Analysts Weigh Real, Illusory Effects of Deficit Trims: Markets and ...
The spending and tax bills signed yesterday by President Reagan won't actually shrink the federal deficit from the 1987 level, budget experts say, but rather will only keep the deficit from widening significantly.</br></br>Moreover, some of the savings claimed in the legislationÛÓsuch as provisions that simply shift spending into the futureÛÓhave minimal effects on the nationÛªs long-run fiscal woes.</br></br>Genuine savings were also enacted, however, and the fact that the White House and Congress finally moved forward with their budget agreement will reduce the risk of disaster in financial markets, economists say. In addition, the outcome pleases America's trading partners, making them more likely to cooperate with the United States in keeping the world economy growing, according to administration officials.</br></br>That, in short, is the economic impact of the two pieces of budget and tax legislation that lawmakers spent the past eight days drafting and nearly all night Monday approving.</br></br>The first thing to understand about the measures, budget experts say, is that they donÛªt cut the deficit, at least not in the way that most people think. Federal red ink totaled $148 billion in the 1987 fiscal year, which ended Sept. 30. If the economy grows sluggishly next year, as many economists expect, the deficit will probably widen to between $160 billion and $170 billion in fiscal 1988, and further the year after, according to budget analysts in the administration, Congress and outside government.