President Reagan, unable to meet his goal of cutting the federal deficit in half over three years, has essentially walked away from the problem, leaving to Congress the politically unpalatable choices on defense, taxes and Social Security.
What his senior officials hoped would be a fresh start this year with dramatic, early leadership by Reagan to trim the deficit -- similar to his 1981 victories -- now looms as a period of compromise in which Congress is in the driver's seat.
"We just couldn't reach the target," an administration official said Friday, referring to the White House goal, set less than two months ago but now moribund, of cutting the deficit to $100 billion by 1988. "Our budget is finished, and there is no way of reopening it."
Reagan dominated the budget debate in his first year, but since then he has increasingly pushed the hard choices over to Congress, delivering budgets that congressional leaders called "dead on arrival." Reagan has then let them forge a compromise and take the blame for it.
Reagan often endorsed the bitter pill of these compromises -- higher taxes and less defense spending than he sought -- but also rhetorically flogged Congress for not giving him what he requested.
Last year, the "Rose Garden" compromise came about in the spring. But this year the process has started unfolding with unaccustomed swiftness as Senate Majority Leader Robert J. Dole (R-Kan.) announced Friday that Senate Republicans would write their own spending blueprint by Feb. 1, a few days before Reagan is due to submit his.
Reagan lost the initiative this year through a confluence of events that had origins in his reelection campaign. Responding to challenges from Democratic nominee Walter F. Mondale, he declared Social Security off-limits to budget cutting and forswore tax increases.
These were political, not budgetary, decisions. Whatever escape hatch Reagan may have left himself at first had evaporated by Election Day. It was not widely noted then, but Reagan started out in August by saying a tax increase would be a "last resort" and ended up in November saying, "Over my dead body."
Likewise, Reagan had said nothing about Social Security cost-of-living adjustments until Mondale accused him of a secret plan to cut benefits. The White House responded by vowing never to touch any aspect of the huge pension system.
Another political, not budgetary, decision was Reagan's campaign assertion that deficits would decline with economic growth. The White House had computers that, if used, would have shown to the contrary that an economic slowdown was driving the deficit upward.
But Reagan aides did not want to tell the president he was wrong, and they did not during the campaign.
"We didn't turn on the machine," one official said, referring to the computers that were activated right after the election, producing ever-higher deficit estimates of more than $200 billion.
Ironically, the one budget area where Reagan left himself maneuvering room during the campaign was his defense buildup. He promised to continue it, but left open the question of how much. That door closed last month, however, when Reagan, with an eye on the upcoming arms control discussions in Geneva, brushed aside any deep cuts in military spending.
The one area where Reagan has made progress against the deficit is domestic spending, approving a package of about $35 billion in budget cuts and selective "freezes," ranging from programs for the poor to subsidies for the middle class and business. Hoping to salvage at least this effort, Office of Management and Budget Director David A. Stockman spent several hours Friday trying to sell it to Dole and other Senate Republicans.
Reagan promised a group of newspaper editors in December that his fiscal 1986 budget, due to be submitted about Feb. 4, would be "the most historic effort ever made to cut unnecessary spending" and that "no area of the budget will be exempt from cost savings."
But the total domestic and defense cuts Reagan has approved so far for next year ($44.2 billion) are less than those he proposed in 1981 ($51.2 billion), and he has backpedaled on some of next year's cuts in response to appeals from his Cabinet.
Looked at another way, Reagan has appeared to be running in place this year.
For example, on Aug. 15, the White House published a deficit estimate of $174 billion in 1986 if no action were taken. Then, after Reagan won, the computers were "turned on" and the deficit estimates skyrocketed to over $200 billion. Reagan approved new domestic budget cuts.
The latest estimate is that, even if all the new budget cuts were enacted, the deficit next year would be $178 billion.
"These budget estimates are a portrayal of failure," Lawrence A. Kudlow, a former OMB chief economist who now runs a private economic consulting firm, wrote recently. "They imply that the Reagan administration fiscal policy is unable to effectively control federal spending or to steadily reduce the federal borrowing requirement."
According to Stockman, the current administration plan, which has been largely completed, will produce deficits of $178 billion next year, $167 billion in 1987 and $139 billion in 1988.
Reagan's targets were $168 billion next year, $136 billion in 1987 and $98 billion in 1988.
The shortfall: $10 billion next year, $31 billion in 1987 and $41 billion in 1988.
White House officials continued to say Friday that they hope to somehow reach these targets. But, for the most part, they have placed their hope in the hands of Dole and his fellow Senate Republicans, who seem ready to make the choices on scaling back the defense buildup and delaying Social Security cost-of-living adjustments. They may even resort to tax increases in later years.
"There is anything but distress at what they're doing," one administration official said after Friday's meeting of Stockman and the Senate Republicans, marking, at least symbolically, the death knell for Reagan's budget and the beginning of the congressional budget-writing effort.
"We're very pleased," the official said. It's entirely welcome."