Budget Deficit Barely Averts Spending Cuts

The Reagan Administration estimated today that the federal deficit for the coming budget year will be $140.1 billion, $5.9 billion under the trigger for across-the-board spending reductions. But Budget Director James C. Miller III said too large a drought-relief package could provoke the automatic cuts.

The new deficit estimate, covering the fiscal year that begins Oct. 1, is $5.9 billion under the $146-billion level that would force cuts to kick-in under the Gramm-Rudman balanced budget law.

But in presenting the estimate, the head of the Office of Management and Budget warned that Congress must exercise spending restraint in granting relief to farmers and in several other areas or face the risk of triggering automatic spending cuts.

“We cannot do all those things. Congress has got to pare down and make sure it does not go over the limit,” Miller told reporters at a White House briefing.

Cites Problem Proposals

Miller warned that drought-relief and other spending proposals pending before Congress could push the deficit upward and trigger the politically painful spending cuts, which would take effect just before the November elections.

The drought-relief measures now being considered in Congress are estimated to cost $4.3 billion to $6.6 billion. The Administration wants to keep the drought package at $4 billion to $5 billion.

The Administration is also fighting to hold the spending line on other measures currently before Congress. These include anti-drug legislation, trade legislation and a supplemental spending bill.

Under the Gramm-Rudman Act, the Administration is required to estimate the coming year’s fiscal budget deficit by mid-August to project whether across-the-board spending cuts will take effect.

The White House budget office must then adjust that estimate in October to take into account any new legislation.

Cuts Invoked Automatically

If such legislation pushes the deficit past the trigger amount of $146 billion, across-the-board spending cuts of more than $10 billion automatically take effect.

The report today, known as a mid-session review, estimated that the deficit in the current fiscal year would be $152.3 billion. This estimate is still more optimistic than those of many private forecasters and the Congressional Budget Office, which is projecting a deficit of $157 billion for the current fiscal year.

The revised deficit estimate for the current fiscal year was up from the Administration’s February estimate of $146.7 billion.