White House Lost Last Chance to Curb Deficit, Stockman Says

The Reagan Administration has lost its last chance to control the federal deficit, leaving the nation headed toward economic instability, former Budget Director David A. Stockman said in an interview released Wednesday.

Stockman, interviewed for the Sept. 2 issue of Fortune magazine, said that there was virtually no chance that Congress or the Administration will adopt the politically painful spending cuts or tax increases necessary to bring the deficit below $200 billion a year.

Resolution Called ‘Limp Rag’

The budget resolution Congress adopted Aug. 2 is a “limp rag” that comes nowhere near the austerity needed to plug the gap, Stockman said in the session, which took place after he resigned as head of the Office of Management and Budget.

Stockman, who will begin work Nov. 1 as a managing partner of the New York investment firm of Salomon Bros., was quoted as saying that this year’s budget turmoil may lead to “traumatic fiscal, political and economic results within the next several years.”

“Basically, the window of opportunity has closed,” he said, citing the Administration’s lack of leadership, Congress’ refusal to sacrifice pork-barrel programs and his own tactical errors as reasons for the failure.

He contended that the deficit took root before Reagan assumed office in 1981 but said that the Administration exacerbated the problem with overly optimistic economic and spending forecasts used to promote supply-side economics and increased defense spending.

Admits to Error

Stockman told the magazine that he himself erred at the start of Reagan’s second term in believing that the House would propose a tax hike to match the Senate’s deficit-reduction program, which included Social Security cuts.

If both taxes and Social Security had been on the table, Reagan could have cited congressional pressure and reneged on campaign promises, ending up with $50 billion in deficit cuts, Stockman said.

He disputed claims that Congress has held the deficit to $172 billion for the next fiscal year, saying the figure will be closer to $200 billion.