It was said of the augurs of ancient Rome that they could not pass each other in the streets--without either bursting out laughing or covering their faces in shame. With the 1983 budget, these twin responses seem peculiarly appropriate at the OMB-- respectively for its political appointees and its unfortunate professionals. This budget's numbers require the same care in interpretation as reading the entrails of a goose.
With the Stockman confessions in the Atlantic, the "leaking" of accurate deficit projections in December, and the sub-presidential consensus within the administration that taxes would have to be raised for the out- years, it had for a time appeared that a sense of reality would be restored in the budget process--and the hopes and hallucinations initially associated with Reaganomics tempered.
Such apparently is not to be the case. Instead, we have an ill-disguised attempt to obscure the wreckage of the nation's fiscal structure inflicted by last summer's tax legislation. The president's late decision to eschew tax increases and the subsequent determination that budget deficits could not be shown as exceeding $100 billion and were to be seen as declining made inevitable a degree of phoneying-up of budget projections unmatched in recent decades (if ever) including the Vietnam War period. Rather than a plan reflecting the programs and spending of the federal government, the budget has undergone a transformation into an instrument of ideological hectoring.
Central to such distortion is the target ceiling concept, first unveiled in last February's "A Program for Economic Recovery." Nothing is inherently wrong with the target concept, so long as the ceilings are related to plausible limitations on spending. These ceilings are not.
For FY 1982 the initial ceiling was $695 billion. The administration now concedes that 1982 spending will be over $725 billion--exceeding the ceiling by $30 billion. Most outside observers believe it will run to $735-740 billion, thus exceeding the ceiling by over $40 billion.
The supposed ceiling for FY 83 was $732 billion. Thus, FY 82 spending already will exceed the FY 83 ceiling. Moreover, a realistic projection of 1983 spending ($805-810 billion) drastically exceeds the $771 billion original ceiling for FY 1984. Such overruns accumulate increasingly in the out-years. Indeed, FY 84 spending itself will likely exceed the 1984 ceiling by $110 billion or more. (There is no easier way on paper to curtail projected spending than just to drop out a year or more of expenditure growth.)
The new budget now projects FY 83 spending at $757 billion--a growth of $32 billion above the (understated) FY 82 figure. Could anyone honestly suggest that non-defense outlays will actually shrink next year by several billion dollars--despite continuing inflation and rising payments for Social Security, interest, retired pay, agricultural subsidies, and the like? Yet that precisely is the bald thesis hidden in this budget's numbers. It implies shrinkage overall of real domestic expenditures by 7 percent, much higher for unsheltered programs. One doubts there are many administration stalwarts on the Hill so suicidally inclined as to walk that plank.
For FY 84, the budget projects a further increase in spending of $38 billion to roughly $806 billion--including a nominal growth of non-defense outlays of $16 billion. (This surprisingly generous outcome reflects the end of a miraculous surge in receipts from the outer continental shelf, expected in 1983 but not further augmented in 1984). How is this dramatic understatement of 1984 outlays achieved? Two of the more egregious examples may suffice. Social Security payments under existing law are estimated to rise by but $4 billion or just over 2 percent (demographic factors should account for more than that, leaving aside cost-of-living increases!). Interest payments, moreover--through the interlocking fictions of drastically understated deficits and the proposition that interest rates will fall sharply as the economy expands by 5 percent in real terms--are understated by $25 billion or so.
Enough of spending projections that embarrassingly stretch credulity.
Regrettably the revenue reductions in the lamentable Economic Recovery Tax Act of 1981 (which substantially destroyed the nation's fiscal structure) were tied to the fancies of the original target ceilings. The effect on further deficits remains calamitous. For example, in FY 84, expenditures will likely run at least $880 billion, but revenues are unlikely to be much over $700 billion--a deficit probably exceeding $180 billion. How does the administration conceal that extra $100 billion or so in the deficit--and thus rationalize its refusal to propose tax increases? Partly by the disingenuous understatement of outlays already outlined, but also by playing around with the revenue calculations. Despite the drastic cuts in the corporate income tax in the 1981 legislation--through transfer of tax credits, etc.--which in the absence of a minimum tax means many corporations will have no corporate tax liability, the budget projects revenues from corporate income doubling between 1982 and 1984, almost to the level projected last year in the Carter budget.
What public purpose does all of this serve--a set of budget projections that knowledgeable people can only regard as preposterous? One hardly knows whether to laugh or to weep. No one from Wall Street can believe these projections; no one from Main Street should believe them.
All this represents a serious blow to the credibility of the budget process within the executive branch. The OMB, unloved but broadly respected for its integrity, has long been a governmental pillar. Its debauchment represents the needless wastage of social capital. The Congressional Budget Office may well enjoy the satisfaction of providing the only credible official estimates in town. Yet, the budget committees will now be faced with the dismaying choice either of acquiescing in dissembling or of watching the congressional budget process come apart.
One scarcely knows what this budget does for waste--but it does seem to have left intact generalized fraud and abuse.