Budget Bashing at the OMB

The cuts are more in butter than in guns

No one ever said that cutting the budget would be easy, but for one top staffer at the Office of Management and Budget it has become a real nightmare. When W. Bowman Cutter, the aptly named Associate Director of OMB, drifts off to sleep these nights, his dreams run regularly to visions of hands that keep grabbing at him from all directions. The symbolism is plain: the hands belong to various interest groups that are desperately appealing to him to be exempted from budget cutbacks. Less than a month remains before Jimmy Carter presents to Congress his spending program for fiscal 1980, and Cutter and his OMB colleagues are locked in a furious struggle with almost the entire federal bureaucracy. The goal is to pare spending requests and put together a budget that will not exceed the $30 billion deficit that Carter has pledged. Congress is in a cutting mood, but may change its mind when specific sacrosanct programs come up for the ax.

Each of the budget's 3,000 spending programs--from the beekeepers' indemnity fund to the space shuttle--has its defenders in Congress, and even the most seemingly inconsequential of cutbacks will inspire protests. OMB is recommending, for example, that the U.S. Travel Service, set up under John Kennedy to lure foreign tourists, be scrapped completely. The saving would be only $14 million, and the travel industry is already lobbying against the cut. The budget bashers have also cut 1,100 men from a Justice Department request for 14,000 border-patrol officers to intercept illegal immigrants from Mexico. Organized labor is expected to fight the recommendation on the theory that more border guards will mean fewer U.S. jobs lost to foreigners. OMB is pro posing to chop the Energy Department budget from $10.5 billion to $8.8 billion. The cuts would reduce research into alternative energy sources and the rate at which the U.S. builds up its strategic oil reserve.

The biggest battles will rage over defense and social welfare spending. Together, the Pentagon and Health, Education and Welfare take about 60% of the budget. OMB is recommending defense spending of $122 billion, an increase of just under 9% from current levels and therefore not enough to offset inflation, which has been running at 91/2%. A defense budget of that size would not honor Carter's NATO pledge of last spring to increase U.S. defense expenditures by 3% above inflation. Last week, however. Carter repeated that promise, suggesting that he could end up overruling the recommendation of his own budget advisers when he meets this week with Defense Secretary Harold Brown for an intensive look at fiscal 1980 military spending.

OMB recommends holding HEW'S spending to some $195 billion next year. That would be an 8% rise and has brought a strong protest from HEW Secretary Joseph Califano about cuts in or alterations to 115 separate items in his thick spending request.

Among the most controversial of the changes is OMB'S recommendation for a 26% cut in this year's $10.8 billion in spending for public jobs-the so-called CETA program. By one Administration estimate, such a reduction could add more than 312,000 people to the nation's unemployment rolls and would be widely condemned by labor and its congressional allies.

It is already clear that OMB'S recommendations are an important departure from previous Administration policy. With its proposed ceiling of $532 billion in spending, the fiscal 1980 budget will rise only about 8%, or less than the inflation rate. Thus the budget for fiscal 1980 looks much more like a "lean and tight" spending program than did the bloated one Carter produced last January. Next year's budget is already a success for OMB Boss James Mclntyre, who came to the job last winter as a fill-in replacement for the fallen Bert Lance, and only recently seems to have taken effective hold of his department. Staffers detect a new crispness in Mclntyre's decisions and report that he often backs up his rulings by saying: "Fm holding firm on that--let him take it [on appeal] to the President."

Unfortunately, budget trimming by OMB seems small when weighed against the remorseless growth of federal expenditures that are mandated by law. Such "entitlement programs" as Social Security. Medicare and federal pensions account for nearly two-thirds of the budget, and in HEW they claim 89c of every dollar. Social Security alone costs $104 billion. Unless the growth of benefits is slowed, the whole Social Security system--as well as the budget--will be in deep trouble. Says Alice Rivlin, director of the Congressional Budget Office: "If you're really concerned about the growth in Government, then you have to go after the uncontrollables." Adds Rudolph Penner, a former economist at OMB under Gerald Ford: "Cutting $30 million here or $100 million there is the approach one is forced to take unless you tackle the entitlement programs."

So far the Administration's assault on the entitlements has been weak and equivocal. One idea that deserves more attention than it is getting is Califano's hospital cost containment bill, which would curb Medicare expenditures by prohibiting hospitals from raising costs by more than 9% a year. Perhaps an even better approach is Economist Penner's suggestion to have the program's recipients pick up a portion of their hospital and doctors' fees. This would not only cut expenditures but also discourage recipients from rushing to the doctor for every sneeze and sniffle. The whole concept of linking federal pensions to the rise in inflation should also be reexamined. Another worthy idea for curtailing entitlements is to reduce sharply the impact aid program, a Government pork barrel that provides nearly $1 billion annually in tax dollars to school districts, no matter how wealthy they are. If Washington is not willing to re-evaluate these open-ended commitments, the day must come when the entire budget will consist of so-called uncontrollable spending obligations. When that happens, the task of cutting the bloat will be tougher than ever.

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