The furious attack on federal spending now being unleashed by the Reagan administration opens -- in a double sense -- a dubious battle. The outcome of the fight inside Congress is in doubt. Even more in doubt is the impact that even a total administration victory would have on the major enemy -- inflation.
The battle plan has been drawn up in a skillful way by President Reagan's budget director, David Stockman. Stokman says that all federal programs will be cut and that the reductions will feature equity as between different groups in the country.
Leaked information already shows that big cuts will come out of the darlings of the construction lobby -- spending for highways, airports and sewer and water systems. Farm subsidies are to be reduced. Almost certainly Stockman has up his sleeve a surprise slash at one of the more outrageous giveaways to super-rich corporations.
As to reductions in social spending for people in trouble, the new budget director has penetrated beyond the wonderful labels -- labels like Social Security and unemployment assistance -- to the minute detail of the programs themselves. In case after case, he has found spending at levels not previously envisaged for purposes only tenuously related to the original program.
Social Security, for example, has had tacked on to it programs benefiting students who are dependents of retired, disabled or deceased workers. Those student benefits have almost nothing to do with the original idea of a pension scheme. Moreover, students are eligible for other benefits. By killing their entitlement, the administration figures to cut $100 million out of 1981 spending and $200 million out of the 1982 budget.
In similar manner, the school lunch program will be reshaped so as not to benefit the vast majority of users who enjoy middle-level incomes. The food stamp program would be amended to bar those who have high incomes during certain periods of the year. The unemployment assistance programs would be consolidated to prevent benefits being paid on top of benefits for those said to suffer from foreign competition.
Going behind the labels to the real programs represents undoubted achievement. The Reagan administration has made what was untouchable subject to scrutiny. It has converted sacred cows to profane cows.
Still, the battle inside Congress will go very hard. Many interested parties will join forces to lobby against the administration. Even if the president does very well in the cutting operation (and I hope he does), the savings are bound to be small -- maybe $15 billion to $20 billion. At precisely that point, there comes into question the relevance of the spending battle to the war on inflation.
The argument advanced in naked form by the president in his speech on Feb. 5 is that federal spending creates deficits, and the deficits create our "economic mess." A more sophisticated gloss is that inflation now feeds on expectations of inflation. Those expectations can only be broken by a show of government determination to cut the budget, especially the entitlement programs.
Once that test is passed, the argument continues, confidence will return to the markets. Long-term interest rates will go down. Productive business investment will rise. More goods will be available. Shortages will end, and inflation abate.
Maybe so. But there are overwhelming reasons to doubt that scenario. A cut of $20 billion in a $3 trillion economy is a mere spit in the ocean -- about half of 1 percent, not something likely to turn around all the markets. Nor is it clear that federal spending is the chief engine of inflation, or that confidence is mainly drained by budget deficits.
How about those other candidates, like skyrocketing energy costs? And dependence for oil on countries run by people who wear sheets and who also dominate with their petrodollars the international money markets? And the danger of Soviet aggression? Or of internal collapse in the oil states? Or how about the inflationary impact of wage settlements, now averaging increases of nearly 10 percent annually?
There is a good chance, in other words, that the Reagan administration, driven by its ideological thing about government spending for social purposes, has severely misdiagnosed the trouble. Faced with the jungleful of man-eating tigers that constitute our economic problems, it has come up, in its emphasis on budget trimming, with a plan to clip the nails of mere kittens. i
If that analysis is correct, then the coming struggle over the budget cannot be decisive. It is much more likely to be the first battle in a long, draw-oukt trench warfare that years from now will leave inflation still high, economic growth still slow and the American position in the world still uneasy.