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When Reagan first came to the White House in 1981, he found that Jimmy Carter had left the cupboard quite bare, and that one of his first acts would have to be to increase the national debt past $1 trillion. What an outrage, especially to a cost-conscious conservative! A trillion dollars--why, if you piled up that many $1,000 bills, Reagan told Congress, you would have a pile 67 miles high! "A monument to the policies of the past," said the new President, "which as of today are reversed." But since Reagan was also determined to increase military spending and to cut taxes (and since Congress was just as determined to stand guard over Social Security and other entitlement programs), there was only one way to balance the budget, and that was by borrowing. So five years of Reaganomic prosperity have been financed by doubling the national debt from $1 trillion to $2 trillion.
Warnings about debts and deficits tend to go ignored as long as things seem prosperous, but there have been signs of increasing worry lately. Just paying the interest on the national debt now takes $143 billion, much of it going to foreign banks that can call in their loans whenever they begin to mistrust the dollar. Worriers also fret that the trade deficit has climbed to a scary $145 billion or so annually. Meaning that it is now the U.S., not Mexico or Brazil, that is the world's biggest debtor nation. And banks keep crumbling (120 of them went under last year). This does not mean that we are approaching 1929, of course, but as Lester Thurow of M.I.T. wrote last week, "Farm bankruptcies, financial speculation, nonperforming loans, large potential defaults . . . the echoes of the Great Depression sound louder and louder."
So as the Government steamed titanically toward default on Dec. 12, congressional leaders decided that they dared not seek approval for yet another increase in the debt unless they could show that they were really doing something about the chronic deficit that nobody wanted to pay for.
Lo, the Gramm-Rudman bill! This simplistic cure-all had been lying around since last summer, gaining a modest amount of support. Now, as an amendment to the bill increasing the debt limit, it became what Co-Sponsor Rudman wryly called "a bad idea whose time has come." There was no time for committee hearings; many members never read the measure that gave away their responsibilities, but they overwhelmingly voted for it; final approval came at 10:15 p.m. on the eve of the prospective default, and then it was soon time to go home for Christmas. Yes, Virginia, there is a Santa Claus.
January is when the mail brings Christmas bills, and so the authorities began taking another look at the new law that Senator Pat Moynihan described as "a suicide pact." Although it had a beautiful simplicity, with its annual series of automatic budget cuts, nothing could possibly be that simple. The interest on the national debt had to be paid in full, for example, and if the Pentagon had just signed a contract to buy a million widgets, it would still be obligated to pay even if it canceled the contract. O.K., these were exempted.