More Budget Cutbacks Seen if Deficit Grows

Even though they want to avoid making politically painful budget cuts just before the November election, congressional and White House fiscal experts said Sunday that they may have to reopen last year’s budget agreement and consider new cutbacks if the deficit grows larger than expected.

“We might have to face up to doing some further deficit reductions . . . and obviously you can’t do it without the President’s support,” warned Rep. William H. Gray III (D-Pa.), chairman of the House Budget Committee. There may be “no choice” but to trigger another round of fiscal cuts, many of them unpopular with voters, he said.

White House Budget Director James C. Miller III tried to offer a rosier picture, noting that current economic forecasts suggest that the nation will meet the target of a $146-billion deficit set by negotiators last year and that further budget cuts may not be necessary this year.

Growth Is Unpredictable

But he and Gray said during an appearance on Cable News Network’s “Newsmaker Sunday” that a budget report due in August could show that the economy’s growth has slowed, thus reducing the revenues flowing into federal coffers and swelling the deficit beyond the $146-billion target.

As a result, there could be a wild scramble in Congress during September and October to make new budget cuts, a time when most members plan to be campaigning. The prospect is equally distasteful to White House officials, who have indicated that they do not want to engage this year in another round of budget confrontations with Congress, Gray said.

Indeed, the $1.1-trillion budget that President Reagan sent to Congress last week contained few surprises and was widely considered to be a non-controversial spending blueprint. Democrats and Republicans said it adhered to the bipartisan economic agreement that White House and congressional negotiators hammered out last year after the stock market crash.

Wearying Debates of Past

More important, it seemed to guarantee that there would be no repetition of the wearying, highly partisan budget debates that have been a hallmark of past years. Last week, House Democratic leaders predicted that the budget process could be completed by the end of September, since both sides had agreed last year to the amount of cuts that had to be made.

Under their two-year plan, White House and congressional negotiators decided to trim more than $76 billion from the nation’s budget deficit. Negotiators could make those cuts themselves or they could be triggered by the Gramm-Rudman deficit reduction law, which mandates across-the-board reductions in military and domestic programs.

Reagan’s budget adhered to the two-year plan largely by assuming continued economic growth for the next 12 months. As a result of these projections, Miller and other experts have suggested that the nation will be able to meet its deficit target for this fiscal year.

However, the law also requires officials to gauge the state of the economy in August, and the data may not be so encouraging at that time, said Sen. Rudy Boschwitz (R-Minn.), a Senate Budget Committee member who also appeared on the CNN broadcast. In particular, budget analysts are worried that declining consumer spending and housing construction might cause a significant slowing in the 2.4% economic growth rate that Reagan’s budget has projected.

Could Reopen Agreement

If it appears the nation will fall short of its deficit target, Boschwitz said, there could be a new move in Congress to reopen the budget agreement and consider new ways to make up the economic shortfall.

And then again, there may not. Some House members believe the White House and Congress will do almost anything to postpone or avoid further cuts, at least before the November election.

One option might be to rely on forecasts that are more optimistic than others, according to congressional budget aides. Although studies by the Congressional Budget Office might indicate a major economic slowdown, similar reports by the Office of Management and Budget, which Miller heads, could offer a more upbeat view of the economy.

Another possibility is that Congress may simply delay dealing with bad economic news until after the election, perhaps calling a special session toward the end of the year.

“Nobody wants to deal with this so close to an election,” Rep. Mel Levine (D-Santa Monica) said in a separate interview. “That might not have been spelled out in the negotiations last year, but everybody knew it to be true. Unless we’d lose all credibility (about economic forecasts), that continues to be the assumption.”