The federal budget deficit is likely to be between $140 billion and $160 billion in each of the next three years even if Congress makes all the spending cuts and tax increases called for in the current budget resolution, Alice Rivlin, director of the Congressional Budget Office, said yesterday.
These deficits, far higher than the ones projected by the Reagan administration or by Congress when the budget resolution was passed, will be higher still if the moderate economic recovery forecast by CBO to begin later this year fails to occur, Rivlin told the Senate Budget Committee.
In a much delayed midyear budget review, the administration will estimate the fiscal 1983 deficit at no more than $114 billion, according to Treasury Secretary Donald T. Regan. Congress, when it passed the budget resolution, said it would produce a deficit of $103.9 billion.
Rivlin noted that Treasury borrowing to finance deficits as large as those CBO is projecting would keep pressure on financial markets, holding interest rates high and preventing a vigorous recovery from the recession.
Even as Rivlin warned of the higher deficits, bills to conform to the budget resolution made faltering progress in the Democratic-controlled House.
The Agriculture Committee approved cost-cutting amendments in dairy and wheat support programs in order to protect food stamps, while the Banking Committee rejected Republican proposals to squeeze Federal Housing Administration loan programs on grounds it had already made enough spending cuts to comply with the budget directive.
In its first floor vote on committee-proposed spending cuts, meanwhile, the House approved relatively modest economies in veterans programs, while its Rules Committee cleared the way for a floor fight later this week over the Post Office and Civil Service Committee's refusal to limit annual cost-of-living increases in federal pensions to 4 percent.
The deficits CBO is projecting are consistent with no more than a moderate recovery that would reduce unemployment slowly, she said. The unemployment rate, which was 9.5 percent in June, will average 8.8 percent in 1983 and still be above 7.5 percent throughout 1985, CBO now estimates.
On the other hand, Rivlin said, inflation should be no higher than about a 6.3 percent rate next year, as measured by the so-called gross national product deflator. That compares to a 4.8 percent annual rate in the first half of this year and a forecast 7 percent in the current six months.
With uncharacteristic bluntness, Rivlin said Congress and the president should act together to reduce the likely deficits by moderating the large planned increases in defense spending over the next few years, taking "significant action" to reduce spending on so-called entitlement programs and further increasing taxes.
Rivlin said that most of the difference between the CBO figures and those of the administration are the result of a different economic forecast, principally a slower rate of economic growth over the next three years.
In Chicago to address the National Conference of State Legislatures, Regan said he would not comment on Rivlin's projections "until I see what the economic assumptions are" for her forecast.
But he told reporters, "she's been reasonably good" in her past estimates.
Asked what the government should do if deficits threaten to remain above $150 billion for the next three years, the Treasury secretary said, "cut the budget. There is room in the budget for further cuts," especially in "nondefense discretionary spending."
Rivlin told the Hill panel there was little Congress could do in coming months to improve the short-term economic outlook other than "hope for the best."
She resisted suggestions by some committee Democrats that rapid expansion of the money supply would help. That could renew inflation fears and cause long-term interest rates to go higher, she cautioned.
In yesterday's committee action:
* The House Agriculture Committee voted tentatively to make major cuts in price-support payments to dairy farmers, thereby lessening the need to make cuts in the food-stamp program.
The committee voted to reduce price-support payments to farmers who exceed set production limits, a departure from current practice that experts said could save $1.3 billion next fiscal year and a total of $3.2 billion over the next three years.
In another departure, the committee voted to pay wheat farmers for taking part in an acreage set-aside program under which, next year, they would have to idle one-fifth of their land. The CBO estimated that this program, for which wheat farmers have been lobbying heavily, would cost $127 million next fiscal year but save $218 million during the following two years as reduced production resulted in increased grain prices and lower support payments from the Treasury.
The committee adopted similar programs for rice and corn, but refused to approve direct payments for cotton farmers.
* The House Banking Committee, contending that it had already cut costs more than enough in two earlier bills, rejected more than $2 billion in savings from the FHA loan program endorsed by the Senate Banking Committee in complying with budget orders.
Instead, the committee's Democratic majority, over Republican objections that it came up with a "turkey" of a proposal, endorsed additional cost-cutting of only about $5 million for next year, largely in the Office of the Treasury Secretary. They invited Republicans to make further cuts on the floor if they wanted.
* The House, by a vote of 400 to 0, approved $548 million in cuts from veterans programs over the next three years as part of an omnibus veterans compensation bill. It was the first of the budget-cutting bills to be approved by the House and it exceeded its target, although the amounts involved are modest in comparison with more controversial proposals that are waiting in the wings.
* The House Rules Committee granted reluctant Republicans a chance to champion cuts in inflation adjustments for federal retirees when a largely token savings measure from the Post Office and Civil Service Committee comes to the full House later in the week.
The Civil Service Committee refused to impose a 4 percent limit on cost-of-living adjustments for military and civilian government retirees, in effect letting the Republicans take responsibility for such a step on the floor. Republicans argued in vain that committee foot-dragging, coupled with piecemeal handling of the spending measures, stacked the deck against them and against compliance with the budget.
The Democrats are "resorting to a nickle-and-dime strategy . . . that would leave us with just that--nickles and dimes," charged Minority Whip Trent Lott (R-Miss.).
"If they Republicans support these cuts, they ought to vote for them," countered Rep. Leon E. Panetta (D-Calif.).
* The House Appropriations Committee, wrapping up the last of its money packages for the 1982 fiscal year ending Sept. 30, approved $14.4 billion in new spending, with the largest chunk, $6.2 billion, for federal pay raises granted last October.
This measure is in addition to a scaled-down "urgent" supplemental money bill that President Reagan signed earlier this month after a protracted veto fight with Congress.