Will the real President Reagan please stand up? Or, at the very least, will he tell us whether he thinks America has a deficit problem?
On one hand, there's the President Reagan who delivered, as only he can, a stirring and uplifting State of the Union address. He said that the best way to reduce deficits is through economic growth -- that "each added percentage point per year of real GNP growth will lead to a cumulative reduction in deficits of nearly $200 billion over five years."
Then there's the President Reagan who signed the president's Budget Message. Here, he acknowledges that we face deficits of $225 to $250 billion under current policies, and that he wants to cut spending by about $240 billion over the next three years to reduce them.
While the president's message does not name any of the "excessive federal benefits" he proposes to eliminate or reduce, David Stockman follows with several hundred pages of painful detail. Strangest of all, there's no mention of "growing our way out" of the deficit. Indeed, Part 3 of the budget explains why it is "highly unlikely" that the economy could grow continuously, without high inflation, at 5 percent per year -- i.e., that "added percentage point per year" above the optimistic 4 percent per year assumed in the budget.
Because the president has given such ambivalent signals, there is a real doubt in our land whether a deficit-reduction effort is necessary. The House Budget Committee recently held hearings across the country to find out what the deficit and the president's budget proposals mean to Main Street. Not surprisingly, we found many citizens who were not eager to climb aboard the Spending Cut Special. Many are simply zzled. If the president's economic program has worked as well as he claims, if indeed we are safely launched on a second American revolution of hope and opportunity, why worry about the deficit?
Main Street's puzzlement and reluctance, of course, is reflected in Congress, especially as spending reduction moves from rhetoric to painfully real choices. If the president is on their side, the supply-side preachers may have their tents filled with eager converts before the economic revival meeting is over. What could be more appealing to a Senate Republican weary of the budget stalemate than a little true economic faith? What could be more appealing to a House Democrat disagreeing strongly with the president's priorities and what surer formula for political stalemate on the budget?
Unfortunately, the reality is this: We're not going to outgrow Reagan's deficits. The evidence of the last several years is compelling. We've now had more than two years of near-record recovery, faster than almost anyone projected. Yet, the deficit has not fallen. Our recession-bloated deficit in 1983 was $195 billion; in more prosperous 1985 we expect $203 billion.
Why? Simply because the Reagan administration's tax and spending policies have produced a structural deficit -- that part of the deficit not related to economic performance -- that rises too rapidly to be submerged by the rising revenues from economic growth. Without the growing structural deficit, the strong economic recovery should have reduced the deficit by about $70 billion in the last two years. However, the structural deficit has expanded at the same time by slightly more than $70 billion, offsetting the effects of recovery.
In the next few years the situation will get worse. As the economic expansion inevitably slows, its deficit- reducing effects are sharply reduced. But the structural deficit just keeps growing, by about $25 billion each year to the end of the decade.
So the problem is real enough, and many of us in the House and Senate, Democrats and Republicans alike, are trying to mobilize our colleagues and the American people to accept the harsh necessity of painful spending cuts.
We need the president's help. We will need his support eventually for a budget that is more fair and balanced than his proposal. But most of all we need his leadership now in explaining to the American people that the deficit problem is real; that we're not going to outgrow it with supply-side hormones; and that the cuts are going to hurt.