ONE CORRECTIVE MEASURE against inflation is to get serious about spending. Forty-four senators are sponsoring a resolution to cut next year's budget by $35 billion, and elsewhere in Congress people are beginning to take a new and grimly serious look. The House Budget Committee asked the Congressional Budget Office for suggestions, and the CBO has published a wide range of strategies. The list demonstrates -- if anyone has any doubt -- the extreme difficulty, and the disruption to established social commitments, of any large reductions. President Carter now seems to be approaching some of these unpleasant choices with his request to the agencies for possible reductions.
The president and Congress are going to have to confront those huge accounts that successive administrations have labeled "uncontrollable." In the Nixon administration, a Republican president and a Democratic Congress joined in transferring resources on a massive scale from military spending to social entitlements. The transfer programs -- those that provide federal benefits, in money or medical services, directly to individual people -- expanded faster than ever before or since. The largest of them was, of course, Social Security. Many of them, like Social Security, were indexed to rise with inflation as it is measured by the Consumer Price Index. As the benefit formulas were expanded, the budget went up automatically. As inflation accelerated, it went up even faster. Now the Consumer Price Index is apparently overstating the inflation rate by several percentage points a year, overcompensating the beneficiaries for the economic troubles that are squeezing down the real incomes of most other Americans. The Senate Budget Committee, whose interest in the subject qualifies as serious, held a hearing last Wednesday on the effects of indexing.
The CBO offers several proposals. One is to devise a more accurate measure of inflation. Another is simply to raise Social Security benefits only 85 percent of the rise in the Consumer Price Index. Either change would reduce spending several billion dollars in 1981 and much more in later years. Or, Congress could impose the income tax on half of each recipient's Social Security benefits, which are at present tax-exempt. That would bring in $5 billion next year, a serious amount of money.
None of these suggestions is attractive, but they will all need to be considered carefully. Out of President Carter's 1981 budget of $616 billion, $188 billion is pensions alone. The direct benefits of all kinds -- pensions, unemployment insurance, welfare, medical services -- are half of all federal spending and nearly two-thirds of all non-defense spending. Any significant reduction of spending requires, at the least, restraining the rate at which these benefits are expanding. Incidentally, when 44 senators acknowledge that truth, it will be proof beyond doubt that they are really serious about holding down the budget.