Edition: U.S. / Global

TAXING MATTERS; A Call for Sacrifice, and the Answer Is No

Published: October 7, 1990

Coalition government, or at least America's de facto version of it, collided with representative democracy on the floor of the House of Representatives early Friday morning, and after the crash the grand budget compromise so painfully wrought by top Congressional leaders and the Bush Administration lay in ruins.

If anything was clear from the debacle, it was that the entrenched political habits of nearly two decades are not so easily shaken, even when the threat is a shutdown of much of the Government.The bitter, bipartisan concoction of tax increases and spending cuts that the House dramatically rejected was supposed to have brokenthe budget stalemate that has been the culmination of forces slowing serious policy-making in Washington for 15 years.

The leaders knew it would be a hard sell, especially the cuts in Medicare, and in the end President Bush could not persuade enough Republicans to swallow the tax increases he had promised never to accept.

''This is a different branch of government,'' said Representative Mickey Edwards, an Oklahoma Republican. ''The President can't deliver us. I'm not a package to be picked up at the department store.''

Under a parliamentary system, such a crisis would have toppled the Government and forced elections. But America's brand of representative democracy is messier than that. On Saturday, even as President Bush vetoed a stopgap budget and the House failed to override him, lawmakers spun off into separate, frantic searches for ways to keep the government functioning.

Wall Street, used to Washington's games of political chicken, looked the other way last week. But if the paralysis continues, the financial markets may not be so obliging.

The Reagan Theme

For all the hand-wringing about deficit spending and its attendant problems of high interest rates and declining American competitiveness, politicians in both parties have been unsuccessful in making a compelling case for the abstraction of deficit-cutting. ''The pain of reducing the deficit comes up front, early and directly, and it's easily traceable,'' said Gary Jacobson, a professor of political science at the University of California at San Diego and a specialist on Congressional elections. ''The benefits, on the other hand, are less certain, longer term and harder to take credit for. The main priority for both sides is protecting their core constituencies - groups served by social programs if you're a Democrat, and the business community if you're a Republican. Neither side is willing to trade that off for a smaller deficit.''

Indeed, successful politics, especially during Ronald Reagan's Presidency and through most of George Bush's first two years, virtually precluded any other approach.

At the state and local level, that meant ballot initiatives freezing property taxes or otherwise constraining the ability of legislatures to raise new revenues. Nationally, it meant oblivion for any politician foolish enough to buck the anti-tax tide.

Republicans pledged to cut taxes or at least keep them from rising, and Democrats pledged to maintain and improve costly benefit programs for the poor, the sick and the elderly. Since neither party troubled to explain how all this largess would be paid for, Americans simply opted for both at the ballot box, electing Republicans to the White House and Democrats to Congress.

Although divided Government also meant that neither party could fully carry out its priorities, the system worked as long as nobody paid attention to the mounting Federal deficit. When fiscal conservatives in both parties began to sound alarm bells in the mid-1980's, Congress and the executive branch constructed for themselves a Rube Goldberg doomsday machine known as the Gramm-Rudman-Hollings balanced budget law.

If the two branches of Government and the two different parties that controlled them could not agree to spending cuts and tax increases, the law would do it for them, imposing automatic, across-the-board cuts in a wide array of domestic and military programs. The enforcement mechanism was designed to be so onerous and disruptive that lawmakers and the President would come to their fiscal senses before it ever had to be invoked.

But maneuvering to avoid the strictures of the law consumed decision-making time, delaying action even on unrelated legislation, until all the budget numbers were brokered. Then, at the end of the session, rank-and-file lawmakers were forced into a take-it-or-leave-it vote on a single massive bill. Most took it.

But this year, with the specter of recession, huge costs of bailing out the savings and loan industry and an unexpected rise in oil prices, Democrats and Republicans discovered that their conflicting priorities for running up the deficit were nothing compared to their conflicts over how to reduce it. ''We like to make tough speeches, but we don't like to make tough choices,'' said the Senate Republican leader, Bob Dole of Kansas.

Hemmed in by the promises they had made to their constituencies for decades, each side bucked the tough decisions to their leaders and three of the President's most senior advisers: the Treasury Secretary, Nicholas Brady, the budget director, Richard G. Darman, and the White House chief of staff, John Sununu. Two weeks of intense bargaining and five months of preparatory negotiations yielded a compromise that slashed $500 billion from the deficit over five years. It let the President say he had raised taxes but not tax rates and let Democratic leaders say they had cut the Medicare program for the elderly, but spared Social Security.