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Bright New Chance for a Balanced Budget

February 23, 1986|Richard E. Cohen | Richard E. Cohen is congressional correspondent for the National Journal.

WASHINGTON — Imagine the federal budget being close to balanced within a few years. Imagine politicians no longer spending their time blaming each other for huge deficits. Fantasy? Maybe not.

Yes, President Ronald Reagan's latest, and relatively unchanged, budget priorities have sparked the usual ritualistic attacks and counterattacks between the Administration and key congressional figures in both parties. Yes, the result has been the predictable gloom-and-doom stories about the harmful impact of various proposals and the dim prospects for an agreement.

But, in quieter moments, budget experts in Congress and the White House report that 1986 can be a year for relatively quick acceptance of a budget that, though painful in some areas, will prove politically acceptable and will make sizable deficit cuts. Compromise, of course, is the required word for all sides, and President Reagan--like each of his predecessors--will not get everything that he has requested. The question is whether and when the key players will stop posturing and, at least in private, seek the inevitable middle ground.

Take a step back and admire the larger perspective. A good argument can be made that the worst of the deficits have passed and that the federal budget prospects are moving out of the trough toward sunnier days.

Reasonable people can disagree about which politicians, if any, deserve credit for the result, but some budget figures and economic news dramatize the improvement:

--Government and private economists are boosting their forecasts for 1986 growth to 3%-4%, a far cry from the recession that many Republican politicians feared a year ago. Key factors are cheaper oil and lower interest rates.

--Last year, Reagan suggested $35 billion in domestic spending cuts to reach his proposed deficit of $180 billion. His latest budget includes a relatively paltry $22 billion in domestic cuts to reach a $144-billion deficit.

--Indeed, the nonpartisan Congressional Budget Office reported last week that in the unlikely event that no further steps are made to reduce the deficit, the fiscal 1990 deficit will be $120 billion. Using the same assumptions only six months ago, that office forecast a $285 billion deficit for 1990. That change has resulted primarily from spending cuts--more than half of them from Pentagon budget growth, made by Congress and Reagan last fall. "The outlook for reducing budget deficits has improved dramatically since last summer," the office said in its report.

Some caution is called for, of course. Not so many years ago, the federal budget was a story that rarely made the front page. The four years of the Carter Administration yielded average deficits of $63 billion annually. Since Reagan took control, the nation has learned to live with $200-billion annual deficits; one result has been an annual budget debate that sometimes seems as calamitous and ever-changing as the "Raiders of the Lost Ark."

Then what about the new Gramm-Rudman-Hollings law and the possibility that it could force automatic cuts in federal programs next October? Budget experts said this week, for example, that one result could be a $49-billion whack in new spending authority from Reagan's proposed $320-billion defense budget.

Forget it. Few lawmakers would find that outcome acceptable or in the national interest. This so-called "sequestering" would be triggered in the event Congress does not do its job. A federal court recently found a technical aspect of that procedure unconstitutional and the Supreme Court will probably rule this spring. Regardless of that decision, the heart of the new budget law will very likely remain its steadily declining deficit targets, moving from this year's estimated $208 billion to $144 billion next year and a balanced budget in 1991.

In the first year of Gramm-Rudman-Hollings, at least, Congress will be most reluctant to walk away from its deficit target. Members of both parties fear that such an action would be greeted by eviction notices from voters in November. Consequently, the pressure is on for an agreement this spring in order to avoid the more Draconian automatic cuts.

The outlines of an acceptable package of roughly $40 billion to reach the $144 billion level are evident. They include a defense increase only to cover inflation, not the 8% above inflation requested by Reagan; some, but by no means all, of his domestic spending cuts; and a small tax increase, perhaps energy-related.

When Reagan protests that he will veto any new revenues, Republican lawmakers quickly respond that he already has voiced willingness to consider an energy tax to ensure that there is enough money for his tax reform plan. In any case, his own budget for 1987 neatly hides $5.3 billion in new revenues plus $6.5 billion from user fees and his proposed sale of federal assets.

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