Carter's Dangerous Budget Act

...PLAYING TO THE HAVES Carter's Dangerous Budget .Act by robert lekachman As political documents, President Carter's new budget ("lean and austere") and soporific State of the Union message ("We cannot afford to live beyond our means") reflect an addiction to the latest public opinion polls His utterances merit both the approval they received from William Safire and Alan Greenspan, chairman of the Council of Economic Adviseis under President Ford, and the contempt they inspired from Arthur Schlesinger Jr "He's a Republican He has the temperament of a small businessman who happened to become President ". Very likely Jerry Rafshoon, Pat Caddell, Ham Jordan, and other canny operators at 1600 Pennsylvania Avenue are pleased with the positioning of their patron Jerry Brown's latest theme, a balanced budget forever, situates the shifty California governor far on the White House right, Senator Edward Kennedy's reiteration of traditional liberal Democratic positions speaks at the moment to a discountable minority on its left The attractive scenario for Jimmy Carter is clear Brown makes an unsuccessful run in the 1980 primaries, while Kennedy waits his turn in 1984 Occupying the cherished center is the President, thrifty but compassionate, eager to move forward toward a New Foundation "for our country and our world ". Faithful to the profuse preliminary advertisement, the budget blueprint for the New Foundation eliminates 158,000 Comprehensive Employment and Training Act (ceta) jobs, 250,000 summer slots for teenageis, 25,000 subsidized housing units, $400 million in school lunch subsidies, and $600 million in Social Security benefits In addition, it cuts smaller sums from support for higher education, libraries, schools in Federally "impacted" areas, mass transit, farmers, and environmental protection The Pentagon is the one big winner In redemption of his pledge to our nato allies (whose reluctance to adequately finance their own defense has been mysteriously underwritten by successive administrations), Carter is asking for a 3 per cent hike in appropriations, after inflation The increase is mostly for weapons procurement If Congress approves, as is highly likely, appropriations for the next decade will automatically swell for tanks, infantry fighting vehicles, helicopters, fighter planes, missiles, and ships-salt or no salt...

...To further reconcile more money for defense with a 1980 budget deficit of less than $30 billion-another of the numerical targets that enchant the President-it has been necessary to contract Federal grants to cities and states b\ 7 per cent in real terms \\\ that is left of last year's urban program is a National Development Bank whose jurisduition, functions and organization remain undeter mined...

...The fate of his mean-spirited budget in Congress is as uncertain as the state of the economy and the mood of the voters Republicans immediately muttered that the President had not cut enough They were supported by the increasingly fatuous Senator William Proxmire(D -Wis ), who grandly proposed balancing the budget right away-a mere matter of subtracting another $29 billion from nondefense allocations Suspecting that Carter in a presidential election year will seduce the voters with another tax cut, Republicans are pushing a revised version of last session's unsuccessful bill sponsored by Representative Jack Kemp of New York and Senator William Roth Jr of Delaware, designed to slash taxes along with spending...

...American politics, thank heaven, are volatile The current competition in beastliness between the major parties will seem politically profitable only so long as the losers are passive They are showing signs of stirring In January, for example, an organization formed by UAW President Douglas Fraser to counter the conservative drift, appropriately named the Progressive Alliance, collected representatives of 60 groups to work out a coalition strategy Among those present were Fraser's own Auto Workers, the Machinists, the Communications Workers, the Urban League, and, interestingly, the AFL-CIO's Industrial Union Department The side effects of the Proposition 13 virus may begin sooner than the Jerry Browns calculate...

...Budgets are as plausible as the economic assumptions that underlie price, revenue and expenditure forecasts The Council of Economic Advisers last year forecast 6 per cent inflation and suffered the embarrassment of an actual 9 per cent This time around it is predicting that by year's end inflation will simmer down to 7 4 per cent and unemployment, now a shade below 6 per cent, will rise no higher than 6 2 per cent The fact that Charles Schul-tze, the Council chairman, was wrong last time does not mean he will be equally mistaken again Still, it is worth more than passing mention that Alice Rivhn, head of the Congressional Budget Office (CBO), anticipates an actual recession, and Carter's very own Federal Reserve chairman, G William Miller, took a cautiously gloomy line in his testimony to the Joint Economic Committee...

