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>Reduce funding for the Farmers Home Administration, which extends credit to people in rural areas who have trouble borrowing elsewhere, by $2 billion in fiscal 1982. In addition, force the Rural Electrification Administration to borrow in the open market, rather than at much lower Government-guaranteed interest rates.
On and on goes the list of potential cuts: the black book suggests reductions in federal aid to the arts, in support for public TV, in mass transit, in postal subsidies and in the space program, even though both Reagan and Stockman are ardent space buffs. Not even the most popular federal programs are spared. In the case of Social Security, the Administration would leave basic retirement benefits untouched. But it is considering scrapping the $122 minimum monthly benefit to retirees who have paid very little into the system and payments to students whose parents have died, as well as reductions in disability payments. Potential savings in fiscal 1982: $2.3 billion.
In several cases, the black book suggests reductions that would be low at the start but grow dramatically in future years. Savings from imposing a limit on Medicaid spending, to take one striking example, are projected to multiply from $100 million this fiscal year to $1 billion next year and $5 billion in fiscal 1985. Speculative though such estimates are, the mere attempt to make them stands the normal budgeting process on its head. Traditionally, the Government starts programs for which spending is relatively small in the early years but snowballs drastically as time goes by. The Reagan Administration is trying to throw that process into reverse.
Ambitious though the Administration's plans are, there are limits to them. Reagan noted ruefully in his TV speech that all the cuts that he proposes will merely make federal spending lower than it otherwise would be, not lower than it is now; total spending will continue to grow because of inflation, however much the White House and Congress may hack and trim. Moreover, there is one gigantic exception to the Administration's cut-and-slash plans: military spending. Secretary of Defense Caspar Weinberger is likely to propose, and Reagan may well recommend, a fiscal 1982 defense budget of $220 billion, almost $24 billion above the figure Jimmy Carter had suggested and $55 billion more than the Pentagon's current budget. That would gobble up more than half the cuts that Reagan is expected to propose in civilian expenditures, even in the unlikely event that Congress enacts every last one of his recommendations.
All of which casts doubt over the other fundamental part of Reagan's economic program: sharp cuts in personal and business taxes. In the President's view, taxes are holding back business growth and feeding inflation quite as much as the explosive growth of federal spending. In his TV speech, he reiterated his familiar pledge to recommend a 10% slash in income tax rates in each of the next three years, plus more generous depreciation allowances for business, and insisted that the reductions must not be held up to await the outcome of the congressional budget debate.