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Easy-Does-It Budget

February 5, 1992



THE $1.52 trillion budget George Bush sent to the Congress on Jan. 29 will do little to push the United States economy out of its doldrums. It's a carefully measured mix of cuts, increases, and tax tinkering that could provide a modicum of economic stimulus while staying within the budget boundaries set by the 1990 agreement between the president and Congress.

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This budget plan fits with Mr. Bush's well-known penchant for caution and prudence.

For just that reason it pleases neither the congressional Democrats who want greatly increased spending for job-producing tasks like infrastructure repair, nor the Reagan Republicans who prefer deep tax cuts to roust the economy from its slumber.

Bush's middle road has a purpose, however. An important economic stimulus has already been administered through the Federal Reserve System's reductions in interest rates. It's not a quick-working remedy, however. Forecasters predict some increased business activity by spring, but the growth rate is expected to remain sluggish through 1992.

The Fed's work could be undone by a tax-cutting spree that would add to the deficit and put upward pressure on rates. The president's middle-class tax breaks are modest. Will Congress follow suit?

Deficit concerns are real. The 1990 budget agreement was billed as a fiscal-discipline measure that would restrain deficit growth. In fact, the government foresees a cumulative deficit of $1.5 trillion over the next five years. Annual interest payments on the national debt are projected to grow to $243 billion by 1995 from about $200 billion this year. Washington will thus continue to soak up money.

Hefty revenue increases are needed, or a large chop in overall spending. But tax hikes are politically ruled out, and increased revenue from heightened economic activity isn't likely any time soon. Budget-slashing faces political obstacles, too: Most federal programs, including many of the 246 the president wants to delete, have strong backers in Congress.

The obvious target, however, isn't the nickel-and-dime federal research grant but the $291 billion defense outlay. Bush has said $50 billion in cuts over the next five years and "no more." But deeper cuts are probable, and a large share of that savings should go directly to deficit reduction - as well as to domestic priorities like education, job retraining, and research and development.

The president's cautious budget avoids extremes. It should serve as a basis for compromises that could free more funds to brighten America's long-term prospects while starting to lift its burden of debt.