'Budget creep' may throw wrench into carefully tuned Reagan plan
In a first test of political will over his economic program, President Reagan ordered administration budget cutters to find another $3 billion to $6 billion in spending cuts on top of the $41 billion already sought.
The alternative was to give ground on the $695.5 billion budget target for fiscal 1982, which he set just a week earlier.
The White House blamed the need for additional cuts on faulty spending estimates in President Carter's 1982 budget proposal. The Reagan team discovered the problem as they double-checked their calculations before sending the detailed program to Congress March 10.
Neutral economic forecasters contend that Mr. Reagan will be pushed toward an eventual 1982 budget of between $725 billion and $730 billion. This is about $ 30 billion above his current target and only $10 billion to $15 billion below Carter's $739 billion estimate.
They reach this "realistic" estimate by pointing out that Carter's budget was already very tight (and "reasonably honest" adds former Ford administration budget expert Rudolf Penner). They also say that economic trends may float government spending higher than Reagan estimates, and that Congress will give the White House less than it asks.
This week's call for more cuts is likely to be the beginning of a series of revisions, say impartial budget experts. They note that Reagan will have to deal with pressures to shrink the apparent difference between his and the Carter '82 budget before Congress acts on his program this summer. Reducing that gap means revising budget estimates upwards.
By the time the President is through dealing with the upward creep of forecasts and spending estimates, and with Congress whittling at his spending and tax goals, he may have to resort to veto threats and the White House "deferral" and "recision" procedures granted under the 1974 Budget Act to replace the old impoundment power.
Data Resources Inc., an economic forecasting firm, calculates Congress will buy "about half" of Reagan's program on tax and spending reductions, yielding a likely eventual budget for '82 of $724.6 billion. Budget experts at Brookings Institution and the American Enterprise Institute and the Federal Reserve Bank of New York come to similar conclusions.
The slippage in budget numbers publicly embarrasses the Reagan administration , which has prided itself with its exactitude in financial matters. At risk is a loss of confidence in the economic underpinning of the program, which already is under attack for a mismatch between monetary and economic growth targets.
"To an old Office of Management and Budget person like myself," this is a non-story," says Mr. Penner. "Every month you move things up and down a few billion dollars. The Reagan people were too busy at the outset to check the Carter spending estimates."
But, Penner continues, "It becomes non- trivial because Reagan wants to make it up." President Carter finessed a steady up-creep in his 1981 budget projects from $616 billion to $660 billion over a 12-month period by simply publishing the new estimates, he says.
Three factors hike -- or less often, lower -- spending estimates. On so-called entitlement programs, such as social security, forecasts can misfigure economic trends or more people may retire. Natural disasters or other events can alter nonentitlement spending. Or spending rates may run faster or slower than the Office of Management and Budget expects -- a problem confronting the Reagan administration. The Ford administration at one point found spending running behind their budget target, Penner points out.
Re-estimations of the budget likely will continue to beset the Reagan administration, its spokesmen say. They may not be able to continue reaching for another few billion to cut, as they attempt to hike defense spending while cutting other programs below current services levels.