The proposed budget President Reagan presented to Congress Feb. 1 totaled $925.5 billion, and included a $33 billion increase in defense spending, while non-defense spending would decline slightly, about $5 billion. Major cutbacks in social spending programs were postponed until the next budget. The budget's most striking feature was its projected $180.4 billion deficit. Reagan proposed no major tax increases, but rather urged Congress to come up with a "down payment" of $100 billion in deficit reduction over the next three years. As projected, the national debt would increase by 74% over the next four years -- the largest increase since World War II.
New Budget Continues Reagan Priorities: Defense Spending Up, Most Other Programs Restrained
Massive Deficits Shadow Outlook
President Reagan presented Congress Feb. 1 with a $925.5 billion budget for fiscal 1985 that was $180.4 billion out of balance. For previous budget, [See 1983 New Reagan Budget Increases Defense Spending 14% But Freezes Most Other Domestic Program Funding; Tax Trigger Proposed to Trim Deficits]
The proposed budget, for the fiscal year beginning on Oct. 1, continued the Reagan-era military buildup, with a $33 billion increase in Pentagon outlays, a 14.5% rise over the previous year's spending.
Nondefense spending would fall slightly, overall, about $5 billion in fiscal 1985, with some increases in certain areas, such as the space program, environmental protection, education, foreign aid and criminal justice programs.
There would be a modest increase in tax revenue in fiscal 1985, by $8 billion, mainly through a tightening of what where considered abuses of the current code.
But the President proposed no new major tax increases for the present. "To those who say we must raise taxes, I say wait," he advised in his budget message. "It is important--more than important, crucial--to get the mix of spending restraint and receipt increases right. There must be substantial reductions in spending and strictly limited increases in receipts."
The President left most of the mixing decisions to the future. A major study of the tax code was not due until a month after the November presidential election. Further major cutbacks in social spending programs were reserved for the next budget.
Budget Director David Stockman said at a news conference Feb. 1 that fiscal 1985's budget would contain "a variety of structural reforms in many different components of the budget."
There would be "some tough bullets to bite," Stockman said. "We're going to have to look at entitlements," he said, in reference to the major social benefit programs, such as Medicare and Social Security. "We're going to have to look at certain categories of domestic spending that haven't been trimmed very much thus far."
This task was not confronted in the current budget, Stockman explained, because it was an election year. "There is no point, in lining up all these changes and proposals in a row so every candidate . . . can pledge not to do them," he said.
The Budget Message itself cautioned that "additional steps" to curb spending would be necessary in the future to "minimize" the need for tax increases. The message named the areas where it would look for cuts. "Given the pending solvency crisis in Medicare, excessive annuity levels embodied in federal pensions, and the potential for further reform of benefit indexing mechanisms, it is apparent that opportunities for such savings do exist."
Also, veterans' programs would be "subject to intensive scrutiny," it said.
The budget message gave assurance that "the social safety net is as strong today as it was in 1981." But it also looked forward to "the steady withering" of domestic programs in future budgets.
Also in the future were Reagan's proposals for constitutional amendments that would require the federal government to balance its budget and grant him authority to veto individual items in an appropriations measure without killing the entire bill.
The consignment of the deficit problem to the future also was implicit in the President's appeal earlier for a bipartisan approach to the problem. He asked for a "working group" of administration and congressional leaders, from both parties, to come up with a way to reduce the deficit.
The President's suggestion that the bipartisan group come up with a "down payment" of $100 billion in deficit reductions over the next three years actually would be necessary to keep the deficit in the $180 billion range.
As currently projected, the national debt after four years of the Reagan administration would have risen 74%, the largest percentage increase since the World War II years.
Reagan warned in his budget message that the prospect of "indefinitely prolonged high budget deficits threatens the continuation of sustained noninflationary growth and prosperity." Such deficits, he said, raised "the specter of sharply higher interest, choked-off investment, renewed recession and rising unemployment."
The $180.4 billion deficit forecast for fiscal 1985 was a falloff from the $183.7 billion expected for fiscal 1984, the current budget year ending Sept. 30, as well as the record $195.4 billion deficit recorded in fiscal 1983.
No significant decline was anticipated, in the administration's budget scenario, until fiscal 1988, when a $152 billion deficit was foreseen, and fiscal 1989, when a $123.4 billion figure was forecast. The projections for 1986 and 1987 were $177.1 billion and $180.5 billion, respectively.
