The budget predicts less red ink but high unemployment
In a State of the Union speech a President can describe his program in appealing generalities, but in the budget he must translate vague words into hard numbers. Ronald Reagan's budget for fiscal 1984 suffers more than a little in that translation. It features a spending freeze that really is not a freeze, and a plan to reduce deficits that would still leave them distressingly high. Moreover, it bases all calculations on a set of predictions about unemployment, output and interest rates so gloomy as to make clear that if the economy is "on the mend," as Reagan proclaims, the mending will be excruciatingly slow.
For those very reasons, however, the budget is far more realistic than the first two that Reagan submitted, which combined heady estimates of expenditure savings with overly optimistic economic forecasts to produce deficit predictions that wandered into dreamland. The highlights of the new document:
SPENDING. Estimated at $848 billion in fiscal 1984, which starts Oct. 1, up slightly more than 5% from the $805 billion now expected for the current fiscal year. The increase would be only a bit above the anticipated rate of inflation, thus allowing Reagan to claim that he has in effect "frozen" expenditures in real terms and cut them $32 billion below what would be paid out if all Government programs continued unchanged. But the so-called freeze would be extremely uneven. After adjustment for inflation, military outlays would jump 9%. Civilian spending in real terms would drop 3%, but only if the Administration is correct in calculating that even a creeping economic recovery will reduce payments for unemployment compensation and farm-price supports by $15 billion. That drop is not included in the $32 billion of expenditure savings because it is supposed to be automatic, but it is the biggest deficit-reducing item in the whole budget.
REVENUES. Calculated to total $660 billion during fiscal 1984, up more than 10% from the current financial year and $10 billion more than would be collected under present tax rates. The extra $10 billion would be provided primarily by increases in Social Security payroll taxes that have been recommended by a bipartisan reform commission and a new plan to make workers pay income taxes on a portion of the medical insurance premiums that employers pay for them.
THE DEFICIT. Will soar to $208 billion in fiscal 1983, nearly double last year's record, $110.7 billion. For fiscal 1984 the deficit would drop to between $188 billion and $189 billion; by Reagan's figuring, that would be $42 billion less than if Congress enacted no changes in spending and tax programs. But in fiscal 1985 the deficit would rise by $5 billion, to $194 billion, largely because tax collections, held down by the final stages of Reagan's 1981 cuts, will not rise fast enough to match increases in spending.