Kemp Urges Reducing Deficit Target for 1987 : Presidential Hopeful Warns Against Drastic Military and Other Spending Cuts

Congress should “declare victory” for now in its drive to cut the federal deficit and not vote drastic spending cuts to meet artificial targets required by the Gramm-Rudman budget-balancing law, Republican presidential hopeful Jack Kemp said Friday.

The conservative New York congressman, co-sponsor of the extensive 1981 tax cuts that spurred an economic recovery but also drove up the deficit, suggested that fellow lawmakers should consider amending the law rather than slashing military and other spending to meet the $144-billion Gramm-Rudman deficit goal for fiscal 1987, which begins Oct. 1.

“I don’t think we ought to tear apart our economy or our government” just to reduce the deficit to $144 billion, Kemp said. “Let’s declare victory . . . and move on to lower deficits next year.”

$20 Billion Above Target

White House and congressional economists predicted Tuesday that next year’s deficit would be about $163.4 billion, nearly $20 billion above the Gramm-Rudman target but well below the record $224 billion to $230 billion in red ink that they estimate for the current fiscal year.

Kemp said that the projected reduction is sufficient to satisfy concerns about the deficit and that Congress should not allow across-the-board military and non-defense spending cuts to take effect. The Gramm-Rudman law requires such cuts to reduce the deficit to its annual targets.

At a breakfast meeting with reporters, Kemp also applauded the Federal Reserve Board’s decision Wednesday to cut the discount rate--the rate it charges financial institutions for money--from 6% to a nine-year low of 5.5%. However, he said the board has been too slow to take such moves, which are designed to stimulate the sluggish economy, and he suggested that it should further slash the rate to about 4%.

Defends Rate Cut

Kemp insisted that a dramatic rate cut would not fuel inflation or prompt foreign investors to flee U.S. markets because their interest earnings would drop.

“People are not investing in the United States of America to take advantage of interest rates,” Kemp said. “They’re investing to take advantage of the rate of return on financial assets.”

On another subject, Kemp criticized the Reagan Administration’s recent decision to help struggling Midwestern farmers by subsidizing wheat sales to the Soviet Union. “This is a slippery slope,” he said. “Soon you are beginning to rely on an infusion of subsidy that knows no end.

“It’s very difficult for me to see how we can spend $290 billion a year in defending ourselves against the Soviets and protesting their invasion of Afghanistan and then subsidize wheat sales to them,” he added.