Reagan Deficit Figures Low, Panel Reports

President Reagan’s fiscal 1989 budget would produce a deficit of $165 billion, an amount that would trigger massive automatic spending cuts under the Gramm-Rudman law, a congressional report said Friday.

The deficit estimate by the Congressional Budget Office is $30-billion higher than the amount of red ink the White House Office of Management and Budget says Reagan’s spending plan would create.

The differences are mainly because the CBO is more pessimistic than the Administration about how the economy will perform.

The Gramm-Rudman balanced budget law calls for a $136-billion deficit target in fiscal 1989, which begins Oct. 1. If final figures indicate the deficit will exceed that amount by more than $10 billion, domestic and defense spending would be cut automatically to shrink the deficit to $136 billion.

Advisory Role

The final deficit estimate, however, is made by the White House budget office, with the CBO playing only an advisory role. According to the White House budget office, Reagan’s $1.1-trillion budget would leave $130 billion in red ink and no automatic cuts would occur.

Acting CBO Director James L. Blum, who presented the report to the Senate Appropriations Committee, said deciding which set of forecasts to trust is “a political judgment call” for legislators.

The CBO expects slower economic growth and higher inflation and interest rates in the next two years than the Administration does. All of those factors would produce higher government spending and lower revenue collections than the White House anticipates.

Blum conceded that recent economic statistics have been better than expected.

“It would appear that the pronounced slowdown we were expecting in the first quarter (of 1988) is not materializing,” he said.