A lively White House debate over Reagan's '84 budget
Washington — Some of President Reagan's top economic aides speak out with a candor that would have been unimaginable a year ago, when the administration moved in lockstep toward the President's goals.
Tax hikes? Cuts in defense spending? Both are an anathema to Mr. Reagan, who not too long ago vowed it would take a ''palace coup'' to make him raise taxes again.
Indeed, White House officials say the vacationing President is angry at public suggestions by administration officials, including Treasury Secretary Donald T. Regan, that selective tax hikes may be required to cope with budget deficits. Such proposals, say White House aides, get nowhere with Reagan, who on one occasion is said to have pounded the table with his fist at the talk of tax increases. Presidential pique, however, cannot banish the expected conjunction this year of meager economic growth, high unemployment, and a budget shortfall in the $200 billion range.
No palace coup is in the offing. The President's men remain loyal - to Reagan himself if not to all the policies he espouses. What motivates his senior economic advisors is a desire to prevent an impatient Congress from wresting economic policy out of White House hands and relegating the President to the sidelines.
All signs point to 1983 economic growth much slower than the 3.1 percent the White House predicted in September. Top administration aides now believe 2 percent, or possibly even less, is realistic.
Growth that slow implies several things, all of which give Reagan problems. Unemployment will remain high, perhaps in the area of 10 percent through 1983.
Tax receipts could fall far below government outlays, resulting in a fiscal 1984 budget deficit near $200 billion. Yet 1984 was the year the President originally had hoped, on the strength of his economic policies, to balance the budget.
Accepting the stringent forecast that his top advisers now press on him would be tantamount to admitting that his policy mix has not worked. More damaging, some aides argue, would be to paint too rosy a glow on the economic forecast the President will present to Congress and the nation at the end of January. Whatever growth, revenue, and spending estimates Reagan makes will shape the fiscal 1984 budget he sends up to Congress Jan. 31.
Too optimistic a forecast would lock the White House into a budget strategy so unrealistic that the 98th Congress likely would sweep it aside and fashion its own economic blueprint for the forthcoming year.
From his vacation headquarters in California, the President says his administration's forecast will be ''conservative,'' though his press secretary stresses that Reagan has not yet decided on details.
Two methods will be used to measure the economy's growth rate this year, compared with 1982. One method makes the record look better than does the other.
The first method lumps together all the ups and downs of 1982 and strikes an average growth figure for the year. Though all the results are not yet in, it looks as though the economy contracted last year.
Do the same for 1983. Then compare this year's average growth rate with that of 1982. By this year-over-year measurement, as analysts now see it, 1983 is likely to show overall growth of 2 percent or less.
The second method calculates growth from the fourth quarter of 1982 to the fourth quarter of 1983. Last year's final quarter - October through December - was very weak, showing a decline by preliminary measurement of 2.2 percent. The final quarter of 1983, by contrast, is expected to be strong. Measuring from a negative fourth quarter to a strong fourth quarter, as White House aides now see it, should yield a growth figure of more than 3 percent.
Reagan's top economic aides agree on the essential first step - to base the fiscal 1984 budget on realistic growth assumptions. If the President agrees, the first battle for credence will have been won.
Consensus breaks down, however, over how to tackle the deficit. Mr. Regan suggests selective tax increases plus spending cuts. Commerce Secretary Malcolm Baldrige rejects the tax hike idea, but contends that all departments - including defense - are candidates for spending trims.
Budget director David A. Stockman, whose office must knit together the budget document due at the end of this month, also favors cutting the growth rate of defense spending.
Reagan has a couple of weeks to weigh all this before putting the stamp of presidential direction on a budget document certain to be the focus of national debate over the month ahead.