Deficits can be cut
Budget Director David Stockman now says that Wall Street and the nation should not be too worried about the size of the projected budget deficits. He is right in a sense. The deficits are not alarming when viewed in relation to the size of the budget or as a percentage of the total economy. The $91 billion deficit projected for fiscal 1983 can be attributed in part to the recession, moreover, and is more tolerable in that context. But it would be irresponsible for the US government - the administration and Congress - to abandon the goal of sound fiscal practice and helplessly accept what are expected to be record deficits totalling at least $300 billion over the next three years.
For one thing, in the absence of adequate savings on which the private sector can draw for capital, the deficits may have decided impact on the economy, forcing heavy government borrowing and helping to push up interest rates. They tend to feed fear and uncertainty. Most important, however, is the poor example which the government sets when it does not live within its means. Why should future generations be made hostage to improvident spending and all the problems flowing from it? If there are still large areas of waste in federal spending - and there demonstrably are - they should be cut back now, regardless of deficit size.
To his credit, President Reagan has managed to slow the growth of government. The budget increase for fiscal 1983 is only 4.5 percent, the smallest in recent years and less than the rate inflation. This is a welcome change pointing to the possibility of more responsible government in future. But it is only a single step.
We continue to believe there are many actions which should still be taken in Congress to go beyond the White House budget. While we will comment in detail on these at a later date, here are some broad areas for reform to which the lawmakers ought to give attention:
* The military budget. The administration has asked for the highest defense spending in history, a whopping increase of 18 percent. No one disputes the need to upgrade America's forces, a process begun even in the previous administration. But every dispassionate expert who has looked at the military establishment decries the waste there and documents areas where billions of dollars could be cut by more cost-effective defense systems, elimination of obsolete military bases in the United States, better control of cost overruns by the defense industry, and stretching out of that 18 percent increase over a longer period.
* Entitlement programs. Mr. Reagan has again slashed many social programs, including food stamps and child nutrition. But such large categories as social security (which affect almost every American) have gone untouched while a presidential commission works on possible reforms. An early measure might be to key benefit adjustments to average wage increases when these are rising less than the CPI; another would be to integrate civil service workers into the social security system. Veterans' benefits - an overly generous system that is open to widespread abuses - should also be looked at with a view to reductions.
* Pork barrel projects and subsidies. These are in their own way a form of ''entitlements'' to lawmakers and their constituents. They include dams, canals , and other water resource projects that are said to be required for flood control, water supply, and so on, but are of dubious value and in some cases do more damage than good. Also, farm subsidies for tobacco, feed grains, and other products.
* Tax expenditures. These special exemptions and deductions are estimated to cost the federal government some $200 billion a year; that is, revenue which it does not raise. Among the things which could be reduced or eliminated are consumer-credit interest deductions; deduction of mortgage-interest on second homes; and special tax breaks to oil companies. Tax reform in the direction of fairness and equity is long overdue.
If Congress is unwilling to tackle these and other areas for reduced spending , an alternative is to adopt tax increases. This is not too palatable at a time of recession and Mr. Reagan declined to follow the advice of his aides to take this route. But this is an obvious area for consideration. The tax cut planned for fiscal year 1984 could be postponed, for instance. Excises could be raised on cigarettes, alcohol, and luxury goods. Natural gas could be decontrolled and a tax levied on windfall profits. Also, revenue from an increased federal tax on gasoline could help out the general Treasury or be used for some specific purpose such as road and bridge reconstruction.
However, if Congress were to opt for reducing military and other spending and introducing tax changes, it would be possible to make less drastic cuts in areas that may be penny-wise and pound-foolish. It is doubtful, for instance, that the nation's best interests are served by cuts in energy conservation programs such as those promoting home insulation. Reducing grants for students from poor families also strikes us as short-sighted.
We applaud the general direction of the President's new budget. But we think both White House and Congress can do more. The objective should not be just to reduce the size of federal government but to make government more efficient and responsive to society's genuine needs. This means cutting with care, discrimination, and a commitment to impartiality.