Carter's Farewell Budget

The 1982 projections may overwhelm Reagan's plans for cutting taxes

The 1982 budget that Jimmy Carter sent to Congress last week was a cold slap of reality for Ronald Reagan on the eve of his Inauguration. The legacy of federal largesse that Reagan inherits is far worse than he had suspected, and the yawning budget deficit severely threatens his strategy to stimulate the U.S. economy by cutting taxes.

The new budget does little to reverse the federal spending machine. Outlays in fiscal 1982 are slated to rise by 11.5%, to $739 billion, leaving a projected deficit of $27.5 billion. More than 75% of the payments are considered "uncontrollable." These include escalating social expenditures like Medicare benefits that are mandated by law and can only be reduced by congressional action. Fully 30% of spending is now indexed to rise automatically in tandem with inflation.

Overall, Carter in his final budget was generous with the Pentagon and stingy with almost everyone else, where he had any choice in the matter. Military spending is projected to rise by 14.5% next year, to $184.4 billion, or an increase of 5% after adjustment for inflation. Carter has already granted a 16% pay hike to servicemen in order to attract and keep better recruits. More money will be used to stockpile spare parts, and a mix of new ships, fighter planes, Trident submarines and MX intercontinental missiles will be added to U.S. armaments in 1982 and in future years.

Only a handful of nondefense programs did well in Carter's budget. The outgoing President asked for a 21% increase in science, space and technology programs and a 37% boost in energy-related outlays. Among the departments scheduled for big cuts is transportation, down almost 10% because of a decline in aid to railroads. On the whole, Carter optimistically predicted that all expenditures other than defense spending will actually fall by .2% next year after inflation is taken into account.

Carter, who campaigned in 1976 on a pledge to balance the budget by 1981, was obviously trying to leave office with as small a deficit as possible, and he sometimes used mirrors to accomplish that. His revenue estimates, for example, include $13.1 billion from a proposed extra 10¢-per-gal. tax on gasoline. Congress has often made it clear that it will not increase the tax on gas. Carter also proclaims that the annual pay raise for federal employees in October will be held to 5.5%. Such restraint seems unlikely; last year Carter initially suggested a 7.8% civil service pay hike, only to increase it later to 9.1%. After looking over Carter's numbers, David Stockman, Reagan's budget chief, charged that "the relatively low deficit is entirely cosmetic and artificial."