US steers towards fiscal 'train wreck'
Tuesday 12 September 1995
Barring changes of stance almost unthinkable in this season of presidential- election manoeuvring, the two ends of Pennsylvania Avenue are on course for a "train wreck" - failure to pass a 1995/96 budget by the appointed date of 30 September. The result will be at the least a partial shutdown of the federal government, at the very worst a default by the Treasury and chaos in international financial markets.
As Senate Finance Committee chairman, Mr Packwood would have been pivotal in the toughest autumn budgetary confrontation in years. His gifts of compromise might have hastened agreement on the 13 appropriations bills releasing money for spending in the new fiscal year starting next month and on the subsequent jumbo "reconciliation bill" which sets out the tax and spending cuts to achieve the Republican goal of a balanced budget by 2002.
Small wonder Bob Dole, the Senate Majority Leader, tried to secure a stay of execution permitting Mr Packwood to see the budget process through. But the Democrats refused. Last weekend he gave up his chairmanship, and will be replaced by William Roth of Delaware, a conservative far less suited to forging budget consensus, first between Republican moderates and hardliners, and with the White House thereafter.
The "train wreck" could come at each, or all, of three moments. The first, virtually guaranteed, is 1 October, when Congress will not have completed the appropriations bills to be sent for President Bill Clinton's signature. The second, almost equally sure, comes a fortnight or so later, when the bills have been sent to the White House, Mr Clinton has vetoed at least a few of them, and Congress has been unable to produce the two-thirds majority required to override.
At this point "non-essential" government services would be shut down, until temporary continuing resolutions are passed to keep them functioning. If deadlock persists, these will probably be forthcoming, given that, with the first presidential primaries just months off, neither Mr Clinton nor Mr Dole, the Republican front-runner, wants to be held responsible for a case-study in Washington gridlock.
But that alone will not avert possible fiscal Armageddon. To force Mr Clinton's hand, some Republican true believers want to combine the reconciliation bill with congressional authorisation of an increase in the federal debt ceiling, currently at $4,900bn (pounds 3,180bn). That ceiling will be hit in November. If neither side blinks, the government will be unable to borrow money to meet debt interest payments - in other words, it will default.
Few believe it will come to that. But who has the stronger hand is far from clear. In the early stages perhaps, the advantage lies with the Republicans; sooner or later Mr Clinton will have to sign spending bills for 1995/96. Thereafter, however, the balance may shift to the White House.
Without a reconciliation bill, the status quo will automatically be extended. Deep Republican cuts in welfare, Medicare and other federal programmes will not happen, nor will Republican tax-cuts. With polls showing the public more concerned about Medicare than tax-cuts, even ones specifically targeted at middle and lower-income earners, Mr Clinton may calculate his opponents will blink first.
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