With or without David A. Stockman, President Reagan faces a tough three years on the dominant issue of his second term: the budget deficit. The spotlight now turns on who will replace the energetic and outspoken budget director, who led the President's charge against big government. Whoever it may be, economists and political observers say Mr. Stockman's successor will face the increasingly difficult task of controlling the unrelenting federal deficit.
The reasons are clear: Congress, backed by the public, is reluctant to make more cuts in domestic spending. The Democrats, facing election in 1986 and not wanting to be seen as soft on defense, are not willing to chop military expenditures further. And Mr. Reagan, also with public support, remains firmly opposed to increasing taxes and to reducing defense spending.
``This is the last time the administration can go through the exercise of cutting defense spending,'' says Barry Bosworth, an economist at the Brookings Institution. ``In the future, increases will come from the need to maintain the equipment now being bought.''
``Next year, says Mr. Bosworth, [the administration] will be left either with saying the budget deficit doesn't matter or accepting the only remaining way of doing something about it -- increasing taxes.''
Mr. Bosworth says the federal debt will have quadrupled in this decade, increasing from $700 billion in 1980 to more than $2.5 trillion by 1990. ``Stockman's leaving is a negative, because he kept the focus on the deficit in the administration and that will be lost,'' he says.
It is speculated that Stockman, aside from personal reasons for leaving the administration -- family concerns and a desire to earn more money -- saw the political writing on the wall and left believing little more could be done.
``It will be harder for any budget director,'' says William Schneider, a political analyst at the American Enterprise Institute. ``Even Stockman would have a tough time. He probably knew the administration would not countenance a tax increase, so there would be three years of big trouble.''
Stockman vigorously pursued the President's goal of shrinking the size of government. His phenomenal mastery of the budget and of the congressional budget process enabled him in the first term to push through Reagan's radical program, including the biggest defense buildup in peacetime.
But the results were mixed. Growth of nonmilitary spending slowed almost to a halt when inflation is taken into account. Reagan thus achieved his desired reduction in many domestic programs.
But federal government has not shrunk. The priorities have simply shifted away from domestic programs to national defense. Federal spending has reached more than $900 billion annually, or about one-quarter of the gross national product. And the deficit now accounts for between 4.5 and 5.0 percent of GNP.
``History will be less kind to Stockman than instant analyses suggest,'' comments Urban Institute economist Robert D. Reischauer. ``We have seen a tremendously skilled firefighter whipping his baton, and admired his command. But that ignores that he is one of the people who has set the barn on fire.''
Stockman is praised even by critics of the administration because he maintained a certain independence from the White House, often getting into trouble because of his candor.
Most recently he vented his frustration in what were meant to be off-the-record remarks to the board of the New York Stock Exchange. The nation's books, he said, are ``wildly, dangerously, intractably out of balance. If the Securities and Exchange Commission had jurisdiction over the government, he said, ``many of us would be in jail'' because of ``accounting gimmicks, evasions, half-truths, and downright dishonesty in our budget numbers, debate, and advocacy.''
Stockman's departure Aug. 1 is not seen as critical if the House and Senate budget conferees, after their meetings with the President this week, manage to hammer out a budget compromise in the next three weeks.
To the extent that a budget package for fiscal 1986 is not nailed down and the administration has to depend on an item-by-item authorization process -- which would extend into the fall -- the loss will be more severely felt.
One legacy of the Stockman era is to centralize control of the budget in the Office of Budget and Management and to impose a top-down budget system on government agencies, making them less relevant in the budget process.
``Through his skill and using the computer resources of OMB, he has restored a spirit to the people at OMB and once again made it an elite presidential agency,'' says presidential analyst Stephen Wayne.
Some economists suggest that, with a new director at OMB, the agency may revert to the older pattern, where lawmakers seek to deal directly with the President, his White House chief of staff, or Cabinet secretaries to get budget problems resolved.