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As passed by the House, the Gramm-Latta budget slashes $50.5 billion from the $739.3 billion that the Carter Administration had proposed spending in fiscal 1982. The cuts include some $8.8 billion in education funds, $13.8 billion in var ious welfare programs, $7.7 billion in energy projects and $1.8 billion in transportation supports. It raises military outlays by $4.4 billion (to $188.8 billion, or 27.4% of the budget). Gramm-Latta includes a three-year individual income tax cut program that would cost the Government $51.3 billion in lost revenue in fiscal 1982. The overall result would be a 1982 deficit projected at $31 billion (this year's deficit is now estimated at $54.9 billion).
Reagan's big win gives him a strong chance to prevail in the two major un certainties still facing his economic pack age: 1) Will Congress stay within the dollar limits of the budget resolution it is now adopting? 2) Will it give the President the kind of tax program on which the budget is based? The first question should theoretically be answered in the President's favor through the "reconciliation" process. Under this, the budget committees in each house are empowered to insert cuts into any committee bill that exceeds the spending limits set out in the budget resolution and include them in a final spending package for floor approval.
The tax uncertainties are greater. The official White House stance has long been that it will not compromise on the so-called Kemp-Roth plan: a threeyear, 10%-a-year cut in individual income tax rates; some retreat, however, had seemed almost inevitable. Now, the size of Reagan's budget win has given the President and his advisers even more reason to hold firm in the real hope of getting just what they want. In all likelihood, any initiative to ward a compromise will have to come from the demoralized Democrats. Asked about that, a smiling Reagan told one Democrat last week: "We're here and willing to listen." One small modification being talked about on Capitol Hill was to seek Reagan's agreement on reducing the 10%-a-year cut to 8%. In return, the Democrats may be willing to slash the marginal tax rate on unearned income (interest and dividends) from its current 70% to 50%, a move that would spur savings and investment far more than would Kemp-Roth alone.
"There will be tougher votes down the road," predicted Republican Michel as he argued for Reagan's budget. In deed there may be, as final program cuts and tax proposals are decided. But, noted a happy White House strategist about the sentiment in Congress: "It's still moving our way." After last week's historic vote, that was an under statement.
— By Ed Magnuson.
Reported by Laurence I. Barrett and Neil MacNeil/ Washington