Deficit Likely to Be Higher Than Forecast : Automatic Cuts Due Unless Spending Is Slashed, Miller Says

Budget Director James C. Miller III said today that this year’s federal deficit will likely be greater than the Administration has forecast, forcing automatic spending cuts unless new ways are found to slash spending.

Miller said greater spending on such things as savings and loan institution bailouts and lower tax revenues will push the budget gap higher than the $146-billion threshold that would force cuts under the Gramm-Rudman budget-balancing law.

“I’m afraid it’s about to fall,” Miller, speaking on NBC-TV’s “Today” program, said of Gramm-Rudman’s automatic budget-cutting ax.

“We’re going over in spending and some of the receipts are a little bit short, so it looks like unless we do something it’ll fall,” said Miller, director of the presidential Office of Management and Budget.

White House Figures Used

The budget blueprint worked out earlier this year by congressional leaders and the Administration projects a $135.3-billion deficit next year, barely below the $136-billion target of the Gramm-Rudman law for fiscal 1989.

The Congressional Budget Office had offered more pessimistic forecasts for the budget, but Congress used figures provided by the White House in projecting the deficit.

“When we sent the budget up, the bipartisan budget agreement didn’t leave very much margin for error at all,” Miller said today. “The problem is that if we just tip over at all, that’ll trigger the cuts.”

He said the Administration’s figuring had assumed revenues that have actually been depressed because of lower inflation than the White House had foreseen and “we have some spending that’s up. For example, bailing out thrift institutions--that’s going to cost more money.”

$1.35-Billion Bailout

The government last week paid out a record $1.35 billion to investors in two failed California savings and loan institutions.

Miller said the Gramm-Rudman law would force cuts of 3.5% in domestic programs and 8% in defense spending unless Congress comes up with other cuts by Oct. 1.

“By law we have to make these determinations,” Miller said. “We don’t want those cuts; I don’t think anybody wants those cuts.”

“A concern is there are a number of threats up there, Congress has got a number of bills it’s trying to pull out of the hopper. . . . And when you’re right there at the margin, it looks like we’re going to have to do these across-the-board cuts, we cannot afford to have that increased spending.”