THE BUDGET: Nixon’s Struggle to Cut

ALMOST every day for the past five weeks, a drama that will change the nation’s future spending priorities has been unfolding in a high-ceilinged Victorian room of Washington’s Executive Office Building. Seated along one side of a 17-ft. table, facing into the glare of sunlight, budget examiners responsible for knowing the spending plans of every federal agency have defended their estimates. Seated across from them—and grilling them—have been their bosses, the top officials of the Office of Management and Budget, headed by Caspar Weinberger, who is known in Washington these days as “Cap the Knife.” The OMB’s annual item-by-item budget review has been a genuine suspense episode because President Nixon has demanded that the columns for the current fiscal year add up to no more than $250 billion. That can be achieved only by lopping about $1 billion a month off outlays between now and June 30—a move that would slash the plans and power of top administrators.

Nixon is determined to cut because he believes that the federal bureaucracy is, in his words, “too fat, too bloated,” and that some employees must be dismissed from what he has privately called the “damn Government.” He is impressed with the large number of Government programs that do not work. The latest catch line echoing within the Administration is: “Throwing money at some problems does not solve them.” More, Nixon wants to prevent the continuing swell of deficits, which could restimulate inflation. Since Nixon has pledged not to raise taxes, the Administration could fight a deficit-caused inflation only by pressing for tight money, and that could stunt the now surging economy.

The President and his aides are shaping two budgets: a new version of the fiscal ’73 budget and a budget for fiscal ’74, which begins in July. It is unlikely that he will reach his $250 billion limit for this year. Something like $254 billion is more probable, but to get that Nixon would have to impound as much as $4 billion in funds already approved by Congress and thus risk a battle with Capitol Hill. On the assumption that Nixon will hit the $254 billion mark, Alan Greenspan, a member of TIME’S Board of Economists and a frequent Nixon adviser, has reduced his estimate of this year’s deficit, from $35.6 billion to $29 billion.

For next year, Greenspan foresees expenditures of $275 billion and federal revenues of about $258 billion, creating a deficit of some $17 billion. The more important figure is the so-called full-employment deficit, which calculates how much Government revenues would be if the economy were fully employed. Next year the full-employment deficit should still be sizable, though less than this year’s $10 billion-plus.

The man with the unenviable job of finding the arithmetic to hit those figures is Weinberger. A Harvard-educated lawyer, who was California’s finance director under Governor Ronald Reagan in 1968-69, Weinberger bluntly warned Cabinet officers in August, just before distributing his estimates of what their individual budgets should be: “When you look at your number, don’t blink. It’s not a typographical error.”

Where to pare? The prime candidates for cuts are the Johnson-era Great Society programs. In a process called “bundling,” the OMB aims to combine, simplify and streamline many of those programs and eliminate others. Many of the grants-in-aid that states and localities receive for specific programs may be eliminated. White House officers argue that if local authorities really want to keep those programs, they can use the new revenue-sharing money—some $30 billion that will be distributed by the end of 1976 for local officials to spend. Critics of that reasoning reply that some localities will not get as much money under revenue sharing as under the old system.

Less for Manpower. There might well be sharp reductions in federal spending for manpower-training programs such as the Job Corps and the Job Opportunities in the Business Sector program. Funds for pollution control and other environmental projects are already being held back. Budget planners want to ax the Model Cities program severely.

Another likely target is the vast housing-subsidy program, including rent and mortgage subsidies for poor and lower-middle-income people. These programs have helped to build the housing boom—about 2.4 million houses and apartments will be started this year and slightly fewer than 2.1 million next year—but some of the public projects have degenerated into high-rise slums. The classic case of failure is St. Louis’ Pruitt-Igoe project, which became such a center of crime that officials razed part of it with dynamite. The problem is that severe reductions in federal grants may leave several major housing authorities close to bankruptcy.

Economies may even be made in the Government’s vast cancer-research program, though it is a Nixon favorite. As for defense, Nixon fears that any reduction in strategically important projects would be viewed by the Soviets and Chinese as a sign of U.S. weakness that they would be tempted to exploit. It is estimated that defense spending in the next fiscal year will rise some $6 billion, to $81 billion. But Nixon may well reduce the ranks of civilian workers in the Defense Department, and there will soon be announcements of defense-base closings. Weinberger will make his recommendations to Nixon in the next few days. “After all this work,” says Weinberger, “you take that black book of recommendations into the Oval Office, and it comes home to you that it is the President’s budget.” Then Cabinet members will try to persuade the President not to slice their allowances.

Nixon has no taste for such confrontations; many of the Cabinet aides will get no farther than the office of White House Aide John Ehrlichman. Meanwhile, other Cabinet aides will quietly try to muster support from sympathetic Congressmen. But the President has shrewdly thrown the department chiefs off balance by asking for mass resignations. It would be a bold bureaucrat indeed who would try to start a congressional backfire when the President has his resignation in his pocket. The President will probably present his budget to Congress shortly after Inauguration Day, Jan. 20. In the next few weeks, Congressmen and lobbyists will be crying out about the alleged damages that reductions will inflict on the nation, and federal agencies may make some highly publicized reductions in conspicuous services. For better or worse, the President seems determined to cut the rate of growth in Government outlays because he is seriously worried about the implications for honest public policy in failing to match the nation’s spending with its income. The remaining question is whether he can stand the political heat that accompanies such quests.