Four years ago, despite massive spending cuts, President Reagan and Congress produced a budget deficit that topped $100 billion for the first time.
A year later, the rallying cry was for spending cuts to achieve a deficit of less than $100 billion. The cuts were approved, but the deficit, aggravated by severe recession, soared to nearly $200 billion.
Since then, Congress has approved billions of dollars in spending cuts just to keep deficits under $200 billion, prompting this year's push for the biggest package of spending cuts so far in order to get deficits down to about $100 billion a year.
But, even if Congress breaks its logjam over conflicting sets of spending cuts approved by the House and Senate, signs are pointing again to deficits nudging $200 billion for the rest of the decade.
The reasons include economic uncertainties, exaggerated savings claims and difficulties in arriving at a compromise that does not add to deficits -- a problem House-Senate conferees have been struggling with for more than two weeks.
"Like gerbils on a treadmill, we're running faster and faster just to stay in the same place," said Sen. Lawton Chiles (D-Fla.), ranking minority member of the Senate Budget Committee.
At least on paper, nearly half the deficit savings for next year has been eaten up by more pessimistic assumptions about the economy's performance than were used in preparation of both the administration and congressional budgets.
Many lawmakers, Republicans as well as Democrats, contended that the early assumptions were overly rosy, projecting economic growth at 4 percent a year and interest rates declining by one-quarter over the next three years. But now there is general agreement that, for whatever reasons, the original assumptions are so unrealistic that the deficit for next year is likely to be about $20 billion higher than the $170 billion-plus forecast in both the House and Senate budgets.
More important, for fiscal 1988, by which time both Reagan and Congress had hoped to halve the deficit to $100 billion or less, it would be about $70 billion more than the two chambers projected. This would mean a deficit after three years of massive new spending cuts of nearly $175 billion under the Senate plan and close to $195 billion under the House version: in other words, nudging $200 billion again.
Beyond the paper losses, however, is the question of whether Congress can achieve anything like the $56 billion in deficit reductions that both chambers have separately approved for next year, leading to cumulative savings of $250 billion to $300 billion over the next three years.
So much political capital has been invested by both parties in nailing down deficit reductions this year that few congressional leaders are suggesting, at least so far, that the effort will break down irrevocably in a dispute over details.
But Reagan has turned his attention to tax simplification, and many lawmakers are complaining that the tax issue is undermining momentum for deficit reduction in Congress, dimming prospects for quick action and easing the pressure for compromise. Concern has deepened to the point that Senate Majority Leader Robert J. Dole (R-Kan.), in a thinly veiled threat last week, warned that delay on deficit reduction jeopardizes action this year on taxes.
Moreover, although public opinion polls have been showing more support for deficit reduction than for tax overhaul, some lawmakers wonder how long this will last if interest rates continue to fall or even level out.
Even if agreement can be reached, there are questions about whether this year's savings targets will translate into actual savings.
Billions of dollars' worth of purported savings are dubious or exaggerated, starting with the fact that both chambers calculate their defense cutbacks from an administration benchmark rather than from actual spending levels.
If actual levels were used for comparison, the savings would be considerably less than claimed. The Congressional Budget Office, in a recalculation that hinged largely on use of actual defense numbers, figured next year's deficit reduction at $38 billion rather than $56 billion, producing a deficit after three years that is about $50 billion higher than claimed.
In a variation on this theme, Senate budget conferees have proposed increasing the estimate of outlay savings for defense by $3 billion for next year without changing their proposed appropriations ceilings.
There are also questionable savings claims on the domestic side. The House, for instance, claims $4 billion from improved contracting of government services to the private sector and another $4 billion from passage of legislation distributing funds from fees and royalties paid for oil and gas exploration on the outer continental shelf. Senate Republicans first ridiculed both moves but then agreed to swallow the OCS proposal as they scrambled to find compromise savings.
Both chambers included credit programs in the budget in order to get a better grip on their costs. But they reap a windfall this year in adding up deficit reductions because they can count loan savings that far exceed actual savings in expenditures.
Similarly, costs of filling the Strategic Petroleum Reserve, once moved "off budget" so the money could be counted as a deficit reduction, was moved back "on budget" by the Senate, enabling it to count savings from a freeze in filling the reserve as a deficit reduction.
A volatile factor in the equation is interest costs, made all the more significant as the cost of servicing a rapidly escalating national debt, fueled by large annual budget deficits, takes up an ever bigger share of federal expenditures. A CBO analysis of interest costs to the government shows that they could rise $24 billion over three years if interest rates remain steady rather than decline as the administration predicts.
Then there is the question of whether the House and Senate, even though both approved $56 billion in deficit reductions for next year, can agree on specifics totaling anywhere near that number.
Defense and Social Security illustrate the problem.
With the House holding firm against cutbacks in Social Security and the administration reluctant to yield further on defense spending, the conferees could lose nearly $8 billion in savings for next year, and more than $30 billion over three years, by choosing the course of least resistance in taking the Senate's position on defense and the House position on Social Security.
If that happens, "I don't know how the hell you're going to get from here to there," said Rep. Marvin Leath (D-Tex.), a House budget conferee.
There is also the question of enforcing the cuts once they are included in a quasi-binding budget resolution that may or may not require most of the savings to be achieved by legislated changes in the programs themselves. The Senate wants authorizing committees to be ordered to make the changes; the House insists that it can do the job through spending ceilings for appropriations committees.
At stake is the Senate's demand for termination of about a dozen domestic programs, such as the Economic Development Administration and Urban Development Action Grants, that the House wants to preserve. Without the "reconciliation" process to force programmatic changes, termination of individual programs, a top-priority concern of the administration, would be difficult to achieve.