Deficit Out of Control

"I was amused when you said I was in charge of the federal budget. I don't know anybody who's in charge of the federal budget."

--Budget Director Caspar

Weinberger, in a recent interview

NEITHER, as he has discovered to his chagrin, does Richard Nixon.

Though he campaigned in 1968 as an advocate of responsible budgets, Nixon will face the electorate this year as the author of three sets of federal books positively dripping with red ink--about $80 billion worth, or more than during any other Administration since World War II. Angered and embarrassed by such large deficits, Nixon has decided to take the offensive in the escalating battle of the budget. He is stepping up attacks on the Democratic-controlled Congress for overspending, and last week he discussed the issue with both G.O.P. legislators and the Cabinet. Nixon is seriously considering taking his hold-that-line message to the legislature in a personal address.

Torrent. The deficit for fiscal '72, which ended June 30, turned out to be substantially less than expected ($23 billion v. a onetime estimate of $39 billion). But the projection for the current year's imbalance has grown to at least $35 billion, v. $26 billion originally. Nixon's own request for flood-relief funds for victims of Hurricane Agnes would add another $1.6 billion to that total. The Brookings Institution calculates that--even if no new federal spending programs beyond those now contemplated were enacted, and if the Treasury were receiving all the tax revenues available at full employment--it would be mid-1978 before the federal budget could possibly show a surplus. Some economists are frankly afraid that the nation's budget is out of control.

The latest example of a huge new deficit maker is the 20% increase in Social Security benefits, which added at least $4.25 billion to the federal shortfall expected this year. By 1977, according to Brookings, the inevitable rise in the number of Social Security recipients will increase net federal borrowing by $20 billion. Between now and the election, Congress could decide to pass a torrent of other social, environmental and educational bills. Since vetoing such legislation might prove politically embarrassing, Nixon is trying to head it off by invoking the threat of inflation. After meeting with the President, Treasury Secretary George Shultz intoned: "A vote for extra spending beyond the President's budget is a vote for higher prices or higher taxes."

The Democrats' retort to Shultz is likely to be that a vote against extra spending is a vote for continued unemployment, which is now running at a 5.5% rate and is not expected to sink below 5% until at least next year. With the economy still far from being fully employed, many Democrats argue, there is little inflationary risk in chalking up higher deficit spending--but a good deal of job-creating gain in it.

Scrooge. For the longer run, both Democrats and Republicans theoretically agree that the huge budget deficits facing any Administration in the 1970s are intolerable. But neither party has faced up to the unpleasant job of trimming them, either through higher taxes or cutbacks in federal programs. The Congressional Joint Economic Committee reckons that subsidies, tax preferences and low-interest loans for special-interest groups, from ghetto blacks to affluent homeowners, cost the Government well over $63 billion a year. These subsidies and benefits all had a purpose when enacted in the past, but many are outdated and could be cut to reduce the deficit.

Worthy candidates for trimming include farm price supports that benefit primarily big farmers, airport aid that allows private aviators to pay less for landing guidance and other services than they actually cost, and subsidies to beekeepers whose hives have been damaged by pesticides used on crops. Says Senator William Proxmire, chairman of the Joint Economic Committee: "These programs are like Christmas, with everyone giving subsidies to everyone else and Congress serving as Santa Claus." Yet until some courageous Scrooge can stop it, the Treasury is bound to continue spending big money on some questionable causes.

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