House and Senate Budget Plans Seen as Falling Short

The Democratic budget proposal approved by the House last week, Senate Majority Leader Bob Dole (R-Kan.) charged, relies on “smoke, gimmicks and other assumptions” to slash $56 billion from the federal deficit next year.

That may be true in some ways, but what Dole failed to acknowledge is that the Republican budget the Senate passed earlier this month depends on similarly questionable assumptions to reach its own $56-billion target.

And perhaps most important, both House and Senate budget alternatives, independent analysts say, are almost certain to fall short of limiting the federal deficit to about $100 billion by 1988--a level that many economists believe the government should reach if the nation is to avoid serious economic problems in the next few years. (By comparison, the deficit is expected to hit a record $220 billion this year.)

According to a report released last week by the nonpartisan Congressional Budget Office, the Senate-passed spending plan would save just $38.4 billion next year and, instead of pushing the deficit down to its projected level of $104 billion by fiscal 1988, it would leave a deficit of $149 billion.

“The Senate clearly did not meet its goal, and the goal of almost every Administration spokesman and private economist--that the deficit must be reduced to 2% of the gross national product (about $100 billion in 1988),” said Sen. Lawton Chiles (D-Fla.), who requested the CBO report.

The House budget has not yet been analyzed by the CBO, but it undoubtedly will also fall short of its goals. Like the Senate budget, it depends on relatively optimistic economic assumptions about growth, inflation and interest rates. In addition, the Democratic-controlled House spending plan relies on slightly more dubious expectations of future spending cuts to reach its own deficit target of $124 billion in 1988.

For example, the Democratic plan, unlike the Senate budget, assumes that $4 billion can be saved next year by improving government contracting and that another $4 billion in revenues will be available from settlement of a longstanding dispute between the states and the federal government over oil monies from offshore drilling.

Next month, House and Senate negotiators will meet to begin the long struggle toward a compromise on the budget, which simply sets the outline for spending decisions and legislative changes that must be approved in the future before budget savings can be achieved. Although the budget proposals share a common bottom line for 1986, the two plans differ substantially in priorities.

The Senate version would eliminate about a dozen specific domestic programs, but the House package ends just one--general revenue sharing.

Under the House plan, the Pentagon’s budget would be frozen at this year’s level of $292.6 billion, but actual military spending would rise by $15 billion because of commitments from past budgets. The Senate approved a budget of $302.5 billion to reflect expected inflation of slightly less than 4% and would allow actual spending to increase by $21 billion above this year’s level.

On Social Security, the most politically sensitive program in the budget, the House would maintain existing cost-of-living increases, while the Senate would skip an inflation adjustment for Social Security recipients next year.

Senators contend that their plan would save $115 billion over three years by holding down defense spending, and House members say their Pentagon cuts would save $137 billion. But the CBO maintains that both claims are exaggerated. This is because they base their military “cuts” on reductions from the high levels assumed in a now-defunct agreement between the Reagan Administration and Senate GOP leaders that was announced more than a year ago.

Moreover, the House and Senate budget plans leave out at least $1 billion in assistance for Israel because the level of funding is still in dispute, and they anticipate that the federal government will receive $1.2 billion from selling Conrail, the government-owned Northeast rail system, despite a serious dispute in Congress over whether the transportation system should be sold.

On Friday, President Reagan complained that the House budget contains “what could only be charitably described as phantom cuts” in domestic programs. And Senate leaders contend that by ending specific programs they would manage to save about $40 billion more than the House budget over the next three years.

“In the future years, the House budget is something like a fond hope that everyone will do what they should do,” Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said. “Our budget mandates the committees to change laws.”

But House Budget Committee Chairman William H. Gray III (D-Pa.), in the Democratic response on Saturday to the President’s weekly radio address, defended the Democratic budget plan as a realistic alternative to the Senate spending program.

“Let me remind the President that he asked for $50 billion in spending cuts and we gave him $56 billion in spending cuts. The President asked for no new taxes and we in the House gave him no new taxes,” Gray said.