PRESIDENT CARTER keeps calling on all good citizens to stand valiantly with him in the combat against the big spenders in Congress. He drafted a tight budget for 1980 and, he said the other day, the usual is now happening: "The inevitable pressures to spend just a little more here or a little more there -- for someone's pet project or for someone's favorite interest group -- have begun." But have they? Our sense of it is that Mr. Carter has his artillery pointed in the wrong direction.
Congress seems much more likely to try to outdo Mr. Carter in cutting next year's budget deficit. The politics of the next budget is going to be decidedly unorthodox, and the implications deserve a bit more attention than they are getting. It's very possible that the economy will slide into a recession toward the end of this year. In the past, the budget served as an automatic stabilizer. Tax revenues drop as a recession begins, and spending -- on things like unemployment insurance and welfare -- increases. The deficit widens, without a hand being laid on it, to pull the economy up again. But there has been no recession since the present budget procedures went into effect, with the legal limit that Congress now imposes each autumn on the following year's deficit.
When Congress passes the first and tentative budget resolution this spring, the economy will probably still be ticking along merrily with output near full capacity. Under those circumstances, anyone who accepts the administration's optimistic economic forecasts would have difficulty justifying a deficit even as large as the $29 billion that Mr. Carter proposes. When the second and binding budget resolution comes to a vote in Congress next September, the business cycle may well have turned and the unemployment rate may be rising. But by that time, the deficit number from the spring will doubtless have acquired a certain political momentum of its own.
With that, Congress will face an interesting choice -- one that it has never before had to make quite so explicitly. It will either have to vote to widen the deficit for the fiscal year 1980, or it will have to vote very large additional budget cuts as tax revenues fall and the government's welfare load rises. To cut federal spending as the country goes into a recession would, unhappily, make the recession go deeper and last longer.
What, presumably, would be the purpose of this self-inflicted pain? To reduce inflation. But there are other ways to reduce inflation. One of them is President Carter's program of wage and price guidelines. It's off to a better start than most people expected, although most of labor remains hostile to it. There is the highly interesting suggestion by the Congressional Budget Office of a cut in the payroll taxes that finance Social Security and unemployment insurance. Unlike income taxes, payroll taxes are a cost of labor and have a direct effect on inflation. The Social Security tax increases of the past two Januaries have significantly contributed to the rise in inflation. Conversely, a cut in payroll taxes provides a way to give working people a real increase in wages without increasing inflation. But, as the Congressional Budget Office acknowledges, cutting payroll taxes has one serious practical drawback. It would require Congress to plunge back into the divisive and intricate debate over how best to pay for Social Security. Meanwhile, balancing the budget has, in principle, a fine simplicity to it.
Inflation is a menace. It has inflicted serious harm on Americans, and the need to restrain it is imperative. But trying to move the budget toward balance during an economic decline would be the slowest and most painful way of doing it. Unfortunately, it seems to be the only method for which the country's political leadership, in the White House and at the Capitol, has been able to build a broad and firm consensus of support.