The new Reagan "compromise" budget announced on Wednesday differs from the original Reagan spending plan in part on taxes and defense, but also in this major respect: it would make much deeper cuts in domestic spending News Analysis News Analysis programs, including Social Security, to bring down the deficit.
The proposed new cuts, worked out by Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) and the White House and approved by the committee on a party-line vote, in many respects rival or surpass the domestic program reductions that preoccupied the president and Congress all last year.
As a starting point, the Domenici-White House plan would freeze all so-called discretionary domestic programs--those subject to the congressional appropriations process, as distinct from "entitlement" programs under which spending is automatic--for three years at this year's budget authority level.
As a result, total spending on these programs would be slightly less in 1985 than 1982; this means that in real terms, after inflation estimated at about 7 percent a year, these programs would shrink by about one-quarter. They include all the big education programs, foreign aid, health grants, highways, law enforcement, the space effort--the biggest block of programs in the federal repertory.
In addition, the new spending plan would mandate major benefit curbs in a large groups of "entitlement" programs for which spending is normally automatic: Medicare, Medicaid, guaranteed student loans, food stamps, welfare, federal employes' disability compensation and general revenue sharing. As a result, the program outlays over the next three years would be cut substantially from the levels they would otherwise reach as a result of population growth and inflation.
A third major feature of the new plan calls for cutting Social Security by $6 billion in fiscal 1983 and $17 billion annually the following two years below the levels it would reach under current law. This means a cut of nearly 10 percent in the outlays anticipated under current law for fiscal 1984-85.
President Reagan, who was stung by public reaction to proposed Social Security cuts last year and appointed a special commission to study the issue, had proposed no Social Security cuts in this year's initial budget. By embracing the Domenici plan, he appears to be embracing Social Security cuts as well.
Theoretically, the Domenici-White House plan does not mandate cuts in Social Security but merely instructs the Finance Committee either to cut benefits by the specified ammount or raise Social Security taxes by an equivalent amount in order to strengthen the solvency of the troubled system. However, Sen. William L. Armstrong (R-Colo.), a member of both committees and chairman of Finance's Social Security subcommittee, voiced the universal expectation yesterday when he said: "I'd be very surprised to see us increase Social Security taxes."
Also in the new plan is a curb on cost-of-living adjustments for federal and military pensioners.
According to the Budget Committee, the cuts in the new plan for Social Security, the non-defense discretionary programs, the entitlement programs and the cost-of-living adjustments for federal and military pensioners compare as follows with Reagan's initial budget:
Reagan's original budget proposed combined cuts in these categories, as compared with anticipated spending levels, totaling $22 billion in fiscal 1983, $35 billion in fiscal 1984 and $49 billion in fiscal 1985, which adds up to $106 billion over the three years.
The new plan, as approved by the committee, would cut about $21.6 billion in fiscal 1983, $46 billion in 1984 and $59 billion in 1985--a three-year total of $127 billion.
The main difference is bigger cuts in Medicare and the addition of the Social Security cuts. The other domestic programs were generally cut somewhat less.
The new package also moves to cut the overall budget deficit by projecting lower costs to the United States for borrowing money, a reduction in the size of the increase in defense spending sought by the president (but it still would rise from $190 billion in 1982 to $278 billion in 1985) plus added tax revenues.
Overall, the new budget package looks like this:
In fiscal 1983, if there were no change in current policies, the deficit would be $182 billion. The committee would cut defense procurement outlays by $5 billion below the president's earlier request, federal civilian and military pay raises by $5.5 billion, the domestic programs discussed earlier by $21.6 billion, government interest by $12.9 billion, government management costs by $8.9 billion; in addition, $22 billion in new taxes would be imposed in a form still not specified. These changes would reduce the deficit to $106.1 billion, nearly $30 billion below the deficit currently estimated for Reagan's original budget.
For fiscal 1984, the deficit under current law would be $216 billion, but $110 billion in outlay cuts (including $7 billion in defense, the $46 billion in domestic programs, interest, management improvements and government employe pay caps) plus $37 billion in new tax revenues would reduce it to $69 billion.
For fiscal 1985, the cuts (including $10 billion in defense) would total $151 billion and the tax increases $42 billion, and the deficit would be $39 billion instead of the $232 billion projected under current law.