Jimmy Carter vs. Inflation

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that will still be $43 billion above the likely totals for the current fiscal year. The ax will fall on a wide variety of Government activities, including, said Carter, "good, worthwhile programs—programs which I support very strongly." Exact proposals will not be submitted to Congress until the end of the month, but the activities known to be due for a slash include revenue sharing for states and cities, job-training programs, airport and highway construction, federal aid to education, health research. There will be a freeze on federal hiring, and the number of federal employees will drop 20,000 by next October. Saturday mail deliveries may well be stopped. Carter, who had pledged in his January State of the Union message to resist any Soviet move into the Persian Gulf by military force if necessary, seemed to draw back even on his plans to raise defense spending. "The Defense Department will not be immune from budget austerity," he declared, but he said that the nation will meet its financial commitment to its NATO allies. That implies an increase in spending, adjusted for inflation, of 3%—not significantly different from the official January budget figure, but well below the increase of up to 5% that Administration officials and some Congressmen had been advocating. The hope is that the difference can be made up by cutting "fat" from the Pentagon budget, rather than by hacking spending for military hardware or personnel.

Even so, the spending cuts apparently do not touch the fastest-growing portion of the budget, the major "entitlement" programs—Social Security, veterans' benefits, unemployment compensation —which are considered politically sacrosanct. Nor will the spending reductions by themselves balance the budget. If Congress and the Administration proceeded on the January plan, the $15.8 billion deficit originally estimated would swell to $25 billion or even $30 billion, according to estimates of the Congressional Budget Office. Main reason: inflation is raising the bills that the Government pays.

Revenues. They will be raised in two ways. Carter will ask Congress to institute a new withholding tax on interest and dividends. "It is intolerable for some to evade prompt payment of taxes," he said. That move alone would increase revenues by $3 billion in fiscal 1981, but much of the increase would not really be new money, merely cash that the Government would collect more speedily than now planned. Far more important, the President will slap a $4.62 per bbl. fee on imported oil, a move that he can take without any new legislative authority. Motorists will pay an extra 100 per gal. for gasoline at the pump, probably beginning in May. The President presented this mostly as a conservation measure to prompt Americans to reduce their "extravagant" use of gas. But another motive is to raise an extra $10 billion a year, to "be held in reserve" either to reduce the national debt or, if necessary, balance the budget. Translation: the extra money is needed to make sure that revenues exceed spending in the next fiscal year and produce a surplus now estimated at up to $3 billion.

Credit controls. They will be imposed, in a mild way. Said Carter: "Inflation is fed by credit-financed spending. Consumers have gone into debt too heavily. Businesses and other borrowers are tempted