President Reagan's fiscal experts have concluded that without new action by Congress, the federal deficit likely will go beyond $190 billion in each of the next few years and rise slightly instead of fall, even with continued economic growth, administration sources said yesterday.
Office of Management and Budget Director David A. Stockman was to present new estimates yesterday to a budget working group that included Cabinet members and senior White House advisers. The estimates, showing what would happen to the deficit if existing policies remain unchanged, run counter to Reagan's statement during his reelection campaign that the deficit would decline automatically because of economic growth.
In August, Stockman estimated that without further action, the deficit would be $172 billion this fiscal year, 1985; $174 billion in fiscal 1986, $184 billion in 1987, $176 billion in 1988 and $161 billlion in 1989.
However, officials said, the estimates for these years have increased to the $190 billion range. If the "off-budget" items are included -- various federal credit programs -- the deficit estimate rises to more than $200 billion, officials said.
The new budget estimates are important because they define the size of the deficit from which policy-makers must work, the direction of the deficit in later years, and the depth of new budget cuts that may be proposed in January. The president is expected by the end of this week to make some overall decisions on budget strategy, and Stockman then will begin program-by-program budget reviews.
Reagan said in the campaign that a tax increase proposed by Democrat Walter F. Mondale was unnecessary because economic growth would increase revenues and bring the deficit down. Reagan also said he would seek to trim "fat" in government to bring the deficit down.
The new estimates suggest that, with current growth estimates and without new budget cuts or tax increases, deficits will remain in the $190 billion range.
Officials cited several reasons for the higher deficit estimates. The first is spending that Congress added at the end of the last session, much of it in the health, education and welfare area. The new estimates assume that this spending will not be rolled back.
The second reason is that the economy grew somewhat slower in the third quarter than was predicted.
Finally, the new deficit estimates assume that defense spending will be higher than Congress approved this year. Congress is likely to slow the buildup again next year.
Administration officials said yesterday that the new deficit estimates for future years were based on the same economic assumptions Reagan last used in August: economic expansion of 4 percent a year after inflation, with declining interest rates, inflation and unemployment.
However, the deficit estimates reflect a slowing of economic expansion to 2.7 percent during the third quarter of this year. The administration is assuming that the rate will be at about 4 percent next year and through the end of the decade.
The economic assumptions could change before the January budget is published, but probably won't, officials said. They have been approved, for budget planning purposes, by Treasury Secretary Donald T. Regan, Stockman and William A. Niskanen, a member of the Council of Economic Advisers. The council is currently without a chairman.
Using different economic assumptions than the administration in its August update, the Congressional Budget Office said that without further action by Congress, the deficit would rise steadily from $191 billion in the current fiscal year to $278 billion by 1989.
Interest rates are a major reason for the difference between CBO and administration estimates of the deficit.
The CBO assumes rates will be higher in future years than Reagan does, and thus increase the cost of servicing the government's debt.
Reagan noted during the campaign that the deficit this year had come down about $20 billion from $195 billion in 1983, when the economic recovery was just beginning. The president said this was evidence that the deficit could fall further with continued growth.
Reagan said that if growth continued at 4 percent a year and spending were held to an increase of 5 percent each year, the budget could be balanced. However, Reagan's program has included overall spending increases of more than 5 percent a year.
The new estimates suggest that growth alone at current levels will not be enough to bring down the deficit.
Reagan has said a tax increase is a "last resort" for dealing with the deficit. He has ruled out cuts in defense spending.
However, some officials say Reagan will settle for a slower defense buildup in his second term, even if he doesn't propose one in January when he presents his budget to Congress.