New law requires U.S. to cut Budget deficits

Press, 14 December 1985, Page 11

New law requires U.S. to cut Budget deficits

NZPA-Reuter Washington A new law requiring the gradual elimination of huge Budget deficits could have an immediate, pronounced impact on United States Government spending for defence and domestic pro-, grammes, officials say. The President, Mr Ronald Reagan, ended months of uncertainty yesterday by signing the landmark Gramm-Rudman balanced Budget legislation.

“Deficit reduction is no longer simply our hope and our goal — deficit reduction is now the law,” he said. The legislation results from" a groundswell of opinion on Capitol Hill that the huge deficits of recent years) are dangerous for the

economy, even though ConEand the Administralave so far been unable to agree on the hard decisions necessary to scale them down.

The new law requires annual reductions of SUS 36 billion ($68.04 billion) in the Federal deficit from SUS2OO billion ($378 billion) until red ink is eliminated entirely in 1991. If Congress exceeds fixed Budget ceilings specified by the measure, spending cuts in defence and domestic accounts excluding Social Security pensions and a small number of other programmes become automatic.

Up to SUSII.S billion ($21.73 billion) is expected to

have to be trimmed from the Budget for this (1986) financial year, which started on October 1, to bring this year’s Budget into compliance.

Half of the prospective cut would be in defence spending and would be likely to reduce the military budget to below last year’s level, officials say. The Pentagon opposed the deficit plan, saying that the cuts would send “a message of comfort” to the Soviet Union.

Mr Reagan insists that there will be no slowing in his military build-up. He has also said that tax increases, which some Congressmen believe are the only way to prevent many popular

social programmes being concealled, are “not an option.” “Deficit reduction must mean spending reductions ” he said. If the President maintains his position, many members of Congress say he is almost certain to provoke bitter battles between the White House and Capitol Hill. When the Congress was debating the new law, cosponsored by Senators Phil Gramm (Rep., Texas), Warren Rudman (Rep., New Hampshire), and Ernest Rollings (Dem., South Carolina), some lawmakers said that its effect would be so drastic that 30 to 50 government programmes could be erased next year alone.