WASHINGTON -- State and local governments would suffer a devastating blow if Congress approves $600 billion of federal spending cuts that would balance the budget under a constitutional amendment some say will pass this year, according to a House Budget Committee study released yesterday.
If the near-$400 billion deficit were to be eliminated by 1997, as required under the amendment, without tax increases and entirely through spending cuts, Congress would have to mount a large-scale assault on the federal government's portion of the infrastructure programs, said committee chairman Leon Panetta, D-Calif., in releasing the study.
Among the casualties most likely would be the superconducting supercollider project, mass transit operating subsidies, highway demonstration projects, and much of the government's housing subsidies, he said.
Besides cutting deeply into infrastructure programs, Congress would have to gouge into the defense budget for another $128 billion of savings, the chairman said. Those savings would be added to the $180 billion, five-year defense cuts envisioned in the 1990 budget agreement, he said. The big defense cuts would cause base closings and other economic hardships for municipalities around the country.
Further savings of $110 billion would have to be achieved from reductions in Medicare, Medicaid, and other government health programs, with implications for the states, he said.
The only way to avoid such deep cuts would be to raise taxes by $200 billion to $300 billion through the imposition of a national sales tax, severe limitations on the mortgage interest deductions, increases in tax rates, or other measures, he said.
The committee offered two alternative deficit reduction plans that would impose a $1 tax increase for every $1 or $2 of spending cuts. But even under those plans, Rep. Panetta said, the deep cuts in spending programs would not be alleviated that much.
Rep. Panetta, a veteran of several budget summits during the 1980s aimed at shaving the ever-increasing deficit, said most of the spending cuts the committee offered have been discussed and discarded in previous negotiations.
He denied that the committee study was a "scare tactic" aimed at drumming up opposition among interest groups to the constitutional amendment. "I'm not trying to scare anybody, but I'm not trying to kid anybody, either" about the dimensions of the problem, he said.
"Like Willie Sutton, you have to go where the money is," he said, commenting that the programs singled out by the committee are the biggest spending ones in the government.
Along with the draconian deficit reduction plan, Rep. Panetta also outlined a budget enforcement program he said he will propose to be debated along with the constitutional amendment, which is expected to come up on the floor of both houses of Congress next month.
The enforcement plan would require a specific and gradually increasing amount of deficit reduction each year through 1997. If legislation passed by Congress and signed by the President does not comply with the targets, across-the-board spending cuts would be imposed on government programs along with an automatic surtax on corporate and individual income taxes.
Despite the massive cuts spelled out in the committee study, many observers say the odds are increasing that Congress will pass the balanced budget amendment to the U.S. Constitution this year.
The amendment's chief sponsor in the House, Rep. Charles Stenholm, D-Tex., has garnered 278 co-sponsors, 12 short of the two-thirds majority needed to pass in the House. The amendment's leading sponsor in the Senate, Sen. Paul Simon, D-III., with 50 co-sponsors, also says he is confident of success.
Despite the potentially staggering impact the draconian cuts would have on states, governors and state and constitutional experts who have testified in recent weeks say it is likely to be ratified quickly by the requisite 38 states if it passes Congress.