When the Cheering Died

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Critics contend that some of the proposed budget cuts are self-defeating. New York Investment Banker Felix Rohatyn voices a widely shared fear that states and cities will raise taxes to make up for some of the proposed reductions in federal aid for education, health, transit and job-training programs. That would weaken some of the stimulus to the economy provided by cuts in federal income taxes.

The principal attack on Reagan's program focuses on three main contentions: > The cuts strike unfairly at the poor. It is impossible to put a figure on how much of the $48.6 billion in proposed budget savings affects low-income people, both because of difficulties in defining who is "poor" and because some of the programs slated for the ax—mass-transit subsidies, for example—benefit several classes. But many of the deepest reductions, such as those in food-stamp and other nutrition programs, health, welfare and job-training plans, do come at the expense of low-income groups. Liberal Democrats vehemently argue that the Reagan tax reductions will save far more money for the affluent than for the needy.

The opposite side of this issue is that Government domestic-spending programs have for decades been aimed largely at increasing the share of national wealth that goes to low-income groups. Thus any serious attempt to reduce federal spending must focus largely on programs that benefit low-income groups. However, the poor will be helped more than any other group by the lessening of inflation and the increase in economic growth that the Reagan plan is supposed to produce. Even some Republicans appear to feel that the Administration is going too far. In a meeting of the Senate Labor and Human Resources Committee last week, Republicans Lowell Weicker of Connecticut and Robert Stafford of Vermont joined six Democrats in rejecting $2 billion of proposed reductions in education programs, legal services for the poor and federal assistance to help low-income people buy fuel.

> The cuts exempt some of the programs for which spending is growing most rapidly. Here the critics—and they include a number of conservative Republicans —have a solid point. Reagan has indeed exempted many major "entitlement" programs, those to which people are automatically "entitled" if they fit certain criteria. These include Social Security pensions, numerous veterans' benefits and Medicare. Such programs are "indexed" to inflation: the faster the Consumer Price Index rises, the more benefits increase—even though the CPI is not a totally accurate measure of the cost of living. The CPI is, for instance, heavily weighted to reflect increases in housing costs, but few of the elderly living on Social Security pensions buy houses.

The Administration has never given a satisfactory explanation for exempting these programs, even though eliminating indexing could save $22 billion in 1982. It argues that Social Security pensions and veterans' benefits form part of a "social safety net" protecting the "truly needy"—though many of the beneficiaries hardly meet any reasonable definition of that term. The real reason is plainly political: to keep millions of the vociferous middle-class elderly and veterans from attacking the Reagan budget.

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