By Robert J. Samuelson
Wednesday, July 16 1997; Page A19

It is a close call whether the present federal budget package – nearing final congressional approval – would be good or bad for the country. The gains and setbacks are finely balanced, and the exercise recalls an important essay written by Yale political scientist Charles Lindblom in 1959. He titled it "The Science of Muddling Through" and observed: "Democracies change their policies almost entirely through incremental [small] adjustments. Policy does not move by leaps and bounds." Precisely.

The press and politicians are in a constant state of denial about this obvious truth. We describe a world of momentous decisions, titanic combats and profound policy changes, when it actually consists of messy compromis\es, slight policy shifts and unintended consequences. The result is a continuous disconnect between how government works and how we portray it. The budget agreement is a prime example.

President Clinton and the Republican congressional leadership hail it as a landmark that would balance the budget – for the first time since 1969 – in 2002. This is a stretch. What's mainly driving the budget toward balance are lower-than-predicted health costs and higher-than-predicted tax revenues.

Susan Tanaka of the Committee for a Responsible Federal Budget points out that the budget would balance earlier if Congress and Clinton simply preserved present policy. Renew the existing 10 percent airline ticket tax. Keep Medicare premiums at 25 percent of doctors' costs (Part B). Continue existing "caps" on so-called discretionary spending. Leave everything else alone. The budget would balance in 2001 under the assumptions of the Congressional Budget Office. Over five years, deficits would be nearly $120 billion less than under the budget agreement.

The new budget delays a balanced budget by allowing Clinton and Congress to do what they like best: raise spending and cut taxes. Between 1998 and 2002, the extra spending (above existing spending ceilings and programs) would total $126 billion; that's partially offset by further savings in Medicare of $115 billion. In the same period, the net tax cut would total $85 billion. These amounts are tiny compared with all spending or taxes over five years (about $9 trillion). Still, Clinton and Congress are sprinkling favors to selected causes and constituencies.

Almost everything in the agreement is inflated for popular consumption. One advertised new program would provide more health insurance for uncovered children. The sponsors hoped to reach 5 million children; the CBO puts new coverage closer to 500,000. The Medicare changes are praised – and damned – as fundamental. Most aren't. Savings generally stem from lower reimbursement rates to hospitals, doctors and managed-care groups.

The budget also falls short in other ways. Consider:

* It doesn't forthrightly face the pressures of an aging society, which – unless Social Security and Medicare are changed – will sharply raise spending, taxes or deficits (and maybe all three) in the next century.

* The tax cuts mutilate the Tax Reform Act of 1986, which lowered top rates and broadened the tax base. Instead, Clinton and Congress are fashioning a system with high rates and many tax breaks that's more complex and cumbersome. Some specific cuts – the tax breaks for college tuition and the cut in the capital gains rate – are bad on their own.

* The budget doesn't end government's least effective or needed programs (from farm subsidies to Amtrak). As a result, government spends too much on its worst programs and not enough on its best.

* There has been no rigorous national security review, and defense cuts – reflecting the end of the Cold War – may have gone too far or focused on the wrong areas. In 1990 defense was 24 percent of all spending; by 2002 it's projected at 14 percent. Sen. John McCain (R-Ariz.) puts the amount of "pork barrel" spending in the defense budget at a hefty $5 billion.

Is there any good here? Well, yes. The broad commitment to a balanced budget marks a shift from the mushier concept of "deficit reduction." If deficits unexpectedly widen, this might induce Congress to restrain them. Perhaps Congress will even adopt, as Tanaka urges, new enforcement rules. These would compel spending cuts – or tax increases – if the costs of entitlement programs (such as Medicare) or tax revenues don't meet estimates.

As important, the Senate dealt with some issues of an aging society by slowly raising the eligibility age for Medicare to 67 and requiring that wealthier Medicare recipients pay higher premiums. If either proposal survives a House-Senate conference, it may mean that Democrats and Republicans can debate these matters without accusing each other of slaughtering the elderly.

Finally, the new budget would correct some past mistakes. The largest was Congress's decision last year to deny government benefits (under the SSI and food stamp programs) to legal immigrants. Changing the rules abruptly was hugely unfair. The new budget would partially restore benefits for almost 500,000 elderly and disabled immigrants. But it also would withhold benefits for new immigrants on the principle that their American sponsors – not taxpayers – should be responsible for them.

No one can say who "won" the budget agreement. Conservatives can argue that their balanced-budget rhetoric triumphed and that – measured by spending – government is shrinking. In 2002 spending is projected at 19 percent of gross domestic product; that compares with 22 percent in 1990. Liberals can gloat that virtually all the drop comes from lower defense spending. Government isn't really in retreat. In 1990 programs for the poor represented 1.7 percent of GDP; by 1996, they were 2.6 percent of GDP, where they would roughly stay through 2002.

Lindblom wrote that public officials avoid big changes because they don't "know enough . . . to avoid repeated errors in predicting the consequences of policy moves." Ignorance breeds caution; no one wants a calamity. Small errors can be reversed; small successes can be enlarged. This is half common sense, half timidity. A last-minute dispute could cause the budget agreement to unravel. Chances are it won't. Either way, we're muddling along. Whether forward or backward, only time will tell.