Federal spending this fiscal year will be 25.2 percent of the gross national product, the highest such percentage since World War II, according to budget documents the Reagan administration distributed Friday to members of Congress.
That figure is an awkward one for the president, whose reputation in office has been as a budget-cutter. He has made cuts in some domestic spending programs, although these cuts have been offset by increases on the defense side and in recession-related spending. But, largely because of lower inflation, Reagan has reduced the nominal growth of the budget as a whole. His problem is that the growth rate of the economy or GNP has also declined.
The budget was 23 percent of the GNP when Reagan took office in fiscal 1981. According to the Friday budget documents, even if Congress accepts the new spending cuts that Reagan proposes, it will take until 1988 to bring the federal government share of GNP back to 23 percent.
For the 10 years before Reagan became president, this measure of the federal government's role in the economy averaged 21.3 percent.
Reagan yesterday defended his budget as "fair and realistic." In his weekly radio speech he acknowledged that "much of the debate in the weeks and months ahead will focus on the deficit." He blamed the deficits on three factors: lower inflation, which has held down incomes and thus government tax revenues; interest payments on past debt, and the need to increase defense spending to restore the nation's military strength.
He said the deficit is "a dirty word which awhile back I'd hoped might be a thing of the past by 1984. But the deficit is going to be large."
In the Democratic reponse to the president's speech, Rep. Wayne Dowdy (Miss.) accused Reagan of freewheeling defense spending and said the president, not circumstances, are to blame for the size of the deficit.
Meanwhile, additional elements of the fiscal 1984 budget due to be revealed officially tomorrow surfaced yesterday. Among other things, they show the administration cutting $90 million from public health programs and lowering the budget for the Department of Housing and Urban Development by more than $1 billion.
In addition, federal spending on the main means-tested programs for the poor--food stamps, welfare and extra income payments to the needy elderly, blind and disabled--would be "slightly lower in 1984 than in 1983" in dollar terms, according to Office of Management and Budget spokesman Edwin Dale Jr.
However, Dale said "the changes are just around the edges . . . . They're minimal. . . . The average welfare mother or food stamp recipient would not be affected."
Sen. Edward M. Kennedy (D-Mass) said the Reagan budget is a "frontal assault on the health of the American people," because of $60 billion in cuts from Medicare-Medicaid programs over the next five years. Rep. Henry A. Waxman (D-Calif.), chairman of the House Energy and Commerce Committee subcommittee on health and environment, said a preliminary analysis of the Reagan budget shows 40 percent increases in Medicare costs for 29 million elderly people.
White House chief of staff James A. Baker III acknowledged that the administration will set a spending record but said it was not the president's fault.
"The fact of the matter," Baker said, "is that we have dipped into a recession, a far deeper recession than we anticipated. And as you know, only 27 percent of the budget is controllable. The rest is triggered automatically, and as we've gone through the recession there has been some automatic spending taking place that has increased the deficit."
Baker added that reaction from congressional leaders yesterday indicated to him that the budget as written by the administration has "a good chance."
At the very least, the administration's budget was a "basis for legislative give and take," Baker said, adding that under no circumstances will the president accept sharper cuts in defense spending.
Rising defense spending is one factor pushing up the government's share of GNP. In fiscal 1988, this spending is expected to absorb 7.8 percent of GNP compared to 5.6 percent in 1981. White House figures show that the defense budget for the current fiscal year is equivalent to about 6.5 percent of the total economy.
Besides defense, another fast-growing portion of the budget has been the cost of servicing the national debt. In the 1970s, debt service was equivalent to less than 2 percent of the total GNP. By 1981, high interest rates and a rising national debt had pushed the cost to 2.4 percent of the GNP.
The White House documents indicate that the share has climbed to just under 3 percent of GNP in the current fiscal year. It is projected to decline to 2.7 percent of the economy by 1988. In that year, other domestic federal programs will absorb 12.7 percent of GNP on Reagan's budget, down from almost 16 percent in the current fiscal year. During the five years before Reagan took office, these programs were equivalent to between 14 and 15 percent of the total economy.
The new budget documents show that Reagan has succeeded in cutting the federal government's tax take, which fell from 21 percent of GNP in fiscal 1981 to an estimated 18.7 percent in fiscal 1983. But the result is a yawning budget gap, now expected by the administration to be equivalent to 6.5 percent of GNP this year, a post-World War II high.
Reagan has moved to undo some of the effects of that tax cut, with last year's $98 billion, three-year tax increase. He is asking Congress to vote new "standby" tax increases that would push the federal tax take back up to 20.6 percent by 1988. It stood at 21 percent of GNP in fiscal 1981.
Reagan has proposed that the tax increases--which would raise between $45 billion and $50 billion a year from 1986 to 1988--would take effect only if the economy is growing, Congress has agreed to spending cuts, and the deficit is equivalent to more than 2.5 percent of GNP.
The White House projects that the 1985 deficit would be equivalent to 5.1 percent of GNP, and that the tax increase would help to narrow this to 3.6 percent the next year and to 2.4 percent by 1988.
From 1985 to 1986 the federal tax share of GNP would jump from 19.1 percent to 20.5 percent while spending would decline slightly from 24.2 percent to 24.1 percent, according to the budget documents.
Reagan's new budget shows that the president has had to retreat a long way from his original goal of shrinking federal government. In February, 1981, Reagan projected that both spending and taxes would fall to about 19 percent of GNP by 1986, with the budget being balanced by 1984.