That Monster Deficit

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result, some economists have come to favor so-called consumption taxes. A 5% federal tax on all forms of energy consumption, for example, would raise $82.9 billion over five years. Another possibility is a value-added tax (VAT), a form of national sales levy that is used in most West European nations. Even if housing, food and medical care were exempted, a 5% VAT would yield $60 billion a year. Such taxes, of course, would take money from consumers' pockets and be a drag on growth.

As the rich range of options shows, closing the budget gap is not an economic or technical problem. It is a political problem. Voters, being human, want more benefits and fewer taxes, and politicians, being politicians, respond to the voters. Says the CBO's Penner: "All spending does some good for someone, and all taxes do some harm to someone. So there is never a good spending cut or tax increase in the eyes of the entire electorate."

Congress is just as much to blame for the budget gridlock as the White House, if not more. "Senators and Congressmen have made great speeches on how to reduce the deficit," says Republican Senator Jake Garn of Utah. "Yet it is because of their voting records that we have these deficits." Too many lawmakers denounce the bloated budget but are unwilling to choose a specific course of action. Their rhetoric is reminiscent of the legendary Congressman who declared a half-century ago, "I oppose inflation. I oppose deflation. I'm for flation."

Several influential Congressmen, however, are beginning to look for ways to bring the deficit under control. In the Senate, this group includes Republicans Robert Dole of Kansas, chairman of the Finance Committee, and Pete Domenici of New Mexico, chairman of the Budget Committee. Dole's committee voted last week to set a $100 billion three-year deficit-cutting goal. Dole can count on support from such leading Democratic Senators as Russell Long of Louisiana and Presidential Candidate Fritz Rollings of South Carolina.

On the House side, such Democrats as Oklahoma's Jim Jones, chairman of the Budget Committee, and Ways and Means Chairman Dan Rostenkowski of Illinois are eager to attack the deficit. Rostenkowski said that his committee would begin work this week on a $51.2 billion revenue-raising bill.

At the moment, these leaders are having trouble achieving a breakthrough, partly because of the uncompromising attitudes of Speaker O'Neill and President Reagan. O'Neill fears that the President's call for a "down payment" toward reducing the deficit is a ploy to force the Democrats into sharing election-year blame for the huge shortfall. Late last week, however, the Speaker declared for the first time that he would consider trimming cost of living increases in social benefits, if the President would give ground on the tax and defense issues.

An Administration delegation led by White House Chief of Staff James Baker met twice last week with congressional leaders. The two sides had their frankest exchanges yet on defense. Republican Domenici stunned Administration negotiators with a proposal that the 1985 military spending increase be held to 5%, instead of the 13% the President wants. House Majority Leader Jim Wright of Texas demanded that the White House provide a list of Pentagon programs ranked according to how vital they