The deficit and the federal budget
Federal deficits that top $200 billion: For many Americans, the gulf between what Uncle Sam takes in and what he spends every year defies comprehension. It works out to about $860 for every man, woman, and child in the United States. The prospect of continuing deficits, and their impact on the economy, is the source of much debate in Congress, at the White House, and among economists at large.Skip to next paragraph
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''The American people want their government to do more for them than they are willing to pay for.''
Thus Alice M. Rivlin, director of the Congressional Budget Office (CBO) for eight years, zeroes in on why the federal government's annual budget sinks into a sea of red ink.
Lawmakers apparently agree with Dr. Rivlin's assessment of what the voters want. Otherwise, the men and women of Congress would tell their constituents that they have a choice - higher taxes, or fewer programs.
Congress, of course, has someone else to worry about. President Reagan rejects tax hikes, boosts defense outlays, and demands that Congress trim social programs.
Over the past two years Congress has done just that, slashing means-tested programs (for which only the poor are eligible) at the President's behest. ''The whole universe of means-tested programs is down 14.4 percent since 1981,'' says Robert Greenstein, director of the Center on Budget and Policy Priorities, citing CBO figures.
''It is time to give social programs a rest,'' declares Sen. Robert Dole (R) of Kansas, chairman of the Senate Finance Committee. Congress agrees. Of the additional cuts in low-income programs proposed by Mr. Reagan in his fiscal 1984 budget, almost none passed.
What, then, grows in the budget?
''Programs that are growing are very limited in number,'' says Dr. Rivlin, now director of economic studies at the Brookings Institution. She ticks off three - defense, retirement programs (mainly social security and medicare), and interest on the soaring national debt, which alone swallows 12 cents of every budget dollar.
These growth areas comprise 65 percent of the total budget, which explains why one of Reagan's prime hopes - to reduce the scope of government spending - has vanished.
When the President took office in January 1981, the federal budget absorbed 21.1 percent of the gross national product (GNP), or total output of goods and services. Reagan vowed to shrink that slice of the pie to 19.3 percent by fiscal 1984, beginning Oct. 1, 1983.
Instead, under the budget passed by the House and Senate, fiscal 1984 spending will be 24.3 percent of the GNP - the highest percentage since World War II. The average for Reagan's four budget years will be well above 24 percent , compared with 21.9 percent for President Carter's term.
Because discretionary programs - chiefly means-tested welfare programs and the like - have already been sharply cut, the government's mammoth spending can be lassoed only if major growth areas are curtailed.
As long as interest rates remain high and continuing deficits force the Treasury to finance the shortfall through additional borrowing, little can be done to shrink interest payments on the debt.
As for defense, Reagan asked for a 10 percent hike in fiscal 1984. Congress gave him 5 percent. Further cuts are unlikely, especially in the wake of the shooting down of a South Korean airliner by the Soviets.
Some progress has been made in slowing the growth rate of social security outlays and, to a lesser extent, of medicare and medicaid. But soaring hospital costs will push federal health outlays from $82.4 billion in 1983 to $90.6 billion in 1984. More than 90 percent of this spending flows through medicare and medicaid.