Interest on the national debt, which amounted to $89.8 billion in fiscal 1983, was expected in fiscal 1985 to total $116.1 billion, which would be 13% of total federal outlays. By 1987, according to the administration's own estimates, the accumulated national debt would reach the $2.3 trillion mark and equal 50.5% of the year's total gross national product.
Vol. 96, No. 6, 13 February 1984
What Reagan's Budget Will Mean to You
A spending plan tailored for an election year -- and aimed at many groups. That's what the President is proposing.
Behind the latest dose of red ink from Washington lies a 1985 federal budget that President Reagan hopes will help him win a second term in November.
If enacted, the spending and taxing proposals unveiled to a skeptical Congress on February 1 would touch vast numbers of Americans -- from elderly people to young parents saving for their children's educations.
....Unlike Reagan's past budgets, this one is for campaigning rather than legislating. Many of its proposals failed in Congress last year and stand little chance of doing much better this year with both parties looking toward the election.
On the spending side, the President avoids major domestic cuts that might alienate moderate voters this fall. On the revenue side, he holds fast against major tax hikes, hoping a buoyant economy will allay voters' fears of huge deficits until after the election.
For conservative voters, there are still signs of Reagan's commitment to reorder spending priorities. The budget nibbles away at spending for social programs while pumping 14.5 percent more into actual outlays for defense....
....The budget does offer a handful of recycled proposals to appeal to voters and salve wounds inflicted by Reagan's past spending cuts. The requests are largely political symbolism. Taken together, their budgetary impact is not a lot in fiscal 1985. Among the new items: Aimed at women, expanding individual retirement accounts for homemakers and tax breaks for some day-care centers; for those worried about crime, more for law enforcement, including efforts to fight organized crime and drug trafficking; for the environment, a doubling of research funds for acid rain.
Overall spending will be up 8.4 percent from this year's 853.8 billion dollars. But inflation will cut the increase to 3.3 percent in real terms.
Defense would get 33.4 billion more, nearly half of the new spending....
Spending cuts are slated for some domestic programs, such as welfare, education, health care and public works. But, pointing up the election-year realities, the reductions are puny compared with those in past Reagan budgets. As Budget Director David Stockman explains: "Big sweeping changes aren't feasible or likely in this Congress."
Stockman promises further large-scale spending cuts in fiscal 1986 -- if Reagan wins. He refuses to specify programs slated for cuts, but the budget itself hints the administration will be looking at such items as veterans' spending and medicare.
....The President also has in mind some "less contentious" spending cuts and, according to aides, hasn't ruled out a compromise on the military budget or further tightening of the tax laws.
"Everything is on the table," vows Treasury Secretary Donald Regan.
At stake as a result are key proposals that would affect such groups as these --
The needy. Some welfare recipients would have to look for work in order to keep benefits. Other rules will be tightened, bringing savings of 374 million dollars on food stamps, 633 million in Aid to Families With Dependent Children and 46 million for child nutrition.
The administration again is seeking to save about 1 billion dollars by setting spending limits and having all medicaid patients pay some of their costs. Nevertheless, spending on health costs for the needy would rise 9.4 percent to 22.1 billion dollars.
....Women. Married couples with only one spouse working outside the home would be allowed to sink $4,000 a year from earnings into an individual retirement plan -- IRA -- instead of up to $2,250 as at present, a move that would put homemakers on a par with working wives.
....Home buyers. Higher mortgage rates for some buyers could result from a proposal to make two federally sponsored lending institutions -- the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation -- totally private.
Veterans. Vietnam-era vets would have 15 percent more federal money available for educational and vocational benefits. Disability benefits and pensions for other veterans would rise.
Farmers. The administration seeks drastic cuts in federally backed financing for rural electric and telephone service and for crop exports.
Automatic increases in support prices for wheat, feed, grains, cotton and rice would be ended, dropping target prices to their 1981 levels. The budget savings: 120 million dollars in 1985 and 2 billion in 1986....
In all, programs to prop up and protect farm incomes will be 12.6 billion, up from 8.9 billion in 1984 but down from a record 20.7 billion in 1983.
Federal workers. Across-the-board raises for the 2.2 million civilian workers would be no bigger than 3.5 percent -- not enough to keep pace with the private sector.
