The looming battle over US deficit
Washington — President Reagan's ''new federalism'' plan swept onto center stage last week. Lawmakers, mayors, governors, and interest groups took turns at hailing or condemning the proposal which would massively reorder state-federal relations during the next decade.
This week the spotlight is shining on a more immediate problem: the biggest federal deficit in US history. On Feb. 8 the President will unveil his fiscal 1983 budget. Reports say the document will project a $96 billion deficit for 1982, $90 billion in '83, and $78 billion in '84. The numbers are a far cry from the balanced budget for which Mr. Reagan campaigned, and they soar above the $58 billion deficit in 1981.
Secretary of the Treasury Donald T. Regan said Jan. 31 that ''nothing has happened to the goal of a balanced budget,'' but that ''it's just the achieving of it that has become more difficult.''
Secretary Regan said on CBS's ''Face the Nation'' that the administration's priorities are curbing inflation, economic prosperity, and deregulation. ''After that comes the deficit,'' he said.
For conservative Reagan supporters on Capitol Hill, the prospect of voting for the biggest federal deficit ever is chilling. ''The deficit is obviously a big concern to me,'' says Rep. Charles W. Stenholm (D) of Texas. Congessman Stenholm heads the Democratic Conservative Forum - the ''boll weevils'' - that helped deliver Reagan victories in the House last year.
Priority now will be to reduce federal spending, says the leader of the boll weevils. In a meeting last week, the group talked about putting even the Pentagon on the budget cutting block.
''Nothing can be sacrosanct,'' says Stenholm.
For the Republican leadership, the only selling point for the enormous deficit figures may be that at least they are predicted to go down.
The numbers are ''headed in the right direction,'' says Rep. Dick Cheney of Wyoming, chairman of the House Republican Policy Committee. ''He has to show declining deficits,'' Congressman Cheney says of Reagan's budget message.
''We can't balance the budget by '85,'' he says, but the administration can convey a notion ''to the country, to the financial markets, and to the long-range investors. You've got to give them a sense of confidence.''
Growing deficits yield higher interest rates, says Mr. Cheney, rejecting a notion held by some ''supply siders'' in his own party who play down the deficit issue.
''Politically, it's not credible for this party or this President after all these years to suddenly abandon (concerns about deficits),'' says Cheney.
All roads toward reducing the deficit look rocky, however. A recession and an election year make it doubly hard to raise taxes beyond the loophole closings Reagan has proposed. Equally difficult would be cutting the enormous federal entitlement programs ranging from veterans benefits to social security.
Even the $30 billion to $40 billion in cuts expected in Reagan's '83 budget may be difficult to make. Congressional members from industrial areas hit hard by the recession are already feeling pressure to keep federal dollars in their districts.
The one route to less spending that Congress seems to prefer is through the defense budget - the one area Reagan wants to increase.
''Some of the programs have been padded just a little too much,'' says Rep. Tom Loeffler (R) of Texas, a pro-defense conservative.
Congressman Cheney notes that the military has finally won favor again after a decade of unpopularity. ''But it's a very fragile consensus,'' he says. ''If the public feels the Penatgon is not spending the money well and there is waste, we will get a backlash.''
''The administration has an obligation, if it wants to continue the increases , to convince the public that we are being very tough and watching every dollar'' the Pentagon spends, says Cheney. ''We need more evidence than we've seen so far.''
Cheney and other members of the Republican leadership have warned the President that they will have trouble rounding up a majority if he proposes defense increases that are too big.
For the President's budget, this year will be more difficult that last ''because the honeymoon is over and this is an election year.'' Moreover, Congress has fewer working days on its calendar.