Senate Finds New Way to Cut Deficits - October 1985

The U.S. Senate came up with a new plan for eliminating the federal budget deficits. The Republican leadership in the Senate and House endorsed a proposal aimed at forcing the government to balance the budget by 1991. The plan would direct the president and Congress to cut the deficit by $36B a year until it disappeared. In any year that the deficit exceeded the specified level by more than 5 percent, the president would have the authority to reduce spending across the board. Support grew for the plan although it appeared to require further cuts in defense and popular domestic programs and increases in taxes. The plan was offered as an amendment to a bill to raise the government's debt ceiling to more than $2T. Pres. Ronald Reagan formally endorsed the plan, October 4. The debate of the amendment delayed action on the debt ceiling, and the Treasury said, October 8, that it would run out of cash that night unless Congress acted on the ceiling. On October 9, the Treasury borrowed $5B to raise the case needed to cover checks already issued. The balance-budget amendment won Senate approval, October 9, as liberals and conservatives joined in the 75-24 majority. The House, October 11, endorsed the goals of the Senate bill; without voting on a specific bill, the House went directly to a conference with the Senate.