AMIDST THIS YEAR'S long struggle over the federal budget, a longer perspective improves visibility. It's conventional to speak of the budget as a president's personal creation, modified slightly by the daily combat of the two parties in Congress. But the basic shape of the budget is determined by the deeper tides of American politics. Over the past decade there have been several key changes, and it's useful to keep them in mind as the present intricate quarrel proceeds between Congress and the White House.
As the Vietnam War ended, military spending dropped sharply. Instead of reducing the budget, the administration and Congress of that time swung the money into social entitlements--mainly Social Security, the other pensions, Medicare and Medicaid--that rose at an unprecedented rate. This expansion of public responsibility was to be financed out of the country's rapid economic growth. But that growth never materialized on the scale expected, and that's why the deficits continued.
As the 1970s went on, people in both parties began to be concerned by the increasing evidence of the Soviet military buildup. They slowed down the decline in military spending and, toward the end of the decade, reversed it.
Meanwhile, anxiety over inflation began to dominate the budget process. The Federal Reserve Board adopted its present monetarist guidelines and, in the spring of 1980, the White House and Congress began to impose significant cuts on the social entitlements. 3 As a matter of partisan politics, the interesting thing about the sequence is that you could never figure out from the budgets which party was in power. The great expansion in the entitlements, in the early 1970s, was a collaboration betwen a Republican president, Mr. Nixon, and a Democratic Congress. Mr. Ford ended the long decline in defense spending, and the present increase began not under a right- wing president but under Mr. Carter. So did the decisions to cut entitlements. The Federal Reserve's move to monetary targets and tight money was made, not under a Republican administration, but under the Democrats in late 1979. Now a conservative president wants to give up the effort to balance the budget and let the deficits widen. It is a bipartisan alliance in a Congress divided between the two parties' control that is forcing him to retreat.
The budget for next year is evidently going to look more like its predecessors than Mr. Reagan had wanted. Taxes are going to be higher than he wished, and defense spending lower. There will certainly be change, but it is likely to be incremental rather than the radical departure that Mr. Reagan had proposed. Congress is now acting to limit the rate of change in fiscal policy, as the country slowly comes to terms with the probability of less rapid economic growth, and less wealth to spend, than it had hopefully anticipated.