THE ADMINISTRATION has now officially
recognized that the scenario laid out by its economic advisers last winter was considerably off the mark. The sharp economic downturn--and overly optimistic spending and revenue estimates--have headed the budget toward record deficits in 1982 and beyond. That's not surprising news, but the official admission of this prospect adds another element to the administration's strategy for the 1983 budget.
The outlines of the president's 1983 budget--due for unveiling next month--have begun to emerge as one department head after another leaks reports of the OMB's insistence on massive reductions in their respective budgets. Some gamesmanship is surely involved in these performances. The Cabinet secretaries who are now protesting had already proposed large cuts on their own. OMB's grab for more allows the secretaries to gain some needed credibility with the special interest groups who normally support their departments. The recognition of massive impending deficits, however, makes it more likely that OMB will prevail despite the secretaries' appeals to the president.
Seeking very large cuts may also be a good strategy to take to Congress. It's more likely that members will settle for substantial cuts in popular programs such as housing and education if the alternative is total decimation. Congress will also be reminded that if it fails to go along with the budget cuts, the administration may try to shift the blame for the coming deficits onto its shoulders.
This strategy, however, may meet with strong resistance. As the consequences of this year's budget cuts translate into real losses of income and services among its constituents--and massive confusion for state and local governments--Congress has been losing its taste for more bloodletting. With a record number of people unemployed in substantial sections of the country, further reductions in aid may seem increasingly self-defeating. This is particularly true since many of the cuts will cause real pain and still make only a small dent in the likely budget deficits.
Congress must accept some blame for the present dilemma. It swallowed the administration's economic program nearly whole last summer--and then threw in some extra tax cuts for good measure. In its defense, Congress may argue that it was only following the leadership of a popular president with the discipline so frequently urged upon it. As congressional leaders develop their strategy for the coming showdown, however, they can no longer afford to ignore the danger that the nation faces. That is the bleak prospect that present policies may be steering the country into a downward spiral: tight money forcing economic slowdown, translating into lowering incomes and tax revenues, producing bigger deficits that remain despite more budget cuts, prompting tighter money. That's not a good scenario either for politicans seeking reelection or for the well-being of the citizens they represent.