Letters to the Editor: A Balanced Approach to the Budget
The Oct. 9 editorial-page article "Growth-Tamed Deficit Needn't Be an Illusion" by A. Gary Shilling illustrates why we need a balanced approach to the deficit issue, instead of simply relying on some combination of economic growth and unspecified spending restraint. Aside from a host of very "iffy" but crucial assumptions regarding revenue growth, interest rates and inflation, Mr. Shilling's "simple projections" assume a great deal when he supposes that federal expenditures could be held to a 3% nominal rate of growth. On this, Mr. Shilling is presuming nothing short of a miracle.</br></br>Last August, the Office of Management and Budget projected government outlays to support current obligations growing at about a 7 1/2% annual compound rate over the next five years. At the same time, the Congressional Budget Office put the rate at 9%. For the increase in nominal outlays to be held to 3% a year over the last half of this decade as Mr. Shilling suggests, roughly $100 billion would have to be pruned from the FY 1989 OMB spending figure (the year before Mr. Shilling's budget would balance!) and a more imposing figure close to $175 billion would have to be lopped off the CBO expenditure projection, even after allowing for his lower inflation rate.</br></br>Although Mr. Shilling proposed "not requiring any cuts in spending," the net result of his expenditure scenario has to be very substantial reductions in spending for current services and commitments. Unless this were to occur, the revenue stream could not come anywhere near the spending track in his time frame. Simply holding the dollar level of the budget at a constant and modest rate of increase ignores the fact that there are many commitments already in the budget, especially for defense, which would force Congress to cut other spending.</br></br>Congress would find the depth and breadth of such reductions unacceptable politically. The only viable course for gaining control of the budget's bottom line is through a thoughtful combination of cutting defense spending, cutting domestic spending, raising revenues and encouraging economic growth. Only if all these are involved in reasonably equal proportions will it be possible to forge the needed political consensus.</br></br>I am afraid that without a greater understanding and lobbying effort on the part of an informed public, the deficit problem may soon become the economy-endangering crisis that has so long been predicted.