Deficit is falling - slightly - by itself
Boston — While Congress thrashes out ways of cutting the budget deficit, the budget deficit is shrinking modestly by itself. At least that's how several financial economists see it in fiscal 1984 after examining actual revenue and spending numbers for the first four months of the fiscal year that began Oct. 1, 1983.
They hold that rising government receipts and slower spending will trim the deficit by more than $20 billion from the official forecast of $183 billion. That, curiously, is not much less than Congress is likely to reduce the deficit in fiscal 1985, the first year of the $100 billion ''down payment.''
Asked about such somewhat more optimistic deficit forecasts, a spokesman for the Office Management and Budget (OMB), says, ''They are all absolutely wrong. They are using the wrong seasonal adjustment.''
That official comment doesn't bother Gert von der Linde, chief economist of the Wall Street brokerage house of Donaldson, Lufkin & Jenrette. Along with colleague Richard F. Hokenson, he projects the deficit this year at $150 billion to $160 billion.
''They are trying to impress Congress as to how serious the problem is,'' Mr. von der Linde says. ''They are not interested in deficit numbers showing any improvement.''
In other words, he figures OMB wants to keep a high-numbers hot foot on Congress to encourage its budget trimmers to make progress.
Von der Linde has conducted similar budget analyses in the past that produced results differing from those of OMB. He recalls that his first run-in with ''officialese'' was in 1971, when Treasury Secretary John Connally forecast the deficit at $40 billion, a horrible number in those days. Von der Linde forecast
Last year, he recalled, the OMB insisted for a long time on its deficit projection of $210 billion, and von der Linde was projecting $190 billion to $ 195 billion. The deficit actually came out at $195 billion, though the reasons for the lower deficit were different than those he cited, he admits.
In reaching his deficit estimate for the current fiscal year, he did not seasonally adjust the numbers, he notes. What he did find is that the total deficit for the past five months (including the last month of fiscal 1983, September) was 16 percent smaller than for the same months in 1982 and 1983. If those trends prevailed for the remaining eight months of this fiscal year, the deficit would be $164.3 billion.
He also discovered that outlays through January were up only 3.1 percent year-over-year vs. the budgeted growth rate of 7.3 percent.
The OMB spokesman admitted that outlays are running ''$3, $4, $5, $6 billion'' below estimates. But von der Linde puts the shortfall in spending at perhaps $14 billion for the year. He recalls how Presidents Ford and Carter were unable in fiscal years 1976 and 1977 to keep spending up to the budget levels.
Also, revenues are running high with the rapid recovery in the economy. Receipts are 8.9 percent higher than for the first four months of fiscal 1983, compared with an 11.6 percent increase in the budget for the entire year. That's because social security payments in the last months of the year are relatively low since high-income individuals' earnings are higher than the annual tax base of $35,700.
Individual income-tax receipts are coming in 2.9 percent higher, compared with 1.5 percent expected in the budget. Excise-tax collections and customs duties are also running better than budgeted, von der Linde maintains. Over the year, he estimates, all these factors could reduce the deficit by $13 billion.
The OMB spokesman says, by contrast, that ''revenues are on track.'' But, he admitted, if the first quarter gross national product ''flash'' estimate (an early calculation of the nation's total output of goods and services) is higher than anticipated in the budget, the OMB might revise upward its revenue estimates.
''We will just see,'' says von der Linde. He says that when the various federal departments were drawing up their budgets for fiscal 1984 in 1982, the assumption was rapid inflation. So they protectively estimated their expenses at a higher level than has been occurring.
Edward Guay of CIGNA economics department, Hartford, Conn., also has looked at spending and revenues for the early months of fiscal 1984, and he too sees a deficit ''below $160 billion.'' Other economists have made similar estimates.
Another New York economist, Michael J. Hamburger, expects inflation to shrink the budget deficit in real terms. In making his calculations, the former OMB economist deflates each year's current-dollar deficit to 1972 value dollars and then subtracts the effect of inflation on the real value of the stock of government bonds outstanding at the beginning of each year.
In '72 dollars, total federal debt outstanding ran around $370 billion in the years 1951-55; about $350 billion in the years 1962-65; about $320 billion in 1971-75; around $400 billion 1977-81; and, given no change, it will increase about $55 billion per year or up $330 billion in the six fiscal years 1982-87.
Despite their points, von der Linde and Hamburger regard the deficit as far too big and are rooting for its reduction by Congress and the White House.