A new internal administration estimate suggests that the federal budget deficit for this fiscal year will approach $190 billion because the economy's continuing weakness has kept tax revenues below expected levels, officials said yesterday.
The administration's last official projection in July forecast a fiscal 1983 budget deficit of $115 billion, but a number of administration economic policy-makers have said since then that it probably would be in the $150 billion to $200 billion range.
President Reagan's Cabinet also was warned recently that the deficit for fiscal 1984 could reach $180 billion or more without deep domestic spending cuts. That deficit now is expected to be $155 billion if all the cuts recommended by Office of Management and Budget Director David A. Stockman are approved by the White House.
But administration policy-makers report there has been significant "erosion" in Stockman's target of $26 billion in cuts in domestic spending programs. Some of the cuts in health care programs already have been overturned on appeal to the White House, officials said. Some other agency heads also are said to be successfully appealing.
Reagan said in a Washington Post interview last week that the nation faces a "structural deficit" that will be difficult to trim by budget cuts or tax increases alone. He has asserted that only economic growth next year can pull the nation out of the ever-expanding deficit quagmire.
The latest deficit projections outline the growing scope of the problem Reagan faces if the economy does not rebound with some strength. Administration officials said the deficits are widening not because of increased spending -- the problem Reagan confronted in his first two years -- but because revenues are eroding as the economy stagnates and unemployment rises.
With more people out of work and with corporate profits lagging, the Treasury collects less in taxes.
Martin Feldstein, chairman of the president's Council of Economic Advisers, said in a Nov. 9 speech that a 1983 deficit of $150 billion would represent more than 4.5 percent of the nation's gross national product, "a larger share than in any previous year." The deficit for fiscal 1982, which ended Sept. 30, was $112 billion or 3.7 percent of GNP, he noted.
Feldstein, the president's chief economic adviser, noted that spending in 1983 is "now essentially beyond our control," but that deficits "can and must be reduced."
That was the purpose of the $26 billion in cuts that Stockman sought in domestic outlays for fiscal 1984, which begins next Oct. 1. Administration officials said there has been "slippage" because various Cabinet members have successfully appealed to the White House some sharp budget cuts proposed by Stockman.
The 1984 budget is to go to Congress Jan. 31.
It could not be determined precisely how many of the targeted $26 billion in 1984 cuts have been overturned. One administration official said less than a quarter of the Stockman cuts have been appealed.
The president has ruled out any curtailment in the growth of the Pentagon budget and insisted on keeping the three-year tax cut voted in 1981 intact, placing the largest burden of spending cuts for 1984 on discretionary domestic outlays. Even with the full $26 billion in proposed cuts, administration officials estimated the 1984 deficit will be about $155 billion.
Administration sources said yesterday that a substantial percentage of the proposed cuts at the Department of Health and Human Services have been overturned. Secretary Richard S. Schweiker successfully appealed to the White House deep cuts in personnel for the Centers for Disease Control and the Food and Drug Administration.
The budget office originally had proposed reducing FDA staff 18 percent over three years except in laboratory and field investigation. A 20 percent cut was sought at CDC.
The sources said Schweiker also won reversal of OMB proposals to strip most functions from his assistant secretary for health. In addition, an OMB plan to wipe out the Alcohol, Drug Abuse and Mental Health Administration reportedly has been overturned by the White House.
"They Schweiker and the HHS won 95 percent of their appeals in the public health area," said a lobbyist on health-related issues.
Schweiker's appeal also brought partial restoration of some funds he sought for the Head Start program, sources within and outside the administration said.
Schweiker had sought a $100 million increase in the basic Head Start program, from the current appropriation of $912 million to $1.012 billion.
OMB had granted the request but demanded that four-fifths of the money go for food programs for Head Start children that previously were funded by the Agriculture Department.
Schweiker complained that the basic program had received only a $20 million increase and appealed for the rest of his proposed increase.
As a result, officials said, Head Start reportedly will end up with $971 million for the basic program and $91 million for food. The sources said this means that the amount allocated for food no longer will be increased automatically each year to compensate for inflation.
On another economic matter, it turned out yesterday that Congress added language at the last minute to the stopgap federal spending bill for the rest of this fiscal year advising the Federal Reserve Board to lower interest rates.
The language was not binding, but was viewed by many officials as a warning that any increase in interest rates might bring efforts to increase controls on the Fed.