Long-Term Deficit Plans Face Delay : Congress’ Slowness on Current Budget Cited by Darman

Prospects that the White House will be able to hammer out a long-term deficit-reduction plan with Congress later this year have narrowed substantially, and the effort may be postponed until early 1990, a Bush Administration official said Monday.

Richard G. Darman, director of the Office of Management and Budget, said that the dimmed outlook reflects the fact that congressional committees are taking more time than expected on the current year’s budget plan, not that any snags have developed.

However, Darman said he doubts that the delay will diminish the ability of the two sides to work out a significant agreement affecting fiscal 1991 and beyond. He said he still is optimistic that an accord can be reached after the current year’s appropriations process is completed.

Momentum From Summer

The Administration had hoped to hammer out a long-term deficit reduction plan with Congress this year to take advantage of momentum from talks held last summer.

Those discussions were limited to the budget for fiscal year 1990, which begins Oct. 1. But, Darman said that “the people who would negotiate on fiscal 1991 are the same people who are working on fiscal 1990, and I don’t think it would be productive . . . to sit down on 1991” without them.

Thus, he said, it is likely that the longer-term talks will not begin until next year.

Darman suggested also that, once the longer-term talks have produced an agreement, the Administration may seek to overhaul the Gramm-Rudman deficit-reduction law to close several major loopholes.

The budget chief said that the biggest gap in the law is that it allows Congress to add to the budget without limit once it has passed the early-October deadlines that trigger automatic spending cuts if the deficit exceeds certain targets.

Other possible changes, he said, involve “silly little” procedural requirements, such as one forcing the OMB to adhere to one set of statistics for the pace of economic growth even if the nation’s actual growth rate turns out to be different, as it generally does.

But Darman warned again that the Administration almost certainly would want to wait until the long-term budget agreement with Congress has been completed before starting any push to “reform” the Gramm-Rudman procedure.

“I don’t favor reforming Gramm-Rudman until you have a credible (long-term deficit reduction) plan in effect,” he said.

Darman made his comments as the OMB issued an updated report showing that fiscal 1990 appropriations are about on track and that no automatic cuts will be required under the Gramm-Rudman law, provided Congress lives up to the budget agreement it worked out with the White House earlier this year.

$116-Billion Deficit Level

The estimates show that, if the budget were totaled up now, the deficit for fiscal 1990 would be $116.2 billion. That would be $16.2 billion over the target set under Gramm-Rudman and $6.2 billion over the level at which automatic spending cuts are triggered.

But, Darman said, if Congress continues to follow its budget agreement with the Administration as it approves remaining appropriations bills between now and Oct. 1, then it probably would come in just low enough to avoid automatic cutbacks.

“They will try to find a way to spend every last dime” up to the level at which automatic spending cuts would be triggered, Darman said. “We are cutting it very close.”

The OMB report estimated that the budget deficit for fiscal 1989, which ends Sept. 30, probably will be near $167.5 billion, roughly $2.5 billion below earlier expectations.

Hope for Capital Gains

Darman predicted that the Administration would be able to persuade Congress to approve Bush’s proposal to reduce the tax on capital gains, which are profits from the sale of stocks, real estate or other assets. Leaders of key tax panels have hinted as much.

The OMB’s deficit projections are somewhat more optimistic than estimates published by the Congressional Budget Office last week. That agency forecast that the fiscal 1990 deficit was heading toward $141.5 billion, about $25.3 billion more than predicted by the OMB.

But Darman reiterated that the gap reflects different estimates by the two agencies of how rapidly the economy would grow, how high interest rates would be and how quickly the Administration could act to bail out troubled savings and loan associations.

Automatic Spending Cuts

Under the Gramm-Rudman legislation, Congress and the Administration must set a target of reducing the deficit to $100 billion in fiscal 1990. If they exceed that target by $10 billion or more, spending is slashed automatically--by 4.3% for military spending and 5.3% elsewhere.

Partly as a warning, Monday’s report contained some illustrations of the possible impact of such cuts on defense and non-defense programs, ranging from reductions in grants to needy college students to cutbacks in the war on drugs.

Congress still has several more appropriations bills to enact and also must go through the process of reconciling differences between the outlays it has approved and the budget targets it set last spring. The lawmakers are scheduled to finish their work in mid-autumn.