President Carter yesterday sent Congress an amended version of the budget proposed last month by former President Ford, boosting federal spending to $459.4 billion for fiscal 1978, an increase of $19.4 billion.
The resultant deficit of $57.7 billion is $10.7 billion more than Ford had projected, a trend that has caused renewed worries about inflation in the business and financial community.
Sensitive to this concern, the Carter administration held its spending proposals to less than what had been proposed by some of its own officials and renewed its commitment to a balanced budget by fiscal 1981.
In a major surprise, Carter announced an effort to enforce a price ceiling - possibly 9 per cent over current charges - on hospital costs for all patients, whether private or government-paid. This is the first plan to put a lid on health costs since formal wage-price controls were in effect during the Nixon administration.
The President temporarily deleted from the Ford budget appropriation requests for 19 water resources projects costing $5.1 billion pending further review, risking confrontations with key representatives and senators. The fiscal 1978 saving would be $289 million.
Resisting the efforts of the military services to stay as close as possible to Ford's requests for new obligational authority, Carter cut the Pentagon's new money requests for fiscal 1978 by $2.7 billion. The actual expenditure reduction of $400 million for fiscal 1978 brings the total down to $109.5 billion. Counting military assistance and atomic energy defense, the defense spending budget is reduced from $112.3 billion to $111.9 billion.
Carter's budget for fiscal 1978, which begins Oct. 1, calls for expenditures of $459.4 billion and revenues of $401.6 billion - both figures representating substantial increases over the Ford estimates.
For fiscal 1977, which ends Sept. 30, the dimensions of the proposed changes were smaller. Spending is now estimated at $417.2 billion, and revenues at $349.4 billion, that latter representing a $4.7 billion decline. Most of the revenue decline results from Carter's proposed tax rebate scheduled for this spring.
The larger spending and deficit totals in the Carter budgets are caused by two decisions of the new administration. First, Ford's proposed permanent tax cuts and massive reductions in health-welfare spending were canceled. And second, Carter introduced an economic stimulus package - now boosted slightly to $31.6 billion.
Carter restored $7.9 billion of $12.4 billion in spending reductions proposed by Ford, putting back money for Medicare, Medicaid, food stamps, child nutrition, housing, education, and public service jobs. Carter also deferred Ford's proposal for increases in Social Security taxes pending futher study.
Other elements in the $19.4 billion net increase in, spending over the Ford fiscal 1978 budget are $8 billion in the economic stimulus package for public works and public service jobs, $1.1 billion in correction some of Ford's estimates, and $2.4 billion in new Carter initiatives, including a $2 billion increase in estimated interest on the federal debt.
In a brief budget message, Carter sought to saddle Ford with the basic responsibility for the large benefits but claimed that some of his own proposals "differ significantly" from Ford's.
"The 1978 budget is essentially still President Ford's budget, with only such limited revisions as my administration has had time to make," Carter said.
He promised that future budgets will reflect "detailed zero-based reviews" of federal spending, comprehensive tax reform, and reorganization of the government, 'Zero-based budgeting is a system that requires justification of all federal programs, not just new ones, every year.
At a budget-signing ceremony yesterday morning, Carter joked with Office of Management and Budget Director Bert Lance, saying, "If you keep the 1979 budget down this small, it will be all right."
Carter said department heads will find zero-based budgeting "quite a radical departure," in which they will be given an over-all budget ceiling into which they must fit all proposals within their agencies.
In his amended budget proposals, Carter also promised a review of "off-budget" federal expenditures estimated at $10.8 billion in fiscal 1977 and $8.5 billion in fiscal 1978. These are federally-owned or managed funds the transactions of which are excluded from budget totals under present law.
Lance stressed the fact that the budget deficit for fiscal 1978 represents a $10.1 billion decline from the red ink total for fiscal 1977, and promised the new administration would strive to "speed up" that trend.
Treasury Secretary W. Michael Blumenthal, meanwhile, sought to allay financial market concern about the deficit by saying the Carter plans "will not have an appreciable effect in the sense of 'crowding out' [private borrowers] or increasing interest rates."
Economic assumptions underlying the budget are only slightly revised from the numbers in the Ford budget, or from the assessment made in constructing the Carter stimulus package, Economic Council Chairman Charles L. Schultze said at a budget press conference.
He conceded, in response to a question, that the year-over-year consumer inflation projections, 5.1 per cent for calendar 1977 and 5.4 per cent for calendar 1978, were uncomfortably high for an economy still operating with considerable slack.
"The underlying rate of inflation in this economy seems to be running at 5 to 6 per cent a year," Schultze said. He reiterated that Carter has under way "a major, comprehensive review of what the government can do" by its own actions, and by consultations with industry and labor "to edge this rate of inflation down."
Later, deputy press secretary Rex Granum said Carter "has no intention of imposing wage and price controls," nor anything so "harsh" as voluntary wage and price guidelines. On Monday prior to publication of the Carter budget, AFL-CIO President George Meany said organized labor would not cooperate with a voluntary request to notify the government in advance of proposed wage and price increases.
The budget document said "it now appears" that the effects on the economy of the record cold winter would be "moderate and temporary," with nearly all lost ground recovered by the fourth quarter of the year.
According to new estimates, the Carter budget - although increased over Ford's - would amount to 22.4 per cent of the gross national product for fiscal 1978, down marginally from 22.8 per cent in fiscal 1977 and 1976.
Ford had estimated that his budget proposals would cut the government share of GNP to 22.5 per cent in fiscal 1977, and 21.6 per cent in fiscal 1978. With one exception, federal expenditures have been under 21 per cent of GNP in all the years from 1954 through 1974.
Gross National Product is the sum of the value of all goods and services production in the United States.
Officials claimed that in preparing the budget revisions, they were constrained by time limitations. Under the new budget process, Carter was required to supply new estimates by March 1 to give congressional committees time to study his basic preferences prior to a new binding resolution on toal federal expenditures.
Thus, the administration said it did not have time to check out fully the belief of OMB economists that spending estimates for both fiscal 1977 and 1978 may prove to be too high.
Health, Education and Welfare Secretary Joseph A. Californo Jr. said the new plan to control hospital costs is vital to damp down runaway health costs. A 9 per cent ceiling in hospital price increases in fiscal 1978, compared with nearly 15 per cent in the past year, he said, would save the public and the government $2.4 billion in fiscal 1978.
Carter's amended budget presupposes legislation to be sent to Capitol Hill in about two weeks that would allow the government to limit increases in reimbursements to hospitals paid by Medicare, Medacaid, state and local governments, insurance companies, and private individuals.
Hospital costs have more than tripled since 1965, while the general cost of living has gone up 70 per cent.