Reagan revises budget
Economists skeptical as ever, Stockman Isn’t
WASHINGTON (AP) — Unswayed by the
recession that upset his glowing forecasts of a
year ago, Pres Ronald Reagan says he still
expects robust economic recovery — just one
year later than planned But after one year of
'■Reaganomics," private economists are as skep
tical as ever
Reagan's budget for fiscal year 1983,
released this weekend, calls for the biggest
federal deficits in history over the same three year
period in which Reagan predicts the nation will
climb out of recession and head into a strong
recovery
At this time last year, Reagan said overall U S.
economic growth would be slight in 1981 but
would bounce back at a healthy 4.2 percent rate
in 1982 after adjusting for inflation.
Now, Reagan says growth this year will be
much less — just two-tenths of 1 percent But
once again, he is saying wait till next year, when
he predicts economic growth will be 5 2 percent
Private economists tend to agree that the
president’s plan — coupled with continued tight
control of the money supply by the Federal Re
serve Board — make strong recovery only possi
ble, rather than probable and make the lasting
recovery Reagan promises not very likely
In fact, they say, the nation could be thrown
into a new recession by this time next year if
things go really wrong
"It all depends on interest rates," said Mi
chael K Evans, president of Evans Economics in
Washington
High interest rates, a major cause of the
current recession, have been widely attribited to
the Fed s restrictive control of the nation's money
supply — a policy backed at least in name by the
Reagan administration
And although rates fell last fall, they have
been rising again recently
Evans isn't as upset as some economists
about the size of the projected deficits: $98 6
billion this year. $91 5 billion next — the year that
as a candidate, Reagan promised a balanced
budget — and $82 9 billion in fiscal 1984, the last
year of Reagan's four-year term
The economist said the red ink could be even
greater — $100 billion to $120 billion a year for the
next three years, compared with the record $66 4
billion in 1976
Treasury Secretary. Donald T. Regan, said
that despite the huge projected deficits, "in light
of the tax incentives we have enacted, and
historical evidence, there is ample reason to
expect a period of better than average growth "
Others aren't so calm about the projected
deficits.
"During a period of recovery, deficits ap
proaching the current magnitude would
threaten prolonged strain and congestion in the
financial markets," Paul Volcker, chairer of the
federal reserve board, recently told Congress.
His recommendation: Cut that deficit.
ADMINISTRATION OFFICIALS DEFENDED
Reagan's budget Sunday — record deficits and all
— as essential for the nation’s economic
recovery. They predicted that despite initial pro
tests, Congress would wind up approving most of
the 1983 spending plan.
And Budget Director David Stockman said
that when Congress looks at the "hard, stark
choices they will understand very quickly that
unless measures of magnitude that we've
proposed by way of savings are adopted, that
there could well be a severe threat to the eco
nomic recovery.
Reagan is asking for about $56 billion in
savings for 1983, including cuts of $27 billion in
domestic programs.
In all. Reagan proposed spending for the
1983 fiscal year of $757.6 billion. His plan would
require taxpayers to spend $99.1 billion in interest
payments on the national debt — more than the
entire budget in 1961.
Despite the confidence Stockman expressed
on CBS' "Face the Nation,” Reagan’s big-deficit
budget sparked talk of open rebellion among
administration allies in Congress.
"The Republicans I talk to are frightened
about the deficits,” said Sen. Bob Dole, R-Kan
sas, chairman of the tax-writing Senate Finance
Committee.
Stockman said the 1982 deficit is about $50
billion higher than it was originally forecast
because of the recession and because inflation is
coming down more rapidly, cutting into tax
revenues.
But he said that in proportion to the economy
as a whole, the deficit is smaller than the $66.4
billion record set in 1976, when the nation was
emerging from an earlier recession. He insisted
the administration has not abandoned its goal of a
balanced budget, although official figures in
dicate deficits of $50 billion through 1987.
"We have another chance next year and the
year after," he said.
Stockman said there was widespread skep
ticism a year ago when Reagan first called for big
cuts in domestic spending and taxes but in
creases for defense But, he said, "We got more
than 80 percent of what we proposed."
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