President Carter served notice on the Washington bureaucracy yesterday that he is setting a budget lid for fiscal 1979 that will allow only about 2 per cent in the real growth of federal spending.
His tentative expenditure target is $498.6 billion, up 7.7 per cent from fiscal 1978, a year in which federal spending is expected to grow by about 14 per cent. Subtracting the 6 per cent or higher inflation rate Carter now projects for calendar years 1978 and 1979, the 7.7 per cent increase in dollar terms would dwindle to 1.7 per cent.
In the process of this hold-down, a newly estimated $16.5 billion deficit for fiscal 1978, which begins Oct. 1. 1977, would be sliced about in half to $31.8 billion for fiscal 1979, which starts Oct. 1, 1978.
These and other detailed figures on the budget for the current year through fiscal 1982 are contained in a budget review provided to Congress as part of its new budget process. It contained the first set of long range forecasts and projections made by the Carter administration.
Officials stressed that the figures particularly those for later years, are highly tentative, and subject to revision by the President and Congress. Changes in what are generally optimistic forecasts of economic growth could also have a drastic impact on the numbers.
But an official of the Office of Management and Budget said in a telephone interview that the spending figure of $498.6 billion for fiscal 1979 should be taken "as first approximation of what the President has already decided he wants."
OMB Director Bert Lane had indicated earlier that limiting real growth in fiscal 1979 to as close to zero as possible would be the only certain route to fulfilling Carter's commitment to a balanced budget in fiscal 1981.
Yesterday's review indicated that it is theoretically possible to reach a balanced budget, with a $3.9 billion surplus, a year earlier - in fiscal 1980. The projections then yeild a surplus of $42.1 billion in fiscal 1981, and $75.7 billion in fiscal 1982.
But officials warned the numbers for 1980 through 1982 should not be taken too seiously. "We're certainly not going to balance the budget in fiscal 1980 if we have a meaningful tax reform program," an OMB official said. Under present plans, tax revision would result in a sizable tax reduction for individuals and business.
As Carter's "first target," the figures for fiscal 1979 are more than merely the normal "current services" estimate showing receipts and outlays as an extension of current law.
The projections reflect Carter initiatives in welfare revision, energy policy. Social Security financing, and congressional action so far on the Carter budget provisions proposed in February.
On the tax side, they assume extension of "temporary" individual and corporate tax benefits that would otherwise expire between now and 1980.
But, in addition to tax revision, the figures do not allow for future action on such crucial matters as the Labor Health. Education and Welfare appropriations, or military budget revisions as a consequences of Carter's decision to halt B-1 bomber production.
A breakdo of the $35.7 billion projected increase in fiscal 1979 expenditures (which compares with an increase of $56.5 billion in fiscal 1978) shows that the major increments would be for income security ($12.6 billion) health ($5.5 billion), and national defense ($9.8 billion). That would leave a net increase of $7.9 billion for all other programs.
There are two sets of economic assumptions attached to the report. The first, for the short range, makes slight changes from a similiar set published in April. Real growth would be a little higher this year and a little lower next year, compared to the April numbers.
But there is noticeable deterioration in the inflation outlook, as seen by Carters's Council of Economic Advisers. Compared with a 1977 consumer price incex increase of 6.7 per cent. For 1978, the forecast jumps from 5.6 to 6.1 per cent.
The second set is Carter's first effort at long-range economic projections through 1982, which form the basis for the budget guesses. These project real growth rates around 5 per cent or more in 1979 through 1981 sliding off to 4.3 per cent in 1982.
They call for inflation to be little better in 1979 than 1978's 6.1 per cent but then declining steadily to 4.3 per cent by 1981. As for unemployment, the jobless rate drops slowly, not going under 5 per cent until 1981, then dipping to 4.5 per cent in 1982.