February 1, 1979

New Budget Prelude To New Direction

President Jimmy Carter's new budget should be kindly treated by the new national legislature which is described by John Rhodes, House minority leader, as "a Republican Congress controlled by Democrats."

In relation to the past and future, the record budget of $531.6 billion is significant.  It is criticized by liberals as stingy and by conservatives as flagrant - a good indication the budget is realistic.

The president tags his budget as "lean and austere."  This is rhetoric designed to psych out the voters who have shown unmistakably they want relief from government spending and don't perceive a deficit of $29 billion as exactly frugal.

Carter's proposals are less than a "moral equivalent of war" against inflation, yet it is a valuable skirmish.  Though the budget is $7.7 billion higher than last year's, the estimated deficit is a bit less than the current $37 billion.

In terms of "real" dollars - the purchasing power of money after inflation - Carter's budget projects a tiny decrease in the rate of government spending.  With inflation now running at 9.2 percent, a budget increase of only 7.7 percent represents a one and a half percent worth of belt tightening.

This is not much, but the direction is revealing.

It was just 15 years ago that President Lyndon Johnson balked at bringing in a budget above the symbolic ceiling of $100 billion.  He let the debt slide up to $8 billion so he could keep the budget to $97.6 billion.  In retrospect, Johnson was a tight-wad.

Largely unnoticed in the president's budget message was a sentence reasserting his determination to "virtually" balance the budget by 1981 and produce a "surplus" the year following.  These targets, of course, are projected into a second term for Mr. Carter.

Until then, apparently, Congress is expected to confine itself to nibbling at the edges of the budget.

To provide Congress with opportunities to exercise its purse-string authority harmlessly, the president has included some "trade items" in his budget.

Proposals for minor cuts in Social Security benefits -such as $255 for burial expenses - will be restored by the solons as proof of their concern for the folks back home.  A relatively small expenditure of $2.5 billion for "wage insurance" to unionists that hew to wage guidelines probably will be eliminated by Congress to demonstrate its new-found thrift.

Thus, the big-guns of the big-spending are spiked.

Big-city mayors were the first to yell about lack of hikes in their hand outs.  But they backed off when the White House promised to stonewall probable Congressional efforts to shift even more urban money into health, education and welfare.

Senator Teddy Kennedy huffed and puffed about the scarcity of funds for a giant national health program.  He was pacified with a vague proposal for "hospital cost containment."

Defense hawks were disappointed we didn't match the Soviet military outlays, but counted themselves lucky with a 10 percent hike.

The special interest groups - principally blacks, Hispanics and women - promise intensive lobbying on behalf of the poor and disadvantaged.  However, it is not likely they can generate much pressure on Congress for more than the $4.5 billion increase proposed by Carter.

Carter has shrewdly balanced domestic forces for the present.  Given the historic trend for social spending, a status quo budget that includes considerable debt is about all that can be expected.

The big crunch still lies ahead.

With inflation approaching double digits, and world confidence in American credit beating down the dollar, the moment of truth is upon us.  The merry-go-round is running out of spin.

Nearer sooner than later, our accounts must be settled.  A few balanced budgets would be a lot easier on the economy than a big depression.

It is interesting that the Republican principles of financial responsibility are being adopted lock-stock-and-barrel by the Democrats.  There is no believer like a convert.

California Governor Jerry Brown now campaigns for a Constitutional Convention to require a federal balanced budget as law.  In the last election, Mississippi became the 23rd state to ratify a call for the first constitutional convention in the history of the nation.  Only 12 more states are needed.

A convention would open the door to dozens of special-interest provisions by an aroused electorate acting independently.  This possibility of being by-passed gives Congress the shakes.  The mood in Washington, therefore, is to balance the budget before the natives get restless.

One of the laws of physics is that an object must stop before it can reverse direction.  The laws of economics react startlingly similar to the natural order.  The president and Congress, working together, must halt the spiraling national budget before it can return to normal.

The economy, however, depends upon other decision makers in addition to the federal government.  If Washington finally bites the bullet will big labor and big business do likewise?  It's a chancy gamble.

The new budget - though debt-ridden - is stopped in its tracks.  This is a necessary first condition to apply an alternate direction.

It is encouraging to see the president and Congress, Democrats and Republicans, liberals and conservatives, all moving in the right direction.

Author: Lindsey Williams