Soaring deficit crimps Reagan budget plans

Like a yawning hole in melting ice, the multibillion-dollar budget gap confronting Ronald Reagan's economic planners continues to widen. The growing deficit -- now expected to go well above $50 billion this year -- could undermine Mr. Reagan's promise to cut big chunks out of this year's federal taxes.

Reagan economics officials, however, will try to fulfill his pledge by trimming some overhead out of the '81 Carter budget. David A. Stockman, who heads the Reagan budget team, insists the tax-cut effort can be supported by culling 2 percent out of current spending.

Originally, as Reagan people saw it, that meant trimming "waste and fraud" while knives were sharpened for deeper cutting into subsequent budgets.

That would have been hard enough, when fiscal 1981 spending was targeted late last November at $632.4 billion, with a $27.4 billion deficit.

Now, however, the budget balloon is soaring up and away, with 1981 spending projected to top $650 billion, with a shortfall well above $50 billion.

"A 2 percent cut," says economist Joseph A. Pechman, "is hardly possible. It will be much closer to zero than to 2 percent."

"Suppose," continued Dr. Pechman, director of economic studies at the Brookings Institution. "[Reagan] inherits a $660 billion budget. I can't believe he can cut that down to $645 billion."

Fiscal 1981, notes Pechman, began Oct. 1, 1980, and will be nearly half over by the time the Reagan team goes into action. "Many of the things they are talking about cutting would require legislation. It would take months and months for results to show."

More realistic in Pechman's view, is for Reagan "to show fairly quickly that he can do something about the fiscal 1982 budget."

"If he can put together a package of $25 billion or $30 billion worth of cuts for fiscal 1982," said the Brookings expert, "including highways, dams, construction, food stamps, and so on, people will be willing to give him the benefit of the doubt."

Behind the scenes, Pechman believes, Mr. Stockman and other Reagan aides already have shifted their focus to fiscal 1982, though their public rhetoric about the need to cut the current budget has not changed.

Stockman's early hope was to trim 1981 outlays to about $620 billion, as a concrete sign to Americans that the newcomer to the White House means business about shrinking the role of government. Now the Republican congressman from Michigan, tapped by Reagan to be director of the Office of Management and Budget , details some of the reasons why the task of making trims in the current federal budget has been made more difficult:

* Jobless auto workers and other Americans hurt by imports were expected, early last year, to need $400 million in retraining, relocation, and other assistance. Now the figure is over $2.5 billion.

* Between June and November 1980, interest on the national debt climbed by $1 .3 billion, because of sky-high interest rates.

* Rising oil prices have pushed the cost of fuel for the US armed forces up by $1.2 billion.

* Like yeast in bread, unemployment compensation to laid-off American workers has swollen by $4.7 billion above earlier projections.

These are some items in what Stockman calls the "coast-to-coast soup line problem and the manner in which it drives outlays upward at mind-numbing speed."

Inflation, high interest rates, depressed conditions in major industries like housing and autos -- these and other economic factors beyond anyone's immediate control have triggered far higher gover nment outlays than the Reagan camp expected to face.

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