Because of an unexpected surge in personal income tax payments, the Carter administration yesterday reduced its estimate of this year's federal budget deficit to $33.2 billion.
The new figure is $4.2 billion less than the administration's January estimate of $37.5 billion. The estimated deficit for fiscal 1980, which begins Cot. 1, was also lowered, by $600 million to $28.4 billion.
The changes basically reflect a stronger-than-predicted economy for the last five months. Higher incomes, and perhaps some shift in the timing of individual tax payments, have pushed up government receipts by $5.8 billion according to James McIntyre, director of the Office of Management and Budget.
McIntyre indicated he was not all that pleased with the smaller prospective deficits, however, because of their source. "The strength in the economy is certainly not all good news," he said. Both the fiscal policy of the administration and the monetary policy of the Federal Reserve are "designed to slow down the economy" to reduce inflation, he explained.
Both government and private sector economists have been surprised at how robust the economy appears to be right now. Virtually all economists are predicting that the economy will slow later this year, and a large number expect a recession.
The deficit figure for this year dropped less than the increase in tax receipts because spending estimates have gone up, too, primarily as a result of events in the Middle East. Total outlays for fiscal 1979 are now put at $495 billion, compared to the $493.4 billion estimated in January.
Partly because of spending that may result from the new peace treaty between Egypt and Israel, the contingency allowance for 1979 was increased by$100 million, and by $600 million for 1980. Administration officials have said that economic and military aid to the two countries could total $4 billion over the next three yeats.
Also, two destroyers and a number of F-16 fighters, which were being built for Iran, will be purchased instead by the Navy and Air Froce Respectively, increasing defense spending by about $500 million this year.
Droughts in the Southwest and winter storms and flooding in the Northeast and Midewst will mean more lending to businesses and farmers under the Small Business Administration's disaster loan program McIntyre said. That will add about $500 million to outlays.
And a drop in oil company bids for leases off the east coast -- a result of the failure so far of any of the companies to find substantial quantities of oil or gas in the area -- will increase the spending total by about $600 million. Payments for such leases is counted as a reduction in spending rather than as income in the federal accounts. Counts.
These spending increases are partly offset by a $700 million drop in the cost of public service employment programs. Enrollment in the programs, which are run primarily by state and local government sponsors, has fallen well below intended levels, as reported earlier.
The 1980 spending total has also crept upward. In January President Carter asked Congress to approve outlays of $531.6 billion. Yesterday, because of that $600 million contingency allowance additions and a series of other smaller changes, that figure became $532.3 billion.
Using longer term economic projections, as it did in January, the administration also made new estimates of outlays and receipts for fiscal 1981 and 1982. If the economy were to follow that projection -- which does not include a recession -- and there were no new spending programs enacted, there could be a narrow $300 million surplus in 1981 and a large $39.2 billion surplus in 1982.