Budget Rhetoric and Reality

Happy Fiscal New Year 1987! There will be no lament for fiscal 1986, with its $230-billion budget deficit, but there is not much to cheer about on the arrival of fiscal 1987 today.

Congress has lurched into the new budget period with much of its technical work left undone and the Gramm-Rudman anti-deficit law rendered largely impotent. None of the 13 appropriation bills for 1987 have passed, and Congress has lumped the measures into one grab-bag $550-plus-billion continuing resolution that President Reagan has threatened to veto.

Aha, the President has declared, Congress is up to its old tax-and-spend tricks. Fortunately, however, the budget mess may not be as bad as it seems, and certainly is not as boondoggle-riddled as the President paints it. Further, there is plenty of blame to go around, and the White House should be willing to take its share of the lumps.

If Reagan carries through with his veto threat, Washington will again go through the unnecessary silliness of “shutting down the government” until Congress can adopt a resolution that is satisfactory to the President. But, first, a backup stopgap was needed to tide the federal establishment over for a few days until the main stopgap resolution can be adopted. Welcome to the Twilight Zone.

Being a canny political animal, the President pounced on the 1987 fiscal snarl as the basis for a little Congress-bashing in his weekly radio address. The President vowed to veto the catch-all budget resolution if it came to him as a “spending spree” bill that included “wasteful boondoggles.” Any notion that past tax cuts have led to massive federal deficits is “hogwash,” he said. “We don’t have deficits because you’re undertaxed. We have deficits because Congress overspends.”

This is routine end-of-the-fiscal-year rhetoric for Reagan. The facts are somewhat different.

Only $6 billion separated the size of the catch-all spending resolution as passed by the Democratic controlled House and the Republican-controlled Senate--$562 billion compared with $556 billion. Both versions came in under the spending ceiling set by Congress earlier in the year.

The President’s own defense-spending spree and the 1981 tax cuts indeed have been major contributors to the soaring budget deficit. Defense spending has increased from 23% to 27% of the total budget while non-defense outlays have declined by a like amount. Corporate and personal income-tax revenues have fallen from 57.9% of total federal revenue collections to 54.6% since the 1981 tax bill passed.

The Conference Board, made up of major corporation executives, credits both Congress and the President with taking “effective action” to control spending. Outlays for the first three quarters of fiscal 1986 increased only 4.2% over the previous year--one of the smallest increases in decades. The only increases were in defense, Social Security, Medicare, agriculture and interest on the federal debt. All other departments were cut, the Conference Board said.

The major reason the deficit keeps rising is that revenues have not come up to expectations in the past 3 1/2 years, largely because of a lagging economy, the board reported. The Administration consistently has underestimated economic growth in its recent budgets, and has refused to consider any tax increase.

Congress is a handy villain to attack for the deficit, but the record defies the White House rhetoric. And the rhetoric makes it increasingly difficult for Congress and the White House to work for reasonable compromises.

The first place to start is for the Administration to develop a responsible 1988 budget for submission to Congress early next year--one that accepts economic realities, focuses on areas where spending still is increasing, and recognizes that taxation is an essential ingredient in the budget process.