The $110 billion (or is it $160 billion?) deficit
The struggle to control the deficit has hardly begun.
Congress, galvanized into action by the powerful symbolism of the figure ''$ 100 billion,'' is currently shaping a package of tax increases and spending cuts - a first step toward the goal of a $60 billion deficit in 1985.
But that goal, set by June's first budget resolution, won't be brought within reach by just this year's moves.
''At best, budget deficits will continue to be a problem for the foreseeable future,'' Congressional Budget Office (CBO) director Alice Rivlin said July 27. ''Further tax changes and additional spending reductions could be required again next year.''
And many analysts worry that Congress won't be able to make the tough decisions needed to haul the deficit back to earth.
Citing questionable budget figures, rosy economic assumptions, and the ''cosmetic'' balanced budget amendment, Bache vice-president Larry Wachtel says, ''Who believes any of that? Washington has to be aware one reason interest rates are so high is the cynicism level on Wall Street.''
The difficulties of pinning down the federal deficit may be seen by the fact that President Reagan, upon taking office, said he would balance the budget by 1983. Last July, the CBO was still projecting only a $17.7 billion shortfall for the same year.
The recession ripped apart those predictions. Treasury Secretary Donald T. Regan, citing the administration's yet-to-be-released midyear budget review, said Sunday that the deficit will be $110 billion to $114 billion in 1983, with progressively smaller shortfalls in 1984 and 1985.
The CBO, however, estimates the deficit will hang between $140 billion and $ 160 billion through 1985 - if Congress passes the spending cuts and tax hikes assumed by the first budget resolution.
Whose figures are more accurate?
Most financial analysts, says Mr. Wachtel of Bache, are predicting a fiscal-year '83 deficit of around $130 billion. And, up in the concrete canyon of Wall Street, they're not sure whether the deficit will be put under control, shrinking in '84 and '85.
One thing is certain: Congress has yet to tackle the toughest political problems associated with deficit control. Defense, social security and related programs, and interest on the national debt account for approximately 75 percent of the federal budget, while spending cuts have been concentrated in the 25 percent marked ''other.''
To winch down the deficit, Congress must slow defense spending, take ''significant action'' on entitlement programs such as social security, and enact further tax changes, says Dr. Rivlin.
''Unless you address the third year of the tax cut, entitlements, and defense , you're nickel and diming this whole thing,'' agrees Bache's Wachtel.
In addition, analysts say, Congress's action on the deficit must be viewed against this background:
The shifting nature of economic assumptions. The difference between the CBO and administration deficit forecasts can be accounted for largely by differences in economic assumptions.
For instance, the CBO estimates the economy will grow at a 3.6 percent clip, after inflation, in 1983. The coming White House review predicts real growth of 4.5 percent - a level of GNP that would yield close to $12 billion more in taxes than the CBO forecast.
''There is a great deal of uncertainty about the economic and budget outlook, '' said Dr. Rivlin when presenting her forecast.
The difficulty of meeting spending targets. The first budget resolution calls for Congress to cut $76.8 billion from government spending for 1983. But there is bound to be some slippage between this goal and actual outlays.
Congress must pass specific appropriations bills to meet the spending target. One committee - House Post Office and Civil Service - has already rebelled, and reported out an appropriation without the mandated $376 million in spending cuts.
Supplemental appropriations bills, passed throughout the year to keep government operating, could also send final outlays above the target of the first budget resolution.
Soft numbers in the tax bill. A bill now progressing through Congress would raise the $20.9 billion in new taxes called for by the budget resolution.
But $4.3 billion of the total is accounted for by withholding taxes on dividents and interest. And $2.3 billion must come from other compliance provisions, instead of new taxes.
Some doubt whether this revenue will materialize. The US League of Savings Institutions, for example, says withholding on interest will generate only $1.2 billion in 1983.