...Here we need to return to that champion tease, the senior senator from Massachusetts When William ("Wimpy") Winpisinger introduced Kennedy at the IAM's legislative conference last month his opening comment was to the effect that he was happy to be sitting next to a president he could be proud of Kennedys are intermittent social idealists and full-time politicians If the omens are propitious, Teddy Kennedy may go in 1980, especially if Brown shows signs of stealing the nomination for himself Quite possibly, higher unemployment and inflation at the 8 per cent rate predicted by the CBO will compel a discredited Carter late this year to swallow still more of his words and ask Congress for mandatory controls The budget, despite the actual and symbolic damage it inflicts on vulnerable constituencies, is unlikely to curtail an inflation solidly entrenched in the food, energy, health, and housing sectors of the economy The polls now report Carter soundly whipping Ford and Reagan and losing to Kennedy Should unemployment be higher by next Labor Day and inflation only slightly lower, the temptation among Democrats to take on the President may well be irresistible...

...Recession or even zero growth will scramble all bets For if unemployment soars to 7 per cent or higher, as the CBO expects, the deficit will swell from $29 billion to $41 billion because of diminished tax receipts and larger outlays for unemployment compensation, welfare, food stamps, and Medicaid When unemployment verges on 7 per cent, it afflicts the white middle class families who are the pampered pets of the political season At that point, Congress looks benignly at job-creation and tax-cutting devices that enlarge the deficit...

...Take, for example, the relatively trivial $600-milhon cut in Social Security benefits Some of the saving will be achieved by shifting widows and children between 16-18 years of age from the Social Security system to Supplemental Security Income (SSI) A combination of earlier schemes to aid the disabled, blind and elderly, this is widely regarded as another welfare program Social Security is generally (albeit mistakenly) interpreted as an insurance protection, enjoys much higher public standing Many of the affected families are black Under the new arrangement, their stipends will be smaller Moreover, the costs of SSI are shared by the states and localities Thus at a stroke this minor economy insults and injures indigent blacks and women, and adds to the fiscal burdens of the communities where they are clustered It is good luck that House Ways and Means Chairman Al Ullman (D -Ore) has declared his committee's agenda too clogged to take up the President's amiable suggestions...

...In alliance with the wage-price guidelines and higher interest rates, the 1980 budget threatens to continue the erosion of working class income Much as AFL-CIO President George Meany warned, employers are doing their patriotic best to enforce the 7 per cent wage standard The enforcers at the Council on Wages and Price Stability succeeded in keeping the settlement between the major oil companies and the Oil, Chemical, and Atomic Workers below 7 per cent Although stronger unions will fare better, it is generally accepted in labor circles that contracts will come in smaller because of the guidelines...

...New York City's Mayor Edward Koch, who has cheerfully folded an additional $100 million of Federal aid into the city's financial plan, stands to receive not a dime Instead, New York will lose between 5,000-6,000 ceta jobs, 16,000 summer positions for young workers, and several millions of dollars for local public works and subsidized housing There will be fewer dollars for mass transit, environment protection, and Federal reimbursement of the cost of entertaining and protecting foreign dignitaries Little things, but they add up Detroit, Newark and Gary, cities that depend to a greater extent than New York on ceta funds to maintain essential public services, will be even more afflicted...

