US economy: it's another fiscal year older and a trillion in debt
Fiscal year 1982 dawns with the United States a trillion dollars in debt and entering a period of perplexing economic uncertainty. As the new fiscal year unfolds, millions of Americans will detect changes in their lives, stemming from President Reagan's far-reaching economic program, which officially begins Oct. 1.
Broadly speaking, low-income Americans may find it harder to make ends meet while upper-income Americans will find it easier to exclude income from Uncle Sam's Internal Revenue Service.
A basic purpose of Reaganomics is to make it attractive for well-to-do Americans to save and invest more money, with the hope that this will help to generate business actvity, create new jobs, and in the end benefit all.
But along the way, the burden of adjustment will fall hardest on the poor, because the budget cuts -- an integral part of the Reagan program -- affect them most. Also, lower-income Americans will get the least tax relief because Mr. Reagan's three-year tax cut program tilts toward the wealthy.
Sept. 30 closed the door on fiscal year 1981, which is likely to end up with a budget deficit somewhere between $55 and $60 billion, about the same as the $ 59 billion shortfall of fiscal 1980. Originally, fiscal 1981 was supposed to show a deficit of $15.8 billion, according to then-President Jimmy Carter -- a budget, he said, that "reduces the deficit by 60 percent in comparison to 1980."
President Reagan, after weeks of insisting that the fiscal 1982 deficit would not exceed $42.5 billion, appears to be allowing his aides to slip a new line of thought into the economic debate. If the 1982 shortfall is considerably below that of 1981, White House officials now say, progress toward a balanced budget in 1984 will be assured.
"A balanced budget in 1984," says chief White House economic adviser Murray Weidenbaum, "is a higher priority for the President than the size of the deficit in 1982."
Even now, the full impact of fiscal 1982 on Americans cannot be gauged because Reagan is asking Congress to reduce spending for many programs another 12 percent. Lawmakers, who already had slashed more than $35 billion from 1982 spending under heavy presidential pressure, are grumbling. Debate on the final shape of the 1982 budget will go on for weeks.
Meanwhile, funding for some government programs will have to be provided by "continuing resolutions," which may or may not be at 1981 spending levels.
Despite this uncertainty, the year that began Oct. 1 will have some predictable results.
The 5 percent individual income tax cut, effective Oct. 1, applies only to the last quarter of 1981. Thus, the real reduction for 1981 is only 1.25 percent and will hardly be noticed by most families.
As the three-year tax program is phased in, the tax cuts will average 10 percent for calendar 1982, 19 percent for 1983, and 23 percent for 1984, according to government figures. Because these rate cuts are across-the-board, the dollar savings become increasingly significant as income rises.
Other provisions in the tax code, effective Jan. 1, 1982, will be more valuable to many families than the rate cuts -- especially a reduction of the "marriage penalty" for two-earner families and an increase in child-care deductions.
Spending cuts will hit lower-income Americans in two ways. First, food stamps, job training, Medicaid, and other social programs are being given less money. Second, the states will get less federal money to supplement state and local welfare and other programs that primarily serve elderly, poor, jobless, and otherwise disadvantaged citizens.
As to the $1,000,000,000,000 debt, experts stress that -- horrendous as the total may sound -- the national debt as a percentage of gross national product is much smaller than it was after World War II and roughly the same as in the early 1930s.