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White House Expects Far Higher Deficit

May 15, 1987|ROBERT A. ROSENBLATT | Times Staff Writer

WASHINGTON — Slower economic growth and faster government spending may drive the federal deficit significantly higher than the $108 billion forecast in President Reagan's proposed budget for the next fiscal year, the White House said Thursday.

The deficit is likely to be closer to the $134-billion figure estimated by the Congressional Budget Office, officials acknowledged.

Because the President has promised to reject any tax increases, the prospect of a larger deficit "puts even greater pressure on us to work even harder for spending controls of one kind or another," White House spokesman Marlin Fitzwater told reporters.

The White House will not make any specific proposals until it issues a midyear budget review in July. The Administration still hopes to meet the $108-billion target established by the Gramm-Rudman deficit-reduction law, Fitzwater said.

Tax Revenues Decline

But meeting that goal will be more difficult because the economy grew more slowly than expected in recent months. When economic growth slows, wages and profits expand less rapidly and yield lower than expected federal tax revenues.

"We're not quite on target because of changes in growth," Fitzwater said.

In addition, spending is expanding more rapidly. Highway bills and clean water legislation, approved over presidential vetoes, will fatten the deficit, Administration officials said.

The White House admission that the deficit is rising "has made Congress' job a whole lot easier," said Stanley E. Collender, director of government relations at Touche Ross & Co., a major accounting firm.

"It takes away a major arguing point for the President, who had been saying: 'I can reach $108 billion, why can't Congress?' " Collender said. "This makes it easier for Congress to pass a budget with a $134-billion deficit."

Conferees Prepare Compromise

The Democrats, controlling both the House and Senate, are pushing for a budget with more taxes and less defense spending than the President has proposed. House and Senate conferees are preparing a compromise budget resolution to set the broad outlines of federal spending for fiscal 1988, which begins Oct. 1.

Each chamber of Congress had approved its own budget resolution. The expected deficits are the same, $133 billion, but the details differ. The Senate would spend $8 billion more than the House for defense and would require much higher tax revenues, $20 billion more than the House in 1989.

The differences caused a major protest Wednesday by Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, which is responsible for tax legislation.

He warned that the Senate revenue figure may be "unrealistic" and said that a Senate plan to link defense spending to taxes may be unconstitutional. Rostenkowski made his complaints in a letter to Rep. William H. Gray III (D-Pa.), chairman of the House Budget Committee.

More Senate Concessions

Gray leads the House conferees in the discussion with the Senate. Because of Rostenkowski's complaints, Gray now is likely to take a tougher position in the negotiation, insisting on more Senate concessions, sources said Thursday.

Despite their conflicts, the House and Senate conferees are expected to agree on a budget resolution next week, presenting a united front against the Administration. Their final resolution will call for more taxes, setting the stage for a confrontation with Reagan, who has pledged to veto any legislation containing tax hikes.

The Democratic leaders believe that the President can be persuaded to accept some increases in federal excise taxes, such as the levies on gasoline, cigarettes, wine and beer.

No Signs From White House

But the White House shows no sign of being ready for negotiations. Republican sources in Congress believe that some tax increases might be acceptable only as part of a package deal including reform of the budget process. The Republicans want a two-year budget, instead of the annual process, and a strict rule to prevent Congress from violating the budget resolution when it adopts individual spending bills.

While the resolution sets general spending limits, the specific programs are funded later by bills approved by congressional appropriations committees. Republican leaders in Congress have been frustrated in the past when final defense outlays were cut and domestic programs expanded beyond the levels originally expected by the budget resolution.

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