House-Senate conferees reached agreement yesterday on a binding budget of $458.3 billion for the federal government in the fiscal year beginning Oct. 1.
The spending plan contemplates a $61.5 billion government deficit and rules out any increase in Social Security taxes in fiscal 1973 beyond those scheduled under current law.
Those scheduled increases are sizable - the tax rate would rise from 5.85 to 6.05 per cent on both employer and employee, and the tax would be applied to the first $17,700 of an individual's earnings, compared with this year's $16,500.
Congress is considering ways to shore up the ailing Social Security system, but the conferees said any further increases in Social Security taxes next year would drain off too much purchasing power and retard economic recovery.
Congressional economists are less optimistic than the President's advisers about the economic outlook. The White House also has begun to have an economic doubt or two.
Yesterday, Charles L. Schultze, chairman of chairman of the Council of Economic Advisers, said the administration was not so wedded to the balanced budget Carter has promised that it would not add stimulus if necessary, while Labor Secretary Ray Marshall suggested separately that the government increase spending for public-sector jobs to help drive down black unemployment (Details on Page D8).
The fiscal 1978 budget, adopted under Congress new budget procedures, is binding in the sense that, once adopted by House and Senate, any spending bill exceeding it is against the rules.
The conferees projected economic growth of about 4.8 per cent in calendar year 1978, compared with the latest administration projection of 5.3 per cent. The budget, which still must be ratified by the full House and Senate, also projects an average unemployment rate of 6.5 per cent next year, while the administration has forecast 6.3 per cent.
However, as the economy has slowed in recent weeks, administration officials have conceded privately that their forecasts are too optimistic and indicated they would not quarrel too much with the congressional estimate.
Jody Powell, White House press secretary, has conceded that the economy is in a "temporary lull" and that President Carter might have to consider taking further stimulative actions if the economy does not resume job-creating growth soon.
The unemployment situation has not improved much since April. In August, 7.1 per cent of the work force was unemployed.
The budget the conferees agreed to yesterday - Tuesday - anticipates federal revenues of $397 billion.
Carter projected federal spending at $462.9 billion next year. But because his official estimates of economic performance are more optimistic than Congress, the administration also projected more tax collections, $401.4 billion, and a deficit about the same as the congressional budgetmakers' $61.5 billion.
The projected $61.5 billion deficit exceeds the $45 billion of red ink the government is expected to record this year.
The deficit is expected to be much bigger in fiscal 1978 than in fiscal 1977 because Carter abandoned his proposed tax rebate last April, which kept federal revenues in fiscal '77 higher than first anticipated, and because Congress has enacted billions of dollars of job-creating programs, such as public works and public-service jobs, that will be in high spending gear in fiscal '78.
While the President's proposed budget makes detailed spending recommendations, the congressional budget sets only board spending totals for 17 different sectors - such as defense or income security - which Congress uses as a guide. While the overall spending ceiling cannot be exceeded, these individual totals can. But if Congress exceeds one of them, it has to cut back on another or vote expressly for higher taxes or a higher deficit.