President’s Deficit Guess Called Low : Congressional Budget Office Less Positive Than Administration

The Congressional Budget Office, less optimistic than the Reagan Administration about the strength of the economy, said today that federal deficits will remain far above the level Congress expected when it approved a fiscal 1986 spending plan.

The office, in a report to the Senate and House Budget committees, estimated that the deficit for the year beginning Oct. 1 will be $175 billion. New red ink would decline to $163 billion in fiscal 1987 and $143 billion in 1988, it said.

When Congress passed its budget Aug. 1, it assumed deficits of $172 billion in fiscal 1986, $155 billion in 1987 and $113 billion in 1988. The Administration, working to update its estimate, expects about $125 billion in red ink by 1988, officials have said.

$210-Billion Estimate

The deficit for the current fiscal year is estimated at $210 billion.

The Administration and Congress started this year with the goal of cutting deficits below $100 billion a year by fiscal 1988, but the CBO report indicated that the budget will fall far short of the goal.

The budget office said it estimated higher deficits because it expects that the economy will not recover as robustly as the Administration predicts and that interest rates will decline less. Most private economists also have called the Administration’s growth estimates too optimistic.

Slower growth reduces expected tax revenues while increased interest rates, still at historically high levels, push up the government’s borrowing costs.

1985 Rebound Seen

The CBO predicted that the economy, as measured by the gross national product, will rebound in the second half of calendar 1985 from the weak 1% annual growth rate posted in the first six months.

“The continued moderate inflation, reduced interest rates and the recent decline in the dollar have significantly improved the prospects for a pickup in economic activity,” the report said.

Although the Administration predicts a 3% rise in GNP, the CBO said growth will be just 2.6% when measured from the fourth quarter of 1984 to the fourth quarter of this year. The CBO predicts that growth will reach 3.6% in 1986 and continue at just below that rate for the next few years, while the Administration predicts 4% growth next year and beyond.

In its forecast, the CBO also estimated that:

--Annual inflation will be 3.7% this year, rise to 4.5% next year, then drop to 4.4% in 1987 and 4.2% in 1988.

--The average civilian unemployment rate will gradually decline from 7.2% this year to 7.0% next year, 6.8% in 1987 and 6.6% in 1988.

--Interest rates, as measured by the annual average of three-month Treasury bills, will drop slightly, from 7.6% this year to 7.4% next year, leveling off at 7.2% after that.