Five former treasury secretaries yesterday urged the president and Congress to slash defense and nondefense spending immediately to prevent high budget deficits from damaging the economy.
A combination of spending cuts, tax increases and a one-year freeze on Social Security, Medicare and federal retirement benefits could reduce the deficit to less than $100 billion in fiscal 1983 and hold the 1985 deficit under $75 billion, the bipartisan group said in a statement.
Otherwise, the former officials said, deficits will continue to grow and borrowing to finance them "would devour virtually every penny of household savings and would divert capital from productive investment at a record rate."
Meanwhile, President Reagan spent yesterday morning phoning House members to seek support for a budget package he prefers that is similar to the one passed by the Senate. The budget package is sponsored by House Minority Leader Robert H. Michel (R-Ill.). The Senate budget resolution calls for a $116 billion deficit in the spending year that begins Oct. 1.
The former treasury secretaries--who planned to issue their appeal formally at a news conference today--and their years in office are: W. Michael Blumenthal, 1977 to 1979; William E. Simon, 1974 to 1976; John B. Connally, 1971 and 1972; Henry H. Fowler, 1965 to 1968, and C. Douglas Dillon, 1961 to 1965.
They were joined by Peter G. Peterson, secretary of commerce under President Nixon and now chairman of the Wall Street investment firm of Lehman Brothers Kuhn Loeb Inc.
Their statement said that fairness is essential and criticized Reagan for concentrating spending cuts in programs "aimed at the poor," such as Medicaid, welfare, food stamps and legal assistance.
"It is now time for a wider sharing of burdens--for focusing fiscal reform on the major spending programs which confer benefits on middle and upper income groups," the six said. They did not single out any such programs in their statement, however.
In what they called a "program for immediate action," the former officials said Congress and the president should slow the growth in nondefense spending in order to reduce the deficit by $60 billion in fiscal 1985 (the federal spending year that begins Oct. 1, 1984).
"The best place to begin," they said, "is with a one-year freeze in benefits flowing from the large, broad-based entitlement programs--Social Security, Medicare, veterans' benefits, civil service and military retirement, and other nondefense subsidies and payments."
After the freeze, the former officials said, some sort of cap should be placed on how much benefits could rise in future years.
They also called for defense spending that would total $25 billion less than the president wants by 1985, and said that taxes should be increased by $60 billion by 1985. They suggested new taxes on oil and natural gas consumption and higher taxes on cigarettes and tobacco, as well as elimination of some corporate tax benefits.
"These steps, if undertaken now, would cut the fiscal 1985 deficit by about $145 billion. This in turn could lead, through less federal borrowing and lower interest rates, to a further deficit reduction of $30 billion to $55 billion."
The former secretaries said "runaway deficits" can never be contained if any portions of the budget are placed "out of bounds." The president has asserted that Social Security benefits will not be changed and has been resistant to any reductions in his defense program.
Unless the deficits are reduced, the former officials said, recovery from the recession will be "feeble and temporary," interest rates will remain "abnormally high," high unemployment will be chronic, and investment by businesses will remain at low levels, resulting in little productivity growth that will depress living standards and decrease the nation's ability to compete in foreign markets.