THE CARTER administration now gloomily acknowledges that its budget next year will run a substantial deficit. The figures will surprise no one. They had been disseminated well in advance, to avoid any further shocks to nervous financial markets. But the embarrassment and confusion of the Carter economic policy over the past six months are full of instruction. The relationship between the federal budget and the national economy seems to have changed fundamentally.
Twice since January a new budget has had an effect precisely the opposite of the one its authors intended. In the 1960s, the people who made policy came to think of themselves as, in effect, the operators of a powerhouse. They kept the gigantic machine running smoothly by adjusting a switch here and a valve there. But now the metaphor has changed.
Economic policy has become a game played between the people in government and the equally sophisticated economists and managers in the business and financial worlds. Games theory now applies: if one player makes a certain move, what strategy does it signal and what countermove gives the best advantage to the opposition?
In January, the administration, wishing to avoid a recession in an election year, wrote a budget with a moderate deficit. It was supposed to encourage expansion into 1981. But the investors and traders in the financial markets immediately saw it to be inflationary. Something unpleasantly close to a panic resulted, forcing the administration into a balanced budget. Spending was cut significantly. That jolt, together with the high interest rates, sharply accelerated the recession that -- as it appears in retrospect -- had already started at the beginning of the year. The recession is now automatically throwing next year's budget into deficit -- a deficit twice as large as the one that Mr. Carter originally proposed in January.
This series of reversals is generally attributed to mere Carter mismanagement. But perhaps there's something deeper at work here. If the private economy rushes to meet each turn in the federal budget policy, perhaps the budget will no longer be a useful tool for managing the economy. The alternative is a budget routinely set to balance in normal conditions, swinging automatically into surplus or deficit with the ups and downs of the business cycle. It amounts to sailing the ship with the rudder lashed. That, at any rate, is the way the ship is going to be sailing for at least the next six months.