Deficit Up 14% to $211 Billion for Fiscal 1985

As Congress groped for a formula for balancing the federal budget by 1991, the Treasury Department announced Friday that the deficit soared to a record $211.9 billion in fiscal 1985, up more than 14% from the year before.

The red ink for fiscal 1985, which ended Sept. 30, is nearly triple the deficit recorded in fiscal 1981, when President Reagan took office, promising a balanced budget. Since then the accumulating deficits have doubled the national debt, which was less than $1 trillion when Reagan entered the White House, and Congress is now debating legislation to lift the ceiling on the national debt above $2 trillion.

The Senate has attached to the debt ceiling bill an amendment that would place annual ceilings on the deficit, falling from $180 billion in fiscal 1986 to zero in 1991. The Senate-passed formula would require across-the-board spending cuts if Congress failed to meet the deficit targets.

Although the Democratic-controlled House has not approved a comparable provision, a conference committee of House and Senate negotiators will resume work next week on a compromise plan that they hope Congress can enact into law.

House Armed Services Committee Chairman Les Aspin (D-Wis.) Friday joined Defense Secretary Caspar W. Weinberger in warning that the Senate-passed plan could harm defense spending. Aspin said proponents had seriously understated defense’s share of the spending cuts that the plan would impose.

“If it’s the desire to take such a large chop out of defense, Congress can of course do so,” Aspin said. “But the conferees ought to understand accurately the scope of what is before them.”

Variety of Causes

The deficit has swelled during Reagan’s presidency for a variety of causes: a huge defense buildup, the sweeping tax cuts enacted in 1981, high interest rates that drove up the cost of government borrowing and a severe recession in 1981 and 1982 that depressed federal revenues while sharply increasing welfare-related spending.

The 1982 deficit of $127.9 billion was the nation’s first over $100 billion. The deficit burst through $200 billion the very next year to $207.8 billion before ebbing to $185.3 billion in 1984.

In 1985, revenues totaled $734 billion, up 10.1% from 1984. Despite Reagan’s determination to curb federal spending, outlays rose 11% to $945.9 billion.

The $211.9-billion deficit includes spending in a variety of budget accounts--including the Strategic Petroleum Reserve, the Postal Service and the Synthetic Fuels Corp.--that Congress has declared to be “off-budget.”

‘On-Budget’ Spending

If only “on-budget” spending is considered, the 1985 deficit is only $202.8 billion. But that is still greater than the previous record for on-budget items of $195.4 billion set in 1983.

The 1985 deficit total was $600 million below the Administration’s August projection and was almost 5% lower than a February estimate of $222.2 billion. Officials said lower-than-expected interest rates, which reduced the government’s costs of carrying the $1.8-trillion national debt, and slower-than-expected defense spending rates helped to hold outlays below the February estimate.

For fiscal 1986, which began Oct. 1, the Administration estimates that the deficit will decline to about $178 billion--slightly below the ceiling set by the Senate-passed balanced-budget formula--if Congress completes action on pending measures to cut the flow of red ink.

The House on Thursday adopted a package of spending and tax measures designed to trim $78 billion from deficits during 1986, 1987 and 1988. A similar Senate bill, aimed at $85 billion worth of savings, is caught in a dispute over some senators’ efforts to attach legislation aimed at reducing textile imports.

The Administration has threatened to veto the deficit-reduction bill on grounds that it contains inadequate spending cuts and would maintain the federal cigarette tax at 16 cents a pack instead of letting it fall, as now scheduled, to 8 cents as of Nov. 15.