The Brookings Institution, which earned a reputation as a Democratic "government in exile" during the Nixon-Ford years, yesterday delivered a wide-ranging critique of President Carter's economic program, and some of his pet theories as well, including "zero-base budgeting."
Brookings is a private research organization located in Washington. In publishing the report, seventh in a series of "setting national priorities," it issued a standard disclaimer of institutional responsibility, saying the book was the work of individual scholars.
The report, edited by Brookings Director Economic Studies Joseph A. Pechman:
Expressed pessimism over the possibility that Carter could fulfill campaign pledges to aid the cities, reform the welfare system, and achieve other social goals if he sticks to his plan to balance the budget in fiscal year 1961.
Sharply criticized the administration's anti-inflation program, which it said contained "little new."
said the energy program would add to general inflationary pressures, and would worsen, rather than relieve, the shortage of natural gas.
forecast that government reoorganization would not be a "promissing" route to efficiency.
In discussing the probability that the budgetary "elbow room" for a mixture of tax cuts and higher spending programs would be too narrow to permit Carter to achieve all his goals, the report did not indicate which should get priority.
But at a press conference, Pechman said that "the major emphasis" should be placed on returning the economy to high employment, and that he personally would have no hesistancy in abandoning the balanced budget target in favor of reducing the jobless rate to 5 per cent by 1981.
The arithmetic produced by a group of 1 economists who wrote the report comes down to this; instead of a $78 billion budget margin that Carter assumed during the 1976 election campaign would be available in 1981, the prospect now is that the available surplus - if all goes well - will be no more than $51 billion.
If the President sticks to his announced goal of limiting government spending to 21 per cent of gross national product, the Brookings papers say, he can divide that $51 billion margin into $30 billion of additional spending and $21 billion in tax cuts.
The $30 billion, the report says, "is probably inadequate to fulfill all President Carter's campaign pledges . . . But it does provide enough extra resources for the administration to achieve many of its social goals. . . Similarly, the more than $20 billion of revenues available for tax reduction could be the 'sweetener' offered to Congress to make tax reform palatable."
Pechman and Brookings economist Robert W. Hartman told reporters that "$30 billion can go mighty fast. When you take into account growth in defense programs, inflation, and a little bit for welfare, there's only a small chance of doing much else." Continued, modest growth in the defense budget was said to be "probably . . . necessary."
Ironically, Hartman's analysis shows that if Carter were to achieve his goal of lowering inflation to 4 per cent, which the report says is highly unlikely, the budget margin would be even further reduced.
That would happen because inflation increases tax revenues more quickly than it does government costs.
"The major conclusion that ought to be drawn from this is certainly not that inflation is good - only a single-minded goal of balancing the budget could produce that answer - but rather that an unanticipated change in the rate of inflation requires a rethinking of budgetary and economic goals," Hartman said.
"It is a mistake to commit the nation to a balanced budget in such a way that future revisions cannot be made," he added.
In the worst possible case - continued high inflation and high unemployment - "the mild anti-anticipation program of the Carter Administration would certainly have to be reconsidered," the report says.
As to zero-base budgeting, which was adopted by Carter in the preparation of the 1973 state of Georgia budket, tht report says that for federal budgetmaking "zero-base budgeting has more drawbacks than merits."
In principle, zero-base budgeting is supposed to eliminate the preference given to "old" budget programs in their competition for funds with "new" ones, subjecting all spending programs to the identical scrutiny each year.
But the Brookings report said that zero base budgeting diverts managerial time for limited results and forces budget policy-makers to focus on the one upcoming year, rather than on multi-year budgeting.
It also criticized sunset laws, as proposed by Sen. Edmund Muskie (D-Maine), which require re-authorization of every federal program at least once every five years. Laudable, but "too comprehensive" spreading available manpower "too thin," is the Brookings verdict.
In a chapter on government reorganization, Herbert Kaufman says that "the real payoffs" are not in efficiency, "but in redistributing political influence, altering public policies, and signaling the administration's ntentions to the rest of the government and to the country."