Legacy to Reagan -- era of 'limits'

Although Jimmy Carter's 1982 budget may be shredded by Congress and Ronald Reagan, it deserves to be read by citizens for the President's insights into what the future holds for the United States.

Permeating Mr. Carter's final budget message is a blunt warning that the nation's government cannot go on spending more money than it takes in, even for social causes that, by themselves, are good.

This part of Mr. Carter's budget message might have been written by Mr. Reagan, because both men and their staffs face the same reality -- that US resources have limits and demands on those resources are frozen by law into a pattern of growth.

Carter transmits to Reagan a dilemma -- how to meet the nation's obligations toward elderly, poor, and disadvantaged citizens without taxing working Americans to the point of rebellion.

"We have a steadily aging population," Carter writes. "As a result, the biggest single increase in the federal budget is the rising cost of retirement programs, particularly social security."

Thirty years ago, says the President, social security and railroad retirement benefits (also a federal responsibility) accounted for less than 3 percent of budget outlays.

Today they account for more than 20 percent and still grow, as inflation automatically swells benefit payments to more than 36 million Americans.

Social security is part of what more broadly is called "income security," embracing medicare and medicaid, aid to families with dependent children, food stamps, unemployment compensation, and a range of other programs.

"In 1982," says Carter, "income security outlays are estimated to be $255 billion, more than 34 percent of total budget outlays."

Together with interest on the national debt (10 percent of the budget), and "binding contracts" (mostly defense) into which the government has entered, more than three-fourths of the fiscal 1982 budget is locked up beyond the immediate control of either Congress or the President.

"I do not propose," says Carter, "that we break faith with the American people by arbitrarily or unfairly reducing entitlement programs."

But such programs, he adds, "too often have been spared from annual budget scrutiny," with the result that they have grown top-heavy, while budget-cutting has been centered "disproportionately" on other areas.

From now on, he writes, Congress should take a hard look at all programs, even those that protect the elderly, disabled, unemployed, and low-income families.

Only 18 percent of all these income security programs, the President notes, are "needs- or income-tested" -- that is, linked to how much a family earns. Even wealthy Americans benefit from some of this largess, notably social security retirement pensions.

A similar point is stressed by Reagan's advisers -- that truly needy Americans can get all the protection they need, if less-deserving recipients are weeded from the rolls.

Usually food stamps, student grants, burial payments, and some marginal benefits are singled out for potential pruning, not social security itself.

Carter proposed to reduce the burgeoning cost of social outlays in several ways:

* Programs whose benefits now are adjusted twice yearly to compensate for inflation -- including federal military and civilian retirement pensions -- should be adjusted only once a year, as social security is.

Child nutrition programs, and to some extent food stamps, fall within this category of recommended change.

* The monthly consumer price index (CPI), as now calculated, "significantly overstates" the importance of housing costs, says Carter. This in turn means that benefit payments, including social security, rise faster than inflation itself.

In the future, the President would link benefit increases to a revised CPI, more accurately measuring changes in the cost of living.

These and other alterations suggested by the outgoing President foreshadow the direction in which Reagan is likely to proceed with his budgets.

Carter's warning about the rising cost of uncontrollables, and what he would do about them, is more important than the numbers of his 1982 budget, which in any case will be changed by the performance of the economy, as well as by Congress and Reagan.

Carter proposes to spend $739 billion, which sounds a great deal larger than the roughly $660 billion for fiscal 1981. In fact, when the effects of inflation are stripped away, says the President, his 1982 budget grows by 1 percent.