Other proposals seek to raise federal workers' contributions to their retirement plan and slow the growth of payments to existing retirees. Cost-of-living raises for federal civilian and military retirees, payable in June, will almost certainly be put off until January, saving 750 million.
Reagan projects the government's nondefense work force in 1985 to have 81,700 fewer employees than in 1982. However, civilian jobs in defense will be up 65,000.
Environmentalists. More money would go to clean up toxic-waste dumps and purify drinking water. Environmental Protection Agency funds to enforce regulation would rise 65 percent....
Law enforcers. Hiring of 1,000 new border-patrol officers to stem the flow of illegal aliens is planned....
Foreign aid. Military and economic aid would jump to 12.9 billion dollars. A key part will go to Central America to carry out recommendations of a study commission headed by Henry Kissinger. Through 1989, that region would get about 8 billion in economic aid, plus 515 million in new military help in 1984 and 1985 -- and possibly more later.
Vol. 123, No. 7, 13 February 1984
Shooting the Moon on Defense
The President's military budget draws fire on Capitol Hill
With the press looking on, Defense Secretary Caspar Weinberger held up a photograph showing a stack of documents 6 ft. 3 in. high: it was the 1984 defense budget, with supporting documents. This year's stack promises to be taller still. Even allowing for inflation, the 1985 budget is the largest submitted by the Pentagon since World War II, including the years of the Korean and Viet Nam wars....
Even not counting their first-time allocations for accrued retirement pay, the services put in for eye-popping increases. The Air Force asked for $104.3 billion, an increase of 21%. The Navy claimed $96.7 billion, an 18% boost. The Army, the services' poor boy for the 14th straight year, requested $72 billion, up 15%. With the higher budgets come proposed boosts in enlistments: 15,000 for the Air Force (to 610,000), 10,000 for the Navy (to 575,000), 3,000 for the Marines (to 200,000), and 1,000 for the Army (to 781,000).
The new budget, like those in recent years, called for sharply higher outlays for military hardware and weapons development. The Pentagon wants a go-ahead to spend $107 billion on weapons procurement, up 25% from last year, and $33.9 billion for research, an increase of 26%. The military's operating and maintenance budget increased 14.7% (to $80.9 billion), and personnel expenses inched up a relatively modest 9% (to $67.8 billion).
High on the Pentagon's shopping list were two controversial big-ticket items. Some $8.2 billion was earmarked for 34 new B-1B bombers. The 1985 budget also seeks $5 billion to buy 40 MX missiles....Also requested: 48 F-15 fighters (at $22 million apiece), 150 F-16s (at $15.1 million) and 720 M-1 tanks (at $2.1 million). There was new, high-tech entry: $1.8 billion in seed money for President Reagan's Star Wars plan to develop a space-based system capable of intercepting missiles targeted at the U.S.
Weinberger defended the increases as necessary if the U.S. is to match the military might of the Soviet Union. The Reagan Administration, he said, "has made significant progress in restoring the credibility of our forces." Yet, he warned, the Soviets outspent the U.S. on defense by a hefty 40% during the past ten years....
Weinberger offered an incentive for congressional cooperation. "If we are allowed to continue on the path we have set," he said, "we can look forward to a time, only two fiscal years from now, when defense increases can begin to slow dramatically." The Pentagon projects that outlays would rise 9.2% in 1986 and a mere 3.9% in 1989. The military's share of the overall budget, however, would jump from 29% in 1985 to 32% in 1989 -- still far less than the 50% high of the mid-1950s.
Democrats on Capitol Hill seemed in no mood to go along with the Administration's shoot-the-moon request....Given social spending cuts, said California Democrat Robert Dellums, the proposed defense budget represents "a level of obscenity that's extraordinarily difficult to understand." Retorted Weinberger: "I've never thought of myself as a public pornographer."
Democrats for Defense, a group of former senior Pentagon officials, held a press conference to criticize the Administration for pushing "unsustainable spasms of spending." They presented a rough list of cuts that would whittle the defense increase to 5%, largely through the elimination of the most controversial weapons systems: the MX, the B-1B and the Star Wars project....
