Any real shrinkage in US deficit requires an increase in taxes
THE nation got its first look at the fiscal 1988 federal budget last week. That's the year that begins on Oct. 1, 1987. More than the usual cynicism greeted this document. The President's priorities and those of the Congress have been divergent enough during the first six years of his presidency that the original budget proposals have been severely altered by Congress.
With both houses of Congress now back in Democratic hands, that is even more apt to be the case this time around, with one proviso: The Democrats alone cannot enact a tax increase (because of the threat of presidential veto), so the Democrats should and will be held more accountable for the budget that does emerge later this year.
From the beginning, Mr. Reagan has wanted to scale back the domestic side of government while spending more on defense. The last year or two the Defense Department requests have had to be trimmed, and the Democrats are now asking what military strategy actually lies behind each weapons procurement system.
The domestic side of government has already been cut back as much as any reasonable consensus will allow, although a lot of time will be spent talking about relatively small amounts of funding to be added to or subtracted from the whopping budget total.
It may help to keep a few basic figures in mind as you hear more about the budget during the year. It just tops the $1 trillion level, which is an easy figure to remember.
Government spending will be about 24 percent of gross national product, almost 2 percent more than when Reagan came into office.
But this increase has been more than accounted for by the increase in defense spending from 5 percent to almost 7 percent of gross national product.
We are still spending a smaller portion of total output on defense, however, than we were throughout the 1960s. The big increase in government commitments came during the years of the Great Society.
The big budget deficits did not appear, however, until the 25 percent tax cuts of 1981-83. Whatever good they did for the economy, they were clearly cuts that the budget process should not have allowed to happen. Until taxes are ``restored'' somewhat to their pre-1981 levels, it is difficult to see how the Gramm-Rudman targets can be met on any honest basis of accounting.
This year the Office of Management and Budget proposes to sell off some government assets - some $10 billion-plus. That is a one-time phenomenon which in no way permanently meets the deficit reduction targets set under Gramm-Rudman.
Back to the $1 trillion in spending. Roughly 30 percent of this is for defense, another 30 percent for social security and medicare payments, and almost 15 percent for interest on the national debt.
This adds up to 75 percent of government spending. Thus, all the other programs we are going to hear so much about should be kept in some kind of perspective - they add up to only one-quarter of the budget. Social security is sacrosanct. The interest has to be paid. Defense will be trimmed slightly, but it won't vary much from the 30 percent estimate.
This is why the other, smaller programs loom so large in Reagan's plans - they are the only places to hold the budget in check.
The irony of it is that all the other activities of government are not going to be substantially altered from their present levels. Reagan knows this. If the budget deficit were taken only half seriously, a tax increase would have been planned some time ago.
The older this business cycle gets, the more damage can obviously be done to it by a poorly planned tax increase. But not to make plans in 1987 to close the gap between income and outgo is to make it more difficult in whatever year that gap is eventually dealt with.
This is the area where most of the discussion about the budget should take place, not in the crevices of individual programs which are not going to make a significant change in the total figures. But who is willing to step up to the bat on this one?