Past negotiations have netted substantial spending reforms and helped doom a presidency. But all have averted a default, a prospect that Treasury Secretary Janet L. Yellen said would cause “economic chaos” and could hurl global markets into a deep recession.— the amount the United States can borrow to pay its bills — without preconditions.
Congress and the president would have five years to rein in borrowing, and in the absence of a deal, automatic across-the-board cuts to federal programs — called “the sequester” or “sequestration” — would snap into place. The legislation drew wide GOP support, though some foreign policy hawks opposed the measure because it did not carve out military spending. A Pentagon spokesman said the bill gave “Democrats were split on the idea, but even some fervent liberals, including Sen. Edward M. Kennedy ,. Social Security, Medicaid and other core entitlements were exempted from the cuts. The bill ultimately passed with wide bipartisan support.
But Gramm-Rudman-Hollings, as the law is known, immediately became an object of scorn. It encouraged brinkmanship, lawmakers said, while leaving Americans and financial markets in suspense. The effects of automatic cuts could be fast and consequential, throwing an unstable economy into a recession if the spigot of federal dollars instantly shut off.Gramm-Rudman-Hollings to “leaping into a black hole, and we don’t know where we’re going to land.” Yet he voted for the bill.
Hollings later renounced the legislation that bears his name. “After four years in a shotgun marriage called Gramm-Rudman-Hollings,” he wrote in a 1989 New York Times