Congress got jarring news from its budget experts yesterday -- that President Reagan seems to have underestimated spending for next fiscal year by up to $25 billion, greatly compounding the problems of the Senate Budget Committee as it began the work of cutting the budget.
Using less optimistic economic forecasts than the administration did and different estimates of programs' probable costs, the Congressional Budget Office, in a preliminary analysis, said Reagan's already much cut budget is likely to cost $715 billion to $720 billion -- not $695 billion, as the administration contends.
Embracing the CBO analysis as evidence of "widely optimistic" forecasting by the administration, democrats on the Budget Committee said the projection would translate directly into a deficit for next year of $60 billion to $70 billion -- well above the $55 billion forecast for this year. CBO made no attempt to calculate revenues and hence offered no deficit forecast.
The staff of the Republican-dominated Senate Budget Committee also questioned the administration's economic assumptions, specifically its interest rate forecasts, and said Reagan's budget cuts will save $42.9 billion, rather than Reagan's figure of $48.6 billion, a $5.7 billion difference.
Together, the two doses of bad news add to pressure on the committee to come up with more savings than Reagan recommended in his 1982 proposal to Congress last week.
In addition to Reagan's proposals, the committee is considering $21.1 billion worth of other program cuts, including about $8 billion that could be saved by cutting the estimated $22 billion in cost-of-living increases for recipients of Social Security, military and civil service pensions, payments to veterans and other federal benefits to individuals.
Meanwhile yesterday, the Senate Finance Committee and a House Ways and Means subcommittee indicated in preliminary votes that they would go along with cuts of the magnitude Reagan has proposed in Social Security and other basic federal benefit programs. The Finance Committee also indicated it would go along with a tax cut of the size he had proposed.
Other congressional committees continued to hear pleas for relief from intended victims of the cuts. The nation's largest railroad union denounced proposed cuts in the Conrail freight system; superintendents of 28 of the nation's largest school systems spoke out against both contemplated cuts in public school aid and the private tuition tax credit the administration favors; an economy-minded Senate Agriculture Committee began hearings on foof stamps; and budget director David A. Stockman was assailed in a House subcommittee for cutting the budgets of the Federal Trade and Consumer Product Safety commissions. An unfazed Stockman defended the cuts on grounds the agencies had been guilty of "self-aggrandizement."
In an attempt to get the package to the Senate floor next week, the Senate Budget Committee will meet round-the-clock, from 10 a.m. to 10 p.m., through Wednesday and perhaps longer. Not all senators were happy with the rushed schedule. "We're changing 30 years of social legislation in three days," complained Sen. Daniel P. Moynihan (D-N.Y.) after a caucus of Democrats on the committee.
The first day of deliberations was devoted to the economic assumptions underlying the proposed Reagan cuts, and, although the CBO forecast was not discussed at the committee meeting, the Democrats pounced on it as a storm signal for the future. "Large future deficits are hidden behind overly optimist economics," they said in a statement after their caucus.
James Blum, chief spending analyst for CBO, also raised questions about whether the administration will be able to reach its goal of a balanced budget in 1984.
In his analysis Blum said that spending could be much higher than the administration forecasts for 1984 if the economy does not perform as the administration says it will. "The amount of additional spending cuts necessary to balance the budget by 1984 could be twice as large -- or more -- as the $44 billion of unidentified savings" that Reagan outlined in his message to Congress last week, Blum said.
In finding that the administration underestimated spending by $20 billion to $25 billion, Blum said about $10 billion could be attributed to optimistic assumptions about the economy's performance. "The CBO alternative assumptions show higher inflation, higher interest rates and higher unemployment, all of which mean higher outlays," he said.
For instance, the administration forecast a 9.1 per cent increase in the Consumer Price Index, while CBO forecast 9.7 percent. The administration anticipated an unemployment rate of 7.4 percent; CBO 7.8 percent. On interest rates, the administration assumed 9.3 percent for 91-day Treasury bills and CBO 13.7 percent.
Blum said the other $10 billion to $15 billion came from underestimating actual spending, especially for defense. CBO figures that defense dollars will be spent at a faster rate than the administration assumes: $6 billion worth of added costs for fiscal 1982.
In addition, it believes that the Pentagon will have to pay $1 billion more than the administration expects for fuel CBO also found "at least $4 billion" in overestimated savings from Reagan's budget cut (analogous) to the $5.7 billion cited by the Budget Committee staff) and "at least $2 billion" in other program costs, including growth in the number of beneficiaries of federal programs.