Share this story
Close X
Switch to Desktop Site

US deficit poses hard choices for Congress, Reagan

''No budget process would make it easy to deal with the situation we now have - the simple fact that, if we don't cut spending or raise taxes or both, we will have escalating deficits of staggering proportions over the next several years.''

Thus Alice M. Rivlin, director of the Congressional Budget Office (CBO) for the last eight years, sums up the dilemma confronting House and Senate conferees wrestling to shape a budget for fiscal 1984.

About these ads

The key word is ''choices.'' What must legislators do, always with an eye on potential presidential vetoes, to get a handle on the deficit?

''The choices,'' says Dr. Rivlin, ''are not very attractive, because the only way to get a deficit down is to spend less or to tax more. In the end we're going to have to do both of those things.''

Choices reflect priorities. President Reagan, the Senate, and the House of Representatives all have different priorities as expressed in their respective versions of the 1984 budget.

All three proposed budgets project a deficit of $130 billion to $140 billion by fiscal 1986, down from more than $200 billion in the current fiscal year.

To achieve that reduction, say budget experts, roughly $180 billion in savings must be found through a combination of tax boosts and spending cuts. Otherwise, because of spending increases built into current law, the 1986 deficit would soar far higher than the shortfall of today.

On the magnitude of the figures there is little disagreement.

But on the specifics of cutting programs and raising taxes, the three protagonists - President, House, and Senate - take different roads.

About these ads

Mr. Reagan wants spending cuts to come primarily out of domestic, nondefense programs. The Democratic-controlled House would boost domestic spending and cut a swath through defense outlays. The Republican-controlled Senate falls somewhere in between.

On taxes, or specifically on how to raise them, the triangular split persists. All three proposed budgets foresee the necessity for tax boosts, but in different ways.

The House and Senate would pack substantial tax hikes into the fiscal 1984 and '85 budgets. President Reagan would not. He offers instead a package of ''contingency taxes'' to be triggered on Oct. 1, 1985 - if three conditions are met.

His contingency taxes would go into effect only if Congress first had passed all his proposed spending cuts, if the deficit forecast for fiscal '86 exceeded 2.5 percent of the gross national product, and if the economy were growing.

If all those conditions are met, Reagan proposes a five-dollar-a-barrel excise tax on oil and a 5 percent surcharge on corporate and individual income taxes, to last for three years.

The President's strategy, as many observers analyze it, is to appear to bend to congressional pressure for higher taxes, but to set up conditions that almost rule them out.

In no way is Congress going to trim domestic programs by the amount Reagan has proposed in his 1984 budget. Instead, the House and Senate restore money for some programs already deeply slashed.

Meanwhile, the President - if his plan succeeds - will preserve intact the July 1 third-year installment of his income tax cuts and also the indexing of income taxes to inflation beginning in 1985.

Reagan, furthermore, gives every sign of not caring if the House and Senate fail to pass a 1984 budget. In that case, Congress would pass individual appropriations bills to fund various agencies. These bills would go to the President's desk.

Under this process, Reagan would get substantially the increase he wants for defense while retaining veto power over domestic spending hikes.

Congress in all likelihood would be unable to override his vetos.

This might give Reagan and the Republicans a battle cry for the 1984 elections: that Democrats want to ''tax and tax, spend and spend.''

But such a situation also would postpone the day when Congress and the White House face up to the hard choices that must be made if future deficits are to be controlled.

''The whole point of having a budget,'' says Dr. Rivlin, ''is to force choices, to put together in one place the spending claims and the revenues and decide what to do.''

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.