The budget cutting is almost over now -- or is it?
Congress starts the last lap of the fiscal 1982 budget-cutting exercise today. But when that is over, battle-weary congressmen will not be able to rest on their laurels for long.
Before the budget can be balanced in 1984, as President Reagan wants, they will have to cut almost as much again as they have done so far. That is on the administration's own last estimates; others put the still uncut amount much higher.
Some argue that this year's resounding success for the budget cutters will breed success for the future. But the savings that still have to be made will almost certainly be harder to achieve than those voted so far. The easier targets have naturally been picked off already.
This was illustrated clearly in the quick and emphatic rejection, even in the Republican Senate, of the administration's proposed cuts in Social Security benefits. Yet Budget Director David A. Stockman is still banking, as he must, on large future savings from Social Security to meet his spending goals.
For fiscal 1982, Congress has already voted to cut nearly $40 billion from spending and has promised to cut more. On top of this, the administration's last published figures showed a further $30 billion of cuts will be needed in 1983, rising to $44 billion in 1984, if the 1984 budget is to be balanced.
These figures are daunting enough, but a spokesman said recently that the administration's midyear budget review, due next week, could show the budget-cutters have even more before them. Since March, when the president's last budget numbers were calculated, interest rates have soared, lifting the cost of servicing the public debt and making bigger savings necessary if the same spending targets are to be met.
The biggest effect of this year's higher rates will come in 1981 and 1982. But the later years could be affected too.
Where can the extra cuts for next year and beyond be made?
Sensitive to criticism from Wall Street that the fast-growing social programs in the budget have been treated relatively gently in the first round of cuts, OMB now says that cuts in entitlements -- programs that grow automatically according to how many people fit the eligibility or entitlement criteria -- must account for 60 percent of those cuts still to come.
By contrast, savings from these social programs account for only 30 to 40 percent of the cuts so far achieved, according to the latest -- provisional -- costing-out of the House and Senate reconciliation bills.
Of the $144 billion in cuts agreed to in the Senate reconciliation (the comparable House figure is $142 billion) for the fiscal years from 1982 through 1984, $46.5 billion came from entitlement programs. This breaks down as $13.4 billion, $15.4 billion, and $17.7 billion in each year.
The House appears to have cut more deeply into entitlement programs, although this may not survive the conference.
OMB numbers released at the end of June showed that in order to reach the 60 percent target, entitlements would have to be cut by a further $4.1 billion, $17.9 billion, and $26.5 billion, in 1982, 1983 and 1984, over and above the version of reconciliation, which the Reagan administration wanted the House to pass.
The administration says that its Social Security proposals will provide almost half of the needed savings: $4.1 billion in 1982, $7.3 billion in 1983 and $12 billion in 1984.
But few in Congress believe that Social Security cuts of this magnitude will be made soon enough to save that much money by 1984. The most unpopular part of the administration's proposals was the provision that saved most in early years: paring back benefits for those intending to retire early in the next few years.
That leaves other entitlement programs such as unemployment benefits, food stamps, welfare and so on as the targets. But further cuts in these programs could endanger the president's commitment to preserve a social safety net.
The OMB figuring left $12 billion in 1983, rising to nearly $18 billion in 1984, to come from cuts in other, so-called discretionary spending. Non-defense spending in this category, from grants to state and local government to the postal service, has already been slashed in the first budget round, although it contributed little to the growth in federal spending in the 1970's. Further cuts could mean the end, rather than just scaling back, of some programs, experts say.
Stockman has made little secret of his desire to pare back the large planned increases in defense spending. But with the administration's commitment to build up national security, and the Pentagon's ability to overspend, cuts in the planned increases will not come easily.
The problem does not end there. Some budget experts believe the OMB numbers underestimate spending significantly. Officials were told to "low-ball" estimates, assuming for each program that spending would be at the bottom of the predicted range. In addition, Reagan's original "rosy scenario" for the economy, in particular the forecasts of a swift fall in inflation and interest rates, held spending numbers down.
Differences on economic assumptions and technical estimates of the cost of programs, left Congressional Budget Office spring numbers for 1984 spending almost $50 billion, or 6 percent, higher than the administration's.
CBO's next analysis could look a little better than that as it is likely to revise its economic assumptions, particularly on inflation, so that they are closer to Reagan's.
But the broad picture for later years is expected to stay the same. At last count the CBO believed the administration had underestimated the cost of its 1984 defense program by at least $10 billion, that inflation could add a further $10 billion to indexed programs by then, and that more realistic forecasts of interest rates would pile a further $20 billion onto the 1984 spending total.
Spending re-estimates along these lines would double the size of the extra cuts OMB needs to hit its 1984 spending target of $770 billion and, some budget experts fear, in the process turn the very difficult into the almost impossible.