That Monster Deficit

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more than two-thirds of Government spending goes for only four items: defense, Social Security, Medicare and interest on the national debt. The rest of the budget has already been trimmed considerably.

Nonetheless, there are numerous ways that spending, much of which goes to support America's middle class, can be reduced. The CBO has a list of 98 possibilities for trimming outlays. Example: limiting cost of living adjustments for Social Security recipients and railroad retirees to two-thirds of the increase in the consumer price index, instead of the present 100% raise, would save the Government 543.6 billion over the next five years.

The Bipartisan Budget Appeal, founded by former Commerce Secretary Peter Peterson and former Treasury Secretaries W. Michael Blumenthal, John Connally, C. Douglas Dillon, Henry Fowler and William Simon, calls for $85 billion in spending cuts by 1986. About $36 billion of that, the group suggests, could come from freezing for two years the cost of living adjustments in numerous federal benefits, including Social Security, civil service and military pensions. The group would carve another $10 billion out of Medicare.

The President's Private Sector Survey on Cost Control, headed by Peter Grace of W.R. Grace & Co., made 2,478 recommendations for cutting the budget, claiming that $424.4 billion could be saved over three years. The steps include revising civil service retirement to make it no more generous than private pension plans (a three-year savings of $30 billion) and repealing the Davis-Bacon Act, which generally requires the Government to pay high union wages on construction projects (a $5 billion savings).

A consensus is forming that the U.S. cannot afford as swift and sweeping a military buildup as Reagan proposes: a 13% increase in defense spending, after adjustment for inflation, in 1985 alone. Though Pentagon critics have long urged that such costly weapons systems as the B-1B bomber ($5.6 billion this year) and the MX missile ($2 billion) be scrapped, Congress is reluctant to abandon programs already started. But the Democrats say that development timetables for most military procurement programs could be stretched out. If the money scheduled to be spent during the next five years were spread over six years instead, they suggest, the cumulative federal deficit from 1985 through 1987 would be $100 billion lower. The Grace commission contends that $7.3 billion could be saved in a three-year span if the Pentagon encouraged more competitive bidding among suppliers of ordinary military parts. Grace said, for example, that the Pentagon was paying $91 each for a type of screw that should have cost 30.

Many economists and congressional leaders are convinced that tax hikes must be added to spending reductions. Privately, several officials besides Feldstein concede the point. Says one top Administration policymaker: "There are some spending hits to be made. The farm program is a fertile area. It has to be made cheaper, and soon. Medicare is an obvious place to look. But you'd be lucky to assemble a package of $25 billion in domestic cuts and $20 billion out of defense during three years. We would still need $100 billion in new taxes."

Hardly anyone wants to increase personal income tax rates. Boosting rates tends to undermine incentives for Americans to work hard, save and invest. As a