Planet Money
11:35 am
Thu February 28, 2013

The Last Time Congress Built A Doomsday Machine

Originally published on Thu February 28, 2013 3:30 pm

After years of tax cuts and a big hike in defense spending, deficits were rising. Then came a bitter battle over the debt limit. Three senators came up with a plan: Unless Congress and the White House could get the deficit under control, this thing called "sequestration" would do it for them.

The year was 2013 1985.

"Right from the beginning, everybody ... said with sincere conviction that sequestration is never supposed to happen," says Richard Kogan a House staffer who worked on the bill. "It's designed to be stupid. It is designed to be uncomfortable. It's designed to be a Doomsday machine."

The Doomsday machine was called the Gramm-Rudman-Hollings Act, named for the Senators who sponsored it. After it passed, people had high hopes that its effects would be so bad and unreasonable that it would force politicians to come up with a reasonable, bipartisan alternative.

But it didn't work.

By 1988, Congress and the White House still couldn't agree on how to cut the deficit. And, thanks to Gramm-Rudman-Hollings, that meant sequestration. So, to avoid that, they agreed to cook the books — to make the deficit look smaller than it really was.

"They would shift funding around in appropriations, use emergency declarations, disaster declarations,", says Mike Solon a long-time adviser to Senator Gramm. "All these sort of things to game it."

Sen. Hollings recently told me that he finally went onto the Senate floor and said, "I want a divorce from Graham-Rudman-Hollings. Y'all just call it Gramm-Rudman."

Washington continued to fudge the numbers, finding ways to wriggle out of the legislative trap it had set for itself. It wasn't until the early 1990s that lawmakers replaced Gramm-Rudman with a series of agreements that made smarter, targeted cuts that ultimately helped balance the budget.

This time around, it may not be so easy for the government to use gimmicks to dodge the sequester.

"The alternatives, the lifeboats away from the sequester were either burned or holes were drilled in the bottom of them," Solon says. "So we don't have the options we used to have."

What's more, the cuts in this sequester are much bigger than the ones the country faced in the '80s.

"What we're looking at today in no way parallels the kind of things that we had in the '80s under Gramm-Rudman," says Scott Lilly, another congressional staffer who worked on the bill. "No one would have suggested that we have cuts of the magnitude that are included in this sequester."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

AUDIE CORNISH, HOST:

On the eve of sequestration, here's one way of exploring what might play out if the cuts aren't averted. Cory Turner of NPR's Planet Money team tries to predict the future by looking to the past. It turns out we've been here before, once.

CORY TURNER, BYLINE: The year was 1985. You might not remember 1985, but everything else I'm about to say should sound eerily familiar. After years of tax cuts and a big hike in defense spending, deficits were rising and then came a bitter battle over the debt limit. It needed to be raised, so three senators came up with a plan. Republican Phil Gramm, Republican Warren Rudman and Democrat Fritz Hollings introduced legislation that said unless Congress and the White House could get the deficit under control, this thing called sequestration would do it for them.

Richard Kogan was a staffer with the House Budget Committee at the time and he helped shape the law.

RICHARD KOGAN: Right from the beginning, everybody, the sponsors, all said with sincere conviction that sequestration is never supposed to happen. It's designed to be stupid. It is designed to be uncomfortable. It is designed to be a Doomsday machine.

TURNER: This intentionally stupid, uncomfortable Doomsday machine was called the Gramm-Rudman-Hollings Act. And after it passed, people had high hopes that its effects would be so bad and unreasonable that it would force politicians to come up with a reasonable, bipartisan alternative. In fact, in his State of the Union address, in February 1986, President Reagan talked it up.

(SOUNDBITE OF ARCHIVED SPEECH)

PRESIDENT RONALD REAGAN: Passage of Gramm-Rudman-Hollings gives us an historic opportunity to achieve what has eluded our national leadership for decades, forcing the federal government to live within its means.

TURNER: There was just one problem. It didn't work. By 1988, Congress and the White House still couldn't agree on how to cut the deficit. And, thanks to Gramm-Rudman-Hollings, that meant sequestration. So, to avoid that, they agreed to cook the books, to make the deficit look smaller than it really was. Mike Solon, a long-time adviser to Senator Gramm, saw a lot of those tricks firsthand.

MIKE SOLON: Shifting a day when they would write the Social Security checks back or the civil service checks; assets sales where they take the money now, but take the loss later here. They would shift funding around in appropriations, use emergency declarations, disaster declarations. All these sort of things to game it.

SENATOR FRITZ HOLLINGS: Everybody thinks that we're compliant, but we're not.

TURNER: That's the Hollings in Gramm-Rudman-Hollings and because the government wasn't complying with his law and resorting to all these tricks, he took to the Senate floor.

HOLLINGS: I said, look, I want a divorce from Gramm-Rudman-Hollings. Y'all just call it Gramm-Rudman.

TURNER: Still, Washington continued to fudge the numbers, finding ways to wriggle out of the legislative trap it had set for itself. It wasn't until the early 1990s that lawmakers replaced Gramm-Rudman with a series of agreements that made smarter, targeted cuts that ultimately helped balance the budget. So, for the people who were involved with Gramm-Rudman, there are a few takeaways.

For Richard Kogan, the former House Budget Committee staffer, the lesson is bad policy won't magically lead to good policy.

KOGAN: Threatening a really badly designed, painful, thoughtless, inappropriate sequestration does not make people compromise their basic principles.

TURNER: For Mike Solon, the advisor to Senator Gramm, there's another lesson, one the White House and Congress took to heart. If they used tricks and gimmicks to avoid cutting the deficit last time, then build a tighter trap.

SOLON: The alternatives, the lifeboats away from the sequester were either burned or holes were drilled in the bottom of them. So we don't have the options we used to have.

TURNER: And that's not the only difference between then and now. Not only are there no lifeboats this time around, the potential pain is much greater. Scott Lilly was executive director of the joint economic committee during Gramm-Rudman and also worked on the bill.

SCOTT LILLY: What we're looking at today is just - in no way parallels the kind of things that we had in the '80s under Gramm-Rudman. No one would have suggested that we have cuts of the magnitude that are included in this sequester.

TURNER: Which brings us at last to our crystal ball moment: What now? Well, I'm pleased to report a show of rare bipartisan consensus. Of the many people I spoke to, Democrats and Republicans alike, all agreed on one thing and one thing only: Sequestration will happen tomorrow. As for what that means, it's anyone's guess because as much as this might look like 1985, it turns out we haven't actually been here before.

Cory Turner, NPR News. Transcript provided by NPR, Copyright NPR.