How big will Reagan budget cut be? Closer to $10 billion than $30 billion, say economists
Washington — Anticipation builds for Ronald Reagan's economic message tomorrow evening -- the first cannon volley in his ambitious four-year seige against inflation. Surveying the new President's prospects, economic and political experts see these intimations of what could lie ahead:
* A budget cut of $10 billion for fiscal 1982 -- not the $30 billion to $45 billion talked about by Reagan Republicans for months -- could emerge as the net effect of the administration's drive to curb government growth and spending. President Carter purposely left behind a tight fiscal '82 budget of $739 billion to measure Reagan results against. So even a $730 billion budget, in terms of recent history, would be "quite an achievement" for the Republican, say some neutral experts.
* Reagan can later scale back his own target, declare his more modest spending cuts a victory in the face of bureaucratic and Democratic opposition, and ask voters to elect a Republican majority in the House of Representatives in 1982 to help him finish the job.
* The prospect of a "veto war" later this year -- at least on selected spending targets, such as Reagan waged effectively as governor of California -- could replace his present tactics of consultation and cooperation.
* While attention focuses on the net cuts in the budget battle, the more far-reaching impact might be in making the federal departments and agencies responsive to White House policy demands -- affecting the "how" of government spending more than the "how much."
Up to now, Democratic opponents concede, the Reagan team has wielded the White House's power to command attention masterfully for its economic plan.
"Whatever Reagan proposes is not going to be the last word on policy for this country," says US Rep. Michael D. Barnes (D) of Maryland. "But it's going to be the firstm word, or at least the first word anyone listens to."
The administration disclosed over the weekend a communications drive -- with business, Cabinet, and trade group spokesmen -- to sell the administration's economic plan to the nation.
To make its selling job easier, the Reagan team apparently has taken much of the rose tint out of its economic forecasts. Through more than 14 different computer runs, economic growth gains promised for 1982 (if the Reagan plan is adopted) shrank from 7 percent down to 4 percent. And the target of an inflation rate down to 6.5 percent by 1982 was adjusted to something over 8 percent, in trial runs.
This kind of expectation seems more plausible to professional economists who had begun to ridicule the early Reagan numbers.
The next adjustment awaited from the White House is a more sober appraisal of what is achievable in budget cuts.
"It's kind of scary that people don't realize Reagan's goals are already unrealistic," says Cary Leahey, fiscal analyst for Data Resources Inc., an economic forecasting firm. "If Reagan gets within $10 billion of Carter's spending target for 1982, he'll be doing very well."
Mr. Leahy notes that "if Reagan got a $12 billion nondefense spending reduction from Carter's $739 billion budget, that would mean an actual real decrease in nondefense spending in fiscal '82 over fiscal '81. That might not look like much to the financial markets, anticipating more. But there has never been a decrease of that magnitude since World War II."
Reagan apparently wants a $10 billion or $11 billion increase in defense spending above Carter's $184.4 billion for fiscal '82, Leahey observes. This in effect would push the budget up to $749 billion before cutting begins. To break even at Carter's $739 billion, cuts of $10 billion would have to be found, and $ 20 billion to cut Carter's budget to $729 billion.
"However, if Reagan protects $210 billion in social programs, and if he has a about $340 billion to get his $40 to $45 billion reduction from -- or one out of every 7 or 8 remaining dollars has to be cut. That's a tough test."
"In my own forecasts, I'm assuming something like $730 billion as an actual number that will come out at the end of the year," says Rudolf Penner, who served in the Office of Management and Budget under President Ford and now is budget policy analyst with the American Enterprise Institute. "By past standards, a $10 billion cut from Carter's budget would be an enormous achievement. There may be lower numbers printed through the year -- but you know how that works in Washington."
Democratic Congressman Barnes says: "The public doesn't realize it, but Carter purposefully made the '82 budget tight. For Reagan to come down to $729 billion would be quite an achievement."
The President knows he will not get much of what he's asking for, says Congressman Barnes. "And if he doesn't know that, [budget director David] Stockman knows it," he says. "Stockman served in the House and has a sense of what is politically achi evable."