(3 of 4)
In general, the Administration proposes that fiscal 1984 expenditures on "nondefense discretionary programs" be set at $115 billion, vs. $116 billion in the current fiscal year. Spending on these programs varies year to year according to congressional appropriations; in contrast, roughly $350 billion of the budget, including outlays for Social Security, food stamps and welfare, is determined by benefit formulas that are fixed by law and can be changed only by rewriting the statutes. Reagan's plan would force real cutbacks in many discretionary programs, because the budget estimates that the inflation rate will rise to 4.9% this year, a percentage point above the 1982 increase, and will settle at about 4.5% thereafter.
Compared with the size of the deficits, the immediate savings from some of these moves would be small: $3 billion in fiscal 1984 from skipping a pay raise for federal civilian employees; $5 billion to $6 billion from delaying COLAs in Social Security and other entitlement programs. But Reagan and his aides calculate that savings would compound dramatically in future years, because of the slowdown in increases. The five-year savings from the pay and COLA hold-downs are estimated at no less than $77 billion.
The freeze, nonetheless, would have an unequal impact. Military spending under Reagan's proposals would be $8 billion less than originally planned in fiscal 1984, but still $30 billion greater than in the current financial year. Funding would also be substantially raised for some civilian programs. Among them: aid to law-enforcement and antidrug programs, and to highway and airport construction.
To compensate for these rises, Reagan would make extra-deep cuts in other programs. Postal subsidies would be whacked to half of the $800 million of fiscal 1983 (probably necessitating sharp increases in postal rates), energy research would be cut to about half of this year's $4 billion, and operating subsidies for mass transit, including Amtrak, would go down substantially.
On the whole, recommended cuts in social spending will be less drastic than those the Administration proposed in its first two years. In fact, one section of the budget lists programs on which Reagan has given up trying to persuade Congress to enact deep reductions. One is the WIC (women, infants and children) nutrition program that Congress has twice refused to slash as deeply as the President wanted; he is now recommending that it be continued at fiscal 1983 funding levels. Says one Administration budgeteer: "We ran into two stone walls, so now we are throwing in the towel and admitting it."
Even so, Reagan is courting controversy by proposing major overhauls in two of the fastest-growing parts of the budget: civil service pensions, which are separate from Social Security, and health care. Expenditures for civil service pensions have rocketed from $2.8 billion in 1970 to $21.1 billion a year at present. Among other reforms, Reagan would require that new federal employees join the Social Security system, raise employee contributions for those already in the federal pension program from 7% to 11% of salary, and change the formulas for computing benefits. Estimated savings: $1.4 billion in fiscal 1984, $16.2 billion over five years.