Balancing Act

A "make believe" budget

When debate opened three weeks ago on federal spending in 1981, House Budget Committee Chairman Robert Giaimo of Connecticut predicted that Congress was about to achieve a "historic breakthrough"--the first balanced budget in twelve years. Last week the House did just that, voting by 225 to 193 to spend $611.8 billion in the fiscal year that begins on Oct. 1. The budget projects a $2 billion surplus, in contrast to the $42.8 billion deficit on 1980 spending of $571.6 billion.

Unfortunately, the budget balancing act was accomplished only through two highly questionable maneuvers. First, to hold down spending, the House budget resolution directed 16 congressional committees to trim a total of $9 billion from Government programs. The chairmen of the committees opposed the move, arguing that it infringed on their traditional authority. Said Interior Committee Chair man Morris Udall of Arizona: "This is a grab for power."

Second, the House Budget Committee based its revenue predictions on the shaky assumption that the recession will not be as bad as most economists think. In his own defense, Giaimo argued: "The economists have been so wrong. They have been predicting recession for three years."

Asked if his economic predictions might be wrong, he replied: "It is possible. It is too early to say."

The House budget assumes that the U.S. unemployment rate will peak at 7.5% by late 1980; other experts believe that the rate will actually climb as high as 8.5% next year. Economists estimate that a miscalculation of one percentage point in the unemployment rate would throw off the House budget figures by more than $25 billion--a loss of $20 billion in revenues and an automatic increase of $5 bil lion to $7 billion in unemployment bene fits. Conceded New York Republican Congressman Barber Conable, a member of the Budget Committee: "There is a substantial aura of make-believe about our prognostications." After the House vote, the budget battle moved to the Senate, where Ernest Hollings of South Carolina has succeeded Edmund Muskie as chairman of the Bud get Committee. A staunch supporter of increased military spending, Hollings is expected to press for deep cuts in domestic programs and a bigger Pentagon budget. In the end, the Senate too is expected to produce a balanced budget, but one that will stay balanced only in the unlikely event that the economy cooperates.

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