...The point merits emphasis because the next decade is likely to be dominated by issues of distribution The current Economic Report predicts annual productivity gains for the coming five years of a mere 1 5 per cent per capita, half the historic trend rate The economics of growth are comparatively kind Before Vietnam swallowed up all other issues, Lyndon Johnson was able simultaneously to reduce taxes in 1964 and fund the War on Poverty and the rest of the Great Society Distribution is a more brutal matter As the British economist Rudolf Klein has put it "One man's prize is another man's loss If the blacks want to improve their share of desirable goods, it can only be at the expense of whites If the over-65s are to be given higher pensions or improved medical services, it can only be at the expense of the working population or the young ". The higher unemployment that accompanies slow growth also exacerbates group tensions In the light of their communal histories, Jews and blacks were fated to split over affirmative action as the issue has registered first in education (Bakke) and now in a pending employment case But what has embittered the conflict and virtually dissolved ancient alliances is the perception that desirable alternatives to professional training are much scarcer than they used to be Layoffs pit unions against women's groups When the Grey Panthers celebrated Congress' extension of mandatory retirement from age 65 to 70, the young were not seen dancing in the streets...

...Zero funds are being sought for welfare reform, and even the $5 5 billion pencilled in for 1982 is a quarter of the cost of last year's Program for Better Jobs and Incomes No numbers are attached to a national health initiative, presumably because no Administration program has yet been agreed upon...

...Overall, the 1980 budget is an exercise in redistributing the Gross National Product in a stagnant economy Because 1978 wages rose only 55 per cent and prices jumped 9 per cent, an average blue- or white-collar worker lost 3 5 per cent of real income-a statistical fact closely related to the increasing number of women in the labor force Last year's tax reduction quite deliberately shifted the fiscal burden from corporations and affluent individuals to the rest of the population Social Security levies, highly regressive in their impact, are up Personal income taxes, mildly progressive in application, are down This budget continues the trend of redistribution from low and moderate income families to their more prosperous neighbors...

...But however transformed the President's budget may be by economic and political events, it remains a major statement of his intentions for the rest of his first term And deliberately or otherwise, this budget injures several of the constituencies that united to push its author into the White House...

...When it comes to specific programs, conservatives and liberals of both parties are as likely to expand as to contract spending Higher farm price supports are attractive to Senators Robert Dole (R -Kansas) and George McGovern (D -S D ) Every President since Eisenhower has tried to shrink Federal aid to "impacted" areas, a number of them embarrassingly upper middle-income in composition One can wish the President and his embattled Georgian budget director, James Mclntyre, well without expecting them to succeed where more popular predecessors failed Still another probable loser is the budget plan to reduce Social Security benefits for survivors and the handicapped Aside from defense, the major new addition to expenditures is the $2 5 billion to finance wage insurance In large measure because the White House has yet to present this potentially useful notion in credible form, it also appears to be going nowhere...

...The budget redistributes income among workers in a dubious fashion Thus ceta employees and other moderately paid public job holders will be laid off, while a smaller number of better paid members of strong unions, like the International Association of Machinists (LAM), and the United Auto Workers (UAW), will be hired in defense plants It is all the more to the credit of the IAM that its researchers have concluded there are more jobs for machinists in the civilian sector or in nondefense public employment than in weapons procurement A billion dollars hires 59,000 men and women in private nondefense industry, 88,000 in government positions, and only 45,000 in defense work...

...In the case of cities suffering delicate health, the most disastrous feature of the New Foundation is its failure to lighten the burden of welfare and Medicaid, amounting to well over a billion dollars in recent municipal budgets But nearly as harmful is the impact of revised and shrunken public job programs For despite the Administration's own predictions of higher unemployment, the new budget proposes less to alleviate it than existing formulas offer at lower unemployment rates...

...In 19601 preferred Hubert Humphrey to Jack Kennedy In 1968 I ran with clean Gene just as long as m\ sluggish contender showed signs of movement In 1976 1 wept with Fred Harris and Mo Udall It is no doubt a sign of the flatness of the surrounding landscape that the current Kennedy stands tall I could wish that m\ knight's coat of armor were shining white instead of tattle-tale grate, but in these bad days we must all take our champions w here we find them...

...The $29-bilhon deficit predicted for the fiscal year 1980 (beginning October 1,1979 and ending September 30, 1980) is $8 billion below the estimated 1979 shortfall Carter's dream book prophesies a piddling $ 1 2 billion deficit in the 1981 accounts and surpluses of $37 8 billion, $72 7 billion, and $106 5 billion in the three following years...