As a major first step toward his goal of balancing the budget by fiscal 1981, President Carter has tentatively proposed increasing federal spending in fiscal 1979 only enough to keep up with inflation.
A budget projection for fiscal 1979, published last month, sets a spending limit of $498.6 billion, an increase of 7.72 per cent in dollar terms over fiscal 1978.
But an official analysis obtained yesterday by The Washington Post forecasts an inflation rate of 7.58 per cent in the year starting Oct. 1, 1978 - substantially higher than the 6.9 per cent expected in fiscal 1978 and then the 6.04 per cent in the current fiscal year, 1977.
Subtracting the inflation factor from the budget increase shows the real growth in the proposed fiscal 1979 budget would be only 0.14 per cent, according to the analysis.
Carter administration officials have repeatedly referred to the fiscal 1979 budget as the first over which they will have total control.
Although the fiscal 1979 target is still tentative, officials said that it is a good approximation of what Carter wants to accomplish. The fact that there is virtually no increase in real terms - compared with a 7 per cent increase in fiscal 1978 and an average of 3.4 per cent in the prior 17 years - is intended to put a tight squeeze on every department.
"This is the only route to a balanced budget in fiscal 1981," an official said.
One of Carter's most-often-stated campaign promises was a balanced budget by the end of his first term as President. Many observers, including economists for the Brookings Institution and the Congressional Budget Office, have been skeptical about the real chance of a balanced budget if Carter also tries to attain other goals, including reducing unemployment to 4 per cent.
But Carter as President has reiterated his expectation of a balanced budget. At the town meeting in Yazoo City on July 21, Carter told a questioner that, "with proper management (and) if we are fortunate, we can have some tax reduction and also balance the budget by fiscal year 1981.
Yesterday, Office of Management and Budget Director Bert Lance told reporters that there had been an additional shortfall in expenditures for fiscal 1977 of $2.4 billion in the month ended July 31.
That reduces the estimate of expenditures to $404 billion, or $12.6 billion less than the administration calculated in February.
Lance said the administration couldn't conclude whether the shortfall is a good thing or bad, but said "we'd rather be accurate" with the estimates.
"We are looking to find the reasons [for the shortfall] and identify them. We've had a series of discussions with Cabinet folks . . . But it's a perplexing problem, and it seems to stay with us," Lance said.
On the good side of the shortfall, Lance pointed to a reduction in the deficit. For fiscal 1977, it is not estimated at $45.7 billion, or more than $22 billion lower than the $68 billion deficit first projected by Carter. Affecting the deficit estimate, in addition to the shortfall, is a changed revenue calculation of $10 billion resulting from cancellation of the $50 per person tax rebate proposal.
As to the potentially negative side of the shortfall, Lance - in response have a dampening effect on economic expansion. But he said that he personally did "not know to what extend [the shortfall] would have an effect on the economy."
If the shortfall turns out to be permanent, "we might consider other steps, a tax adjustment and that sort of thing," the OMB director declared.When pressed, he warned against interpreting that comment as a commitment to a new tax cut.
OMB officials later said that "no one will be surprised" if the shortfall turns out to be as much as $14 billion on Sept. 30, at the end of the fiscal year.
The budget shortfall first turned up in mid-1976 and baffled experts in both the Ford and Carter administrations. Lance said that one theory is that government departments overestimate what they can actually spend, because under the new congressional budget process, Congress sets budget ceilings that are not easily pierced.
Thus, he suggested, government bureaucrats play it safe by boosting their estimated departmental ceilings. The shortfall, he pointed out, is not concentrated, but runs pretty much across the board.
Lance refused all comments on his personal finances as "inappropriate" while the comptroller of the currency is investigating some of his affairs.
Even when that is completed, he said, he will refrain from comment on bank interest rates because he will still own several bank stocks, even after the projected sale of his block of shares in the National Bank of Georgia.