Faster economic growth will help trim the federal budget deficit from a record $209.8 billion in fiscal 1983 to $179.7 billion in 1984, the Reagan administration said yesterday in its annual mid-session budget review.
The 1984 deficit figure is $10.5 billion less than the administration's last official estimate made in April. The 1982 deficit was $110.6 billion, the current record.
Since April, administration economists have revised upward from 4.7 percent to 5.5 percent their forecast for growth in the inflation-adjusted gross national product during calendar 1983. Similarly, the figure for 1984 was raised from 4 percent to 4.5 percent.
Treasury Secretary Donald T. Regan said the added economic growth will cut the deficits by a cumulative $110 billion over a five-year period. "What we need now is a congressional response that reduces federal spending," Regan told reporters.
Many economists both in and out of government say that the large budget deficits are keeping interest rates higher than they otherwise would be. While on the one hand the deficits add to the total level of demand for goods and services in the country, the economists say that they also add to the nation's trade deficit by helping keep the value of the dollar unusually high compared with other currencies.
If the deficits are not reduced as the economic recovery causes more individuals and businesses to try to borrow money, many economists expect a clash between private and public demand for credit to send interest rates upward again.
Congress and the administration remain at odds over how to reduce the deficits in future years, though both the 1984 congressional budget resolution and the president's budget call for tax increases from 1986 onward. But Reagan has refused to consider higher taxes before then, and not even for that year if Congress refuses to cut non-defense spending as much as he wishes.
The review declared, "Although unemployment still remains high at 9.8 percent including armed forces personnel , there is growing evidence that the economy is getting stronger and stronger, and that a broad-based non-inflationary economic recovery is well under way . . . It must be understood, however, that bipartisan cooperation of the Congress is imperative if the administration's high non-inflationary growth forecast is to be achieved.
"Any undisciplined tax or spending increases that exceed those reflected in this review would pose a serious threat to sustained recovery," the review warned.
As announced earlier, the more rapid economic recovery is predicted to cut the unemployment rate to 9.6 percent in the fourth quarter of this year and to 8.6 percent in the fourth quarter of 1984. Inflation, as measured by the GNP deflator, is forecast to be 4.6 percent during this year and 5 percent in 1984.
The higher level of economic activity is expected to raise estimated fiscal 1984 tax receipts to $668.4 billion, a $14.7 billion increase from the April number. Most of the increase, some $9.9 billion, will come from corporations, the forecast of whose profits for 1984 has been boosted by nearly 20 percent.
The change in spending due to the healthier economy is a modest $2.8 billion reduction, as an increase in interest payments absorbs some of the savings on unemployment compensation and other programs. Meanwhile, the estimated cost of other programs in 1984 has gone up by $7.4 billion, leaving total outlays at $848.1 billion, an increase of $4.2 billion compared with the April numbers.
The largest increase in any program was a $4.1 billion boost in the cost of farm price supports.
As usual, all the budget estimates in the mid-session review assume passage of all of the president's tax and spending proposals.
Since Congress has so far rejected many of Reagan's latest proposed cuts in non-defense programs, 1984 outlays could for that reason alone easily be more than $10 billion higher than the administration has estimated. Defense spending, however, could turn out to be somewhat lower as a result of congressional changes in the president's military buildup.
In the same vein, the legislators have shown little interest in taxing as personal income a portion of employer-provided health insurance premiums, a $2.4 billion item for 1984. The mid-session review also assumes that withholding on interest and dividend payments will go into effect next month even though Congress is close to adopting a compromise bill that would reduce next year's tax take from that source by about $2.5 billion from the estimate included in the review.