Seeing `wink to wink' on deficit. Washington plays down large budget shortfall estimates
Washington — ``This is the year of the Big Wink,'' said Rep. Dan Rostenkowski earlier this year regarding the prospects of reducing the United States budget deficit. The White House announced yesterday the budget deficit is currently estimated to be only $145.3 billion for fiscal year 1989.
Hovering just $700 million below the $146 billion limit specified under the revised Gramm-Rudman target, this estimate, based on an optimistic view of the economy will save both Congress and the White House from the embarrassing position of having to cut spending prior to the November elections.
``I'm not sleeping too well,'' says James C. Miller III, director of the Office of Management and Budget (OMB) referring to a host of spending bills that are pending in Congress. Mr. Miller warns that there is no room for new spending unless cuts are made to make up the difference.
Outside budget experts maintain there are several ways the deficit can swell.
Drought aid. According to the OMB, drought relief is expected to cost $3.9 billion. But only last week, the Congressional Budget Office gave a different number, estimating the federal aid to farmers would cost $4.5 billion.
Bailing out thrifts. No one is sure yet how much it will actually cost to rescue ailing savings institutions, says Stan Collender, a budget analyst at Price Waterhouse, an accounting firm. But OMB is estimating it will cost $4.2 billion in FY 1989, and a total of $13.3 billion for FY 1988 and '89 combined.
Overspending at the Pentagon. This year the Department of Defense will overspend its budget by about $6 billion. According to some estimates, it will be $4 billion to $5 billion over budget in FY 1989 as well.
Pending appropriations bills. Ten of 11 spending bills have yet to pass Congress. Although most of these will not impact the budget either positively or negatively (in budgetese, they are called ``revenue neutral''), congressmen still have some opportunities to prove to their constitutents how much they really care for them.
According to Miller, one of the largest potential for spending increases is a pending drug enforcement bill that will cost 1.3 billion.
In addition, the Reagan administration has not included in its estimates a loss of $100 million in customs revenues from the elimination of tariffs under the Canadian Free Trade Agreement. This is because the legislation has yet to pass Congress.
Economic assumptions. So far, the administration has been on target - possibly even a little too pessimistic about the economy. This means that revenues are running higher as more people pay taxes and fewer collect unemployment.
Yesterday, the administration got another boost when it revised its estimate of the second-quarter gross national product upward to 3.5 percent. This will help since every decline of one percentage point in the unemployment rate reduces the budget deficit by $30 billion.
Only last week, the Congressional Budget Office released its own estimate of the budget deficit, figuring it at $153 billion. According to the CBO estimates, the economy will grow at only 3.1 percent.
Because of these differences, outside experts are skeptical that the actual deficit will come in below the required $146 billion. ``None of the surprises in the budget are ever nice ones,'' says Carol Cox of the Citizens for a Responsible Budget.
Mrs. Cox says the budget deficit will more likely run about $150 billion for FY 1989. Mr. Collender is even more pessimistic, expecting the deficit could reach $160 billion.
All of these outside estimates, however, are politically unimportant. According to the Gramm-Rudman law, Congress must reduce the budget deficit to $136 billion for FY '89. It also has a $10 billion cushion, meaning it can actually have a deficit of $146 billion. If it does not meet this target, spending cuts will automatically take place.
The next critical date for the budget is Oct. 15 when OMB again estimates current spending levels.
Even though the administration and Congress have buried the hatchet over the budget, the camp of presidential candidate Michael Dukakis used the numbers to attack the administration. ``The deficit is tens of tens of billions of dollars too high,'' said Rob Shapiro, deputy issues coordinator for the Dukakis campaign.
Hillary Chura contributed to this report.