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Budget 'firewalls' are shaken: Congress leans toward bringing defense savings home.

The nation's community leaders scored major successes in the Congress last week as they took their first step in meeting NLC's highest priority: using post Cold War defense savings to reinvest in America's cities and towns.

The action was critical as the House and Senate are set to act on key tax and budget legislation this week. The House is scheduled to take up action on taxes Wednesday; the House Budget Committee is scheduled to begin work on the 1993 budget resolution on Thursday; and the Senate Finance Committee is scheduled to take up its version of a tax bill on Thursday.

Piercing the wall

Leaders in the House and Senate took the first major steps to clear the way for changing the federal spending priorities which have prevailed for the past half century and overwhelmingly rejected proposals to use defense cuts affecting communities to pay for middle income tax cuts. The administration sent the first signal to the Congress that it might be willing to give in on the issue and compromise.

House Government Operations Committee Chairman John Conyers (D-MIch.) scored the first major community victory when he steered his NLC-supported legislation, HR 3732, to eliminate the "firewall" between defense and city priorities through both subcommittee and full committee last week.

The bill, on which NLC's leaders have lobbied in support with the entire House leadership, would clear the way for Congress to use savings from defense cuts to enact Conyers' NLC-supported Local Partnership Act (see accompanying story).

NLC Executive Director Don Borut congratulated Conyers on his fine victory:

"Just one year ago NLC's leadership began Operation Urban Storm in a united appearance before Chairman Conyers and his committee. Today marked the first major victory, and the first of many.

"Community leaders owe a vote of thanks to all who supported reinvesting in the economic security of our communities and our strongest support to see this bill signed into law."

The win came after Conyers' committee overwhelmingly rejected a substitute offered by Rep. Frank Horton (R-N.Y.) to dedicate half of any defense savings to pay for middle income tax cuts and half for deficit reduction. Under the Horton substitute, no defense savings would have been permitted to assist in economic conversion for communities severely impacted by the loss of contracts or by base closures from the cutbacks in defense spending.

Late Thursday, in another major step, Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) announced that he would only support tax cuts (see accompanying tax story) if they were paid for by offsetting federal tax increases. Bentsen, who had previously proposed to finance some $72 billion in tax cuts over the next 5 years through cuts in defense spending, announced his new position after a caucus of Senate Dmocrats late Thursday. The move promises to help clear the way for the senate to act on similar legislation to the Conyers bill. Senate Budget Committee Chairman Jim Sasser (D-Tenn.) and Sen. Dale Bumpers (D-Ark.) have indicated they intend to introduce such legislation in the near future.

At the same time, in the first signal of retreat from the administration, White House Budget Director Richard Darman last Tuesday testified before the Senate Appropriations Committee that the administration would be willing to renegotiate the 1990 budget agreement to permit economic conversion of defense into domestic reinvestment in return for Congressional willingness to consider meaningful reform of federal spending on entitlement or automatic spending programs, such as Social Security, Medicare, and Medicaid. Until Tuesday, the administration had opposed any possible transfer of defense savings into communiy reinvestment and instead supported using the so-called "peace dividend" to pay for the President's proposed $24 billion middle income tax cuts.

Rewriting the 1990 budget agreement

The House Committee on Government Operations marked-up H.R. 3732, the Budget Process Reform Act, Last Thursday. The bill would amend the 1990 budget summit agreement by eliminating the budget walls between defense, international, and domestic spending effective next October 1st. If passed, Congress would be allowed greater flexibility to use defense savings for urgent domestic needs, deficit reduction, or other purposes as it moves through the budget and appropriations process.

The Budget Process Reform Act is in response to the political changes in the world, such as the break up of the Soviet Union, and to the dire condition of the U.S. economy. H.R. 3732, supported by the Democratic leadership in the House of Representatives and co-sponsored by 83 Members, would eliminate the "firewalls" between defense and domestic spending. Congress would be given the opportunity to apprpriate funds to ailing cities and town to repair their infrastructures. These firewalls that prevent using defense savings for domestic purposes are not set to be eliminated until October 1, 1993 under current law. The Congressional Budget Office estimated that without H.R. 3732, domestic programs in FY 1993 would have to be cut $8.8 Billion below current spending levels.

At the Committee meeting, Conyers stressed that his bill does not directly cut defense spending or transfer money from defense to other sources. Conveyers believed those are decisions for the budget resolution, authorization, and appropriations process. Rather, the bill consolidates all discretionary spending under a single cap one year early.

Horton offered his substitute amendment during mark-up to require that any peace dividend be used equally to reduce the deficit and increase personal tax exemptions, and not on domestic spending. Horton's substitute was defeated by the Committee 25 to 13.

Rep. Chris Shays (R-Conn.) joined all committee Democrats in opposing the substitute. Conyers remarked that Horton's amendment would bring Government Operations into an area of the budget process that it should not be in, and that the bill should simply institute changes in the budget procedure. Representative Ted Weiss (D-N.Y.) remarked that he did not support Horton's substitute because subsequent investment into America's infrastructures allowed by this bill would help the economy the most and indirectly reduce the deficit.

Republican Craig Thomas (R-Wyo.) said he did not support H.R. 3732 because he believed the unrestricted money would go to another Conyer's bill benefiting cities and towns, referring to H.R. 3601 Local Partnership Act.

The Budget Process Reform Act now reported out of committee is expected to be considered on the the House floor soon.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Feb 24, 1992
Previous Article:NLC launches public service announcement.
Next Article:Conflicting tax proposals head for Capitol Hill showdown.

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