President Reagan has decided to cut $8 billion out of the Pentagon budget next fiscal year, but some administration officials believe that is not the most important decision, from either a defense or fiscal standpoint.
Their question is what will happen in the years after that, the "out-years," when they feel the looming budget deficits could jeopardize economic recovery.
And that is precisely what no one yet knows about the defense cuts--whether they will turn out to have been one-year wonders or will also affect those deficits out in the future.
At issue is whether Reagan can credibly show, as aides say he wants to do, a declining deficit path for five years in the fiscal 1984 budget proposal he is scheduled to submit to Congress Jan. 31. Under current administration projections, the deficit path is steadily upward--to $295 billion in 1988 if no offsetting action is taken.
Defense cuts are not the only piece of the puzzle.
The president is also expected to ask Congress for further cuts in domestic spending that will produce expanding savings in the out-years. In addition, he is also considering proposing contingent tax increases that would take effect in fiscal 1986 if high deficits persisted. And he is counting on an expanding economy to shrink the deficits later on.
The still-unanswered question confronting Reagan in the final throes of his budget preparation is whether a growing economy, these possible new taxes, and domestic spending cuts will solve the out-year deficit problem alone, or whether defense must also be part of the equation in later years.
So far, the administration has gingerly sidestepped the matter.
In announcing the $8 billion outlay cut this week, Defense Secretary Caspar W. Weinberger emphasized that weapons programs, which take shape over many years, would be unscathed by his action.
Instead, he said the one-year savings would result from inflation adjustments, lower fuel prices, postponing some military construction projects, curbing training exercises and forgoing the 7.6 percent military pay raise next October.
Yesterday, in a brief question-and-answer session with reporters, Reagan reinforced this interpretation of the defense trims, saying: "Our preference was not to delay or set back the weapons buildups that we need in order to close the window of vulnerability." He acknowledged there "might be some stretching out of our readiness preparations" but maintained "we have already achieved great gains in those."
"I myself would have preferred to not have to make those," Reagan said of the fiscal 1984 Pentagon cuts.
The president's original defense spending blueprint called for an additional $116 billion over five years. Administration officials claim they have trimmed this by $41 billion in various compromises. Reagan and his Pentagon chief agreed on the latest round of spending cuts--which still leave military outlays on a rising course--at a private White House meeting last Monday.
The imperative for making the trims, and for Weinberger's quick public announcement of them, was the need to show Congress and the financial markets that the administration would be "fair" by imposing spending reductions on both domestic and military outlays.
"We're facing reality with what we're going to present in a budget to the Congress and what we believe can meet our problems and would be acceptable to Congress," Reagan said yesterday.
And his White House chief of staff, James A. Baker III, told a San Francisco business audience this week that "as a political matter" the Weinberger savings "will pave the way for the administration to assemble a budget that is comprehensive and across-the-board in attacking our deficit problems."
Administration officials have not detailed how it will "pave the way." Privately, some have said that the defense budget will be permanently on a lower track. Others have said that the chief advantage of Weinberger's move is not to contribute to substantial deficit reduction, but to make the Reagan budget more saleable politically this spring at a time when Pentagon spending is being questioned on Capitol Hill.