Congressional budget cutters yesterday zeroed in on cost-of-living increases for Social Security and other federal benefits as likely targets as they searched for ways to amend -- and maybe expand -- the spending reductions that President Reagan has proposed.
The mounting interest in scaling back the anticipated $22 billion price tag for cost-of-living adjustments during fiscal 1982 came as Reagan's proposed spending cuts and the economic rationale for them came under renewed fire on Capitol Hill. Among the highlights:
Sen. Howard H. Metzenbaum (D-Ohio) accused Budget Director David A. Stockman of being "cruel . . . inhumane . . . unfair" in cutting programs for the poor while failing to move against tax breaks that primarily benefit the rich. It was one of the harshest tongue-lashings that Stockman has received so far from a Democratic member of Congress. In comments to reporters, Sen. Ernest F. Hollings (D-S.C) also expressed exasperation at Stockman, saying, "I'm tired of those divinity students [Stockman was once one] giving me psychology. Hell, we're running the government here. I'm tired of running deficits."
Three independent economic forecasters told the House Budget Committee that Reagan's economic plan will probably reduce inflation only modestly and warned that it could boomerang, triggering even higher prices and interest rates. The "net effect" is likely to be to "make the inflation rate worse," said Robert A. Gough Jr. of Data Resources Inc. There is "virtually no chance" of a balanced budget by 1984, as Reagan plans, said Lawrence Chimerine of Chase Econometrics. The plan is "too optimistic," said Lawrence R. Klein of Wharton Econometric Forecasting Associates.
The escalating pressure for some as yet undefined cost-savings from the huge pool of federal benefits that are adjusted at least once a year for inflation comes primarily but not exclusively from the Senate Budget Committee, which will have the first crack at the Reagan spending program.
Committee Chairman Pete V. Domenici (R-N.M) said some modification of the current system of "indexing" major federal benefit programs to the consumer price index (CPI) will be proposed when the committee begins work on Reagan's recommendations next week.
Hollings, ranking minority member of the committee, went further, saying he thought a change in the indexing system -- or possibly a delay in payment of scheduled cost-of-living increases -- will be approved by the committee and by the Senate as a whole.
The Reagan administration, reluctant to tamper with what it calls "safety net" programs, has opposed modification of the automatic cost-of-living increases for Social Security, federal retirement, veterans and other benefits.
But Stockman told the Senate committee yesterday the administration would not object to changes aimed at preventing overpayments, presumably referring to the contention that the CPI overstates housing costs, especially for retirees. However, Stockman said the administration continues to oppose anything less than "100 percent" compensation of retirees for living-cost increases.
Both Domenici and Hollings indicated the committee may go beyond the administration's wishes on this point. Among the possibilities are using a wage increase index if it is lower than the CPI, pegging benefits to less than 100 percent of the CPI or delaying the effective date of the increase.
Stockman weathered the attack from Metzenbaum with hardly a feather ruffled, suggesting at one point that the poor are suffering more from current policies than they would from the Reagan retrenchment. "The cruelest injustice you can impose on the poor is an economy that is . . . not creating any jobs," he said. As for selective tax increases by eliminating tax breaks, he responded, "We think there was a mandate [from last year's elections] and we think it was for cutting spending, not raising taxes."
In a breakfast with reporters, he also challenged the notion that recent redistribution of income toward the poor is "written in stone." Said Stockman: "If we have to move back the other way . . . to revive the economy, we will. There's nothing wrong with that."