal government to purchase surplus milk products from dairy farmers.

The presumed savings to the government: $14.5 million a year.

Pizzas made with real cheese may be a minor example, but they are typical of the way Washington has dodged the task of bringing the government’s deficit under control. Time after time, year after year, both the White House and Congress have relied on illusory spending cuts and overly optimistic expectations for the economy to bring skyrocketing deficits back down to Earth.

In the first month of Ronald Reagan’s presidency, when the Administration sent Congress a radically new set of spending and taxing policies, the White House claimed that its approach would balance the budget by 1984. When the dust finally settled, though, the 1984 deficit was a stunning $185 billion.

Budget-cutters have been trying to stop the hemorrhaging ever since. But they have eliminated only one major program--revenue-sharing grants to cities--and shied away from the huge middle-class benefit programs, Social Security and Medicare.

Now, Administration and congressional leaders are trying to negotiate yet another deficit-reduction package, aimed at trimming as much as $30 billion from this year’s projected deficit of about $179 billion.

Most of the provisions are vague but apparently solid--$10 billion in new taxes and $5 billion in defense spending cuts, for example--although the pizza provision may survive, and negotiators are counting on $2 billion in new tax revenues from tougher enforcement by the IRS.

“We’re not kidding anybody now,” Rep. Leon E. Panetta (D-Monterey) contends.

Built-in Growth

Yet, it is one measure of the difficulty facing the budget-cutters that their package would do little more than offset built-in growth in the budget and hold this year’s deficit to about the $148 billion recorded last year.

Moreover, after Wall Street’s crash last month, the new proposal is likely to face far greater scrutiny than earlier packages. And with good reason. Judging from the record of the last seven years, both Reagan and Congress have consistently promised much more than they have delivered.

To be sure, all the earlier efforts have not gone for naught. To make up for the excesses of its 1981 income tax cut, Congress approved major tax increases in the election years of 1982 and 1984, despite strong initial opposition from the White House.

In addition, government officials worked together to ram through the largest tax hike in history in 1983 to help pull the Social Security system back from the brink of bankruptcy. And, in 1985, lawmakers finally forced Reagan to agree to rein in defense spending.

Without those decisions, former Budget Director David A. Stockman once estimated, the deficit would have reached more than $300 billion by now.

Public Indifference Cited

Nonetheless, neither Congress nor the White House has kept its promises over the years to restore the nation’s fiscal house to order. Stockman believes that that merely reflects the lack of importance the public attaches to deficit reduction.

“Despite their often fuzzy rhetoric and twisted rationalizations, congressmen and senators ultimately deliver what their constituencies demand,” he wrote in his 1986 memoirs after leaving the Reagan Administration. “ . . . What you see done in the halls of the politicians may not be wise, but it is the only real, viable definition of what the electorate wants.”

What the electorate wants, by that measure, is roughly $1 worth of government services for every 80 cents in taxes. And the White House and Congress have kept the fiscal merry-go-round spinning by relying heavily on gimmickry to produce apparent--but often not real--deficit cuts.

Although Congress is ultimately responsible for government spending, much of the blame rests with President Reagan, analysts contend.

Lack of Leadership Charged

“Legislators in Washington aren’t much different from anybody else--they always hope that things will turn out better than they do,” said Alice M. Rivlin, former director of the Congressional Budget Office and now an economist at the Brookings Institution. “But the reason so little has been accomplished is because there’s been a real absence of leadership from the White House.”

The seeds of the nation’s current budget problems were sown in the first weeks of the Reagan Administration. Not only did the White House plug part of a $130-billion spending gap by simply promising unspecified savings at some future date, but it adopted the famed “rosy scenario,” which predicted a painless transition to rapid economic growth exceeding 5% a year.

Instead, the Federal Reserve’s determination to bring inflation under control brought about a deep recession. As a result, the original White House projection of economic growth overestimated the nation’s output of goods and services by $700 billion over a five-year period, leading to a shortfall of $200 billion in government revenues from that one mistake alone.

“The economy almost never behaves as well as they project,” said Stanley Collender, a leading budget analyst at the accounting firm of Touche Ross & Co. “That’s the biggest problem in budgeting since the beginning of the Reagan Administration.”

Costly Economic Estimates

The deficit gap widened by an additional $58 billion in 1983 because of weaker-than-expected growth. Errors in economic estimates alone, according to the Congressional Budget Office, added an average of $23 billion annually to the deficit from 1980 through 1987.

Fiscal gimmickry--what budget analysts blandly refer to as “technical differences”--also added to the deficit, to the tune of about $15 billion a year, according to the Congressional Budget Office.

Another problem is that lawmakers have found it easier to resort to accounting maneuvers to accomplish their immediate goal of making next year’s deficit look better, even if it comes at the cost of making future deficits worse. Selling of government assets, such as loan portfolios, provides a quick windfall but aggravates deficits down the road because it eliminates a source of future revenues.

“They do it because they can’t do real things,” said Steve Bell, former staff director for the Senate Budget Committee and now a partner at Salomon Bros.

User Fee in Persian Gulf

Despite the new urgency resulting from Wall Street’s debacle last month, the fiscal gamesmanship has not ended. In the $23-billion deficit reduction measure that the House passed last month by one vote, for example, the Merchant Marines and Fisheries Committee included a plan to impose a user fee of at least $250,000 every time a U.S. naval ship escorts a commercial vessel in the Persian Gulf.

The committee contended that the United States would raise $135 million from Kuwait and other nations whose ships might need U.S. Navy escorts. But the committee has no authority to make foreign policy, and Collender said: “You’re never going to collect it.”

No wonder Rep. Pat Williams (D-Mont.), one of the congressional representatives at this year’s budget negotiations, remains gloomy about undoing seven years of avoiding tough decisions on the deficit. Williams told reporters earlier this week: “I feel like a repairman at Chernobyl.”