....By week's end, the question on Capitol Hill was not whether the defense budget would be cut, but how and where. Congressmen, however, have found talking a lot easier than trimming. Last year they shaved only $17 billion off the Administration's $274 billion budget authority request. Commented Alan Greenspan, chief economist under President Ford: "Everybody is terribly anxious to control defense expenditures -- in other people's districts."
Atlanta, Ga., 2 February 1984
Frankly, the budget President Reagan has proposed for 1985 is just silly, at least as a fiscal document. It is bad economics and bad policy. But the candidate-president presumably has judged it will be good politics.
With this budget, much as with last year's, Reagan in effect resigns from leadership, turning the practical decisions over to Congress. Congress won't go for the budget in its proposed form, and Reagan knows that.
The Republican-controlled Senate will try to be more supportive in a re-election year than it was last year, when even the GOP leadership rejected out of hand Reagan's unrelenting efforts to run up military spending at the expense of social-justice programs. But the Democratic House will dig in even harder against this year's budget than it did against last year's. The prospect is for a second year of budget gridlock.
Consider. Over his first three budgets, Reagan cut discretionary spending 23 percent. Add in 19 percent growth in Social Security and Medicare, and Reagan, though still posing as an anti-big government president and candidate, has presided over record increases in the federal budget.
The real change has been a massive shift of national resources from social effort to military effort -- and adventure. Congress last year said "enough," Republicans little less emphatically than Democrats. Yet the president proposes further distortion. He would cut social programs a bit less this time -- Reagan, steadily ideological in the long run, is tactically as political as the next guy -- but he would increase military spending another whopping 13 percent.
About his awesome deficit -- $185 [b]illion -- the president is blithe andsometimes misleading. When he isn't still blaming 50 wastrel Democratic years, he blames Congress for rejecting $50 billion in budget cuts he asked for over the last three years.
....The deficit is now his, in part the result of the recession but to a major degree the consequence of Reagan policies: A 25-percent tax cut while he was shifting every saved domestic-side penny -- and more -- to the military ledger. Reagan has outspent himself quite deliberately.
....Administration budgets are always political documents, and never more so than when a president is running for re-election. But even by that standard, Reagan offers a budget less pragmatic than most. It is not, or not mainly, a working budget. It is a blueprint for the kind of America Reagan wants to spend a second term trying to bring about. It is what this year's election is all about.
Lincoln, Neb., 2 February 1984
What to say about President Reagan's $925.5 billion re-election year budget? If the document overwhelms those in the belly of the federal establishment, people who are far more knowledgeable, who understand the assumptions and catch the nuances, what hope is there for those at considerable distance to render fair, balanced comment?
....The irony, grim or delicious, is that the most ideologically rigid conservative president since Calvin Coolidge, and maybe even William McKinley, a man who gained the political stars by aiming constant abuse at government spending and government debt, turns out to be the biggest spender in national history and generator of the greatest federal deficit. A more perfect Keynesian in applying deficit spending to rev an economic recovery would be hard to find.
....Reagan cannot escape profound historical responsibility for the expansion of the debt nor for the budget's size because of his simultaneous policies of cutting revenue and increasing military spending.
However, it was undoubtedly past Democratic presidents and Democratic Congresses who made the frightful error of indexing massive social and income redistribution programs. And it was Democrats in the Congress...who helped enact the very Reagan tax and military authorization programs which are today the partial cause of the nearly $1 trillion budget -- a budget incorporating a planned operating deficit in excess of $180 billion.
Put no serious hope in some bipartisan commission to make a down payment of sorts on reducing the deficit. That's as much an election year gimmick as the renewed presidential call for line-item veto power.
....Would that President Reagan got behind a bill sponsored by House Budget Committee Chairman James R. Jones, an Oklahoma Democrat, and Rep. Carroll Campbell, a South Carolina Republican. It bites bullets.
It would temporarily reduce annual indexing in non-means-tested entitlement programs -- old age, survivors and disability insurance; armed services, civil service and railroad retirement, and federal worker compensation for job-related injuries. On the tax side, it would reduce the size of personal exemptions and standard deductions.
Beyond that should come some "give" by the administration in military spending, the cancellation of weapons systems. The Journal's candidates for scrapping remain the MX missile and B-1B bomber programs....
All we sense is that by delaying yet another year, the subsequent pain will be greater, the extent of reduced living standards more widespread and the real strength of the nation further endangered. But survival requires responsibility.