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Stage is set for great federal budget drama; Reagan plugs his version on the Hill; two others in hopper

By Harry B. EllisStaff correspondent of The Christian Science Monitor / April 28, 1981



Washington

Congress is back in town, the President heads up Capitol Hill to give a pep talk, and ouf of the following weeks will emerge the nation's next budget. Several versions are in the hopper -- Ronald Reagan's own proposals, a Democratic counter-effort, and, in between, a compromise called the Gramm-Latta budget.

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All this has great meaning to Americans at large, for most individuals, families, and businesses will be affected by the tax and spending decisions embodied in the budget.

First step for Mr. Reagan is to try to rally public opinion behind his vision of the economy through his appearance before a joint session of Congress April 28.

Buoyed by a wave of sympathy during his recovery period, the President evidently hopes to lift the debate above the sharpshooting that has been going on between Congress and his White House aides.

Speaker of the House Thomas P. (Tip) O'Neill (D) of Massachusetts, saying that his own mail runs 5 to 1 in Reagan's favor, believes the President will get his way on the budget, after a stiff fight.

Once the speech is over, Reagan faces several legislative hurdles, if his program is to survive relatively intact:

He must persuade three conservative Republicans on the Senate Budget Committee -- normally his supporters --identified enough cuts in future years to balance the budget by 1984.

The three senators balked at moving a budget to the Senate floor, because future spending cuts outlined by Mr. Stockman are too vague to satisfy them.

The leader of the effort to bring the three dissidents back to the fold is Sen. Pete V. Domenici (R) of New Mexico, chairman of the Budget Committee.

"I think . . . I'll be able to assure the President," said Senator Domenici April 27, "we will be adopting his program and will take it to the [Senate] floor next week."

Beyond spending cuts detailed for 1982, says Mr. Stockman, another $29 billion worth of trims will be needed in fiscal 1983 and an additional $44 billion the following year.

Cuts of this magnitude, says the budget director, will balance the 1984 budget and reduce the annual growth rate of federal government spending from 16 percent to about 6 percent.

Such cuts will get into politically sensitive areas, White House aides concede, including a rejiggering of the way in which social security benefits are calculated.

The President and his lieutenants hope to defer discussion of such issues until the nation is launched on the first stages of the Reagan economic recovery program.

Assuming that the three Republican senators go along, Reagan is likely to get from the full Senate roughly the budget he wants for fiscal 1982.

The outlook in the House is cloudy. The House Budget Committee has approved and sent to the House a budget version shaped largely by Rep. James R. Jones (De of Oklahoma, chairman of the committee.

The Jones budget, while cutting deeply into total spending, would give more money to social programs and less to defense than the White House proposes.

Also -- and this is a fact of key importance --cut advanced by House Ways and Means chairman Dan Rostenkowski (D) of Illinois.

The Rostenkowski plan tilts its tax cuts to favor middle - and lower-income Americans. Reagan, by contrast, insists on a 30-percent across-the-board income tax cut over three years, from which the well-to-do would benefit the most.

Such a tax-cut program amounts to a massive shift of income toward the rich. This is essential, according to White House aides, if upper-income Americans -- a prime source of investment capital -- are to be induced to put more of their money to productive use.

Wealthy Americans, the argument goes, now tend to seek tax shelters, often nonproductive, because inflation pushes them into higher brackets.

"If you think it is economically important to reduce marginal tax rates," says Stockman, "then redistribution of income will result."

To fend off the Jones budget, the White House supports an alternative effort sponsored by Rep. Phil Gramm (D) of Texas and Rep. Delbert L. Latta (R) of Ohio.

The Gramm-Latta budget is based on revenue assumptions similar to those of Mr. Reagan and generally adheres to the Reagan model on the spending side.

BUDGET PROPOSALS COMPARED Reagan Gramm/Latta Jones Outlays 695.3 n1 689.0 713.65 Revenues 650.3 650.3 688.90 Deficit 45.0 n1 39.0 24.75 Defense 188.8 188.8 193.90 International affairs 11.2 11.2 11.20 Energy 8.7 4.2 6.70 Agriculture 4.4 4.4 5.10 Health 73.4 73.3 74.45 Transportation 19.9 19.7 21.05 Education/social services 25.6 n2 25.8 29.40 Income security 241.4 241.2 237.30 Veterans' benefits 23.6 24.0 23.90 Interest 82.5 82.2 89.50 Other 47.7 n2 46.6 49.50

n1 approximate and tentative

n2 rounded off All figures in billions of dollar s