Looking for ways to erase soaring federal deficits; As GNP continues to slip, Domenici urges new taxes, deeper budget cuts
Both Congress and the White House are beginning to shift gears to cope with a federal budget problem that grows worse as recession spreads across the land. ''A balanced budget,'' Sen. Pete V. Domenici (R) of New Mexico says, ''is going to be very, very difficult to achieve by 1984,'' the year President Reagan hopes to erase the last red ink from government accounts.
Americans, meanwhile, gained fresh evidence that the nation's economy is stalled, when the government announced that the rate of increase of the gross national product (GNP), or total output of goods and services - after accounting for inflation - declined at an annual rate of 0.6 percent in the third quarter of the year.
This follows a 1.6 percent drop in output in the second, or April-June, quarter. Two successive quarters of declining output constitute one definition of a recession.
''We had expected a soft and soggy 1981,'' said chief White House economic adviser Murray L. Weidenbaum in a telephone interview, ''with no growth, or even a decline, for several quarters.''
Many experts say they believe the current, or fourth, quarter of the year also will show a decline, with an uptick in the economy not expected until early next year.
Accompanying the GNP news was a government report that inflation, broadly measured, rose at a 9.4 percent annual rate in the third quarter, up from 6.4 percent in the April-June period. Higher prices for food and services spurred inflation, the Commerce Department said.
Officials still hope that the current recession, even if it turns out to be mild, will help to cool inflation by reducing demand for goods and services.
On the outlay side, recession will boost government spending for unemployment compensation and related costs, while at the same time shrinking tax revenues. This combination is expected to swell the 1982 budget shortfall.
A cumulative deficit of $200 billion over the three-year period 1982-84 is foreseen by Senator Domenici, the chairman of the Senate Budget Committee, unless Congress and the White House agree on massive new spending cuts.
The New Mexico lawmaker, speaking to reporters at breakfast, called for a $ 115 billion package of fresh spending cuts and ''revenue enhancers'' - i.e., tax increases - to whittle down the burgeoning budget shortfall.
These cuts would be over and above the $35.2 billion in spending reductions wrestled through Congress last summer and now embodied in the tentative 1982 budget.
The package described by the senator might not balance the budget, he says. ''But the important thing,'' he adds, ''is to show our ability to reduce significantly the cumulative deficits of 1982 through '84.''
This might give investors confidence, said the budget committee chief, to keep interest rates down after the recession, rather than pump them back up because of fear about huge impending government deficits.
''We cannot avoid coming up with a deficit reduction package,'' Domenici says. ''Otherwise you will spring back, after the recession, into a high interest situation.''
As a first installment on his $115 billion package, Domenici seeks $16 billion in spending cuts and ''revenue enhancers'' for fiscal 1982, the current fiscal year.
''Revenue enhancers'' are fancy words for tax increases, designed to soothe lawmakers.
President Reagan also calls for a $16 billion package for 1982 - $13 billion in new spending cuts, $3 billion in increased revenues. The congressional mix would be different, which does not disturb White House officials.
''The size of the cuts is what is important,'' Mr. Weidenbaum says. ''Their composition can be altered.''
Reagan is adamant that personal income tax cuts already enacted - including a 10 percent across-the-board reduction next July - should not be postponed, although this might boost federal revenues and lower the deficit.
Business tax cuts now in place, centering on faster depreciation of plant and equipment, also will not be postponed, by congressional and White House agreement.
One revenue raiser under study, in addition to excise taxes on cigarettes and alcoholic beverages, would end a tax break widely used by those who buy on installment.
Americans now can exclude from taxable income interest paid on installment debt. Lawmakers are weighing whether to limit this exclusion to interest paid on mortgages and car payments - the original intent of the law.
So far, despite the urgency voiced by Senator Domenici, Republicans in the House and the Senate - let alone the Democrats - have not agreed on how to shape a new spending-cut package.
Observers doubt that Congress is in any mood to work out and vote on details for a three-year package along the Domenici line, before adjournment at the end of the year.
When lawmakers return to Washington in January, they will receive President Reagan's 1983 budget, which, according to Mr. Weidenbaum, will incorporate changes dictated by economic conditions.
To avoid losing momentum toward the overall goal of deficit reduction, Senator Domenici favors a binding congressional agreement on savings totaling $ 115 billion over three years, with details to be worked out later.