A $9 Billion Shortfall

When the Federal Government began balancing its checkbook, it discovered something that would have delighted any consumer in the same position: $11.5 billion that was supposed to have been spent this year on Government programs had not been spent. Baffled by the shortfall, Office of Management and Budget officials double-checked their figures and found that $2.5 billion of it was due mainly to accounting quirks That still left $9 billion in unused money and provided ammunition for Columnist Art Buchwald. Plotkin, his fictional, frazzled OMB bureaucrat, worries about how to get rid of the excess money and asks, "Have you ever tried to spend a billion dollars in two months?"

That is not quite the issue faced by Government planners now. In all likelihood, most of the $9 billion will never be spent; it shows up as a reduction in the budget deficit for the first nine months of the year. There is no mystery as to why the Treasury finds itself with such an embarrassment of riches. Nearly everyone involved in Government spending overestimated needs and wound up using far less money than expected. The Department of Defense fell $1.9 billion short of its projected outlays for payrolls, operations, research and development. Transportation spending was $400 million below target because states let fewer highway-construction contracts. Payouts to veterans were down $400 million.

OMB's figures came at an inappropriate time for an election-conscious Ford Administration. During the past nine months, the budget was providing less of a push to the economy than the White House had intended. The shortfall probably was one reason for the pause in the U.S. economic recovery Explains one Washington economist:"We are worried about this pause, and we get more worried every day. This shortfall is just one more worry " It is sure to strengthen the hand of liberal economists who believe Congress should act early next year to give the economy another boost, probably a tax cut Brookings Institution Economist Arthur Okun, a Democrat and former chairman of the Council of Economic Advisers bristled over the shortfall and called the original budget figures a "serious overestimate." Said he: "I think if Congress had recognized that spending was going to be down that substantially, there would have been an additional tax cut "

Bubble Effect. Ford's chief economic adviser, Alan Greenspan, is concerned that the shortfall may lead "to an acceleration of spending later on." But he is not pleased with the prospect and cautions that a "very bad fiscal-policy decision" could cause the economy to overheat and drive up inflation. Just how much new spending will be touched off by the unused $9 billion remains to be seen. One guess: not much. Deputy OMB Director Paul O'Neill doubts that there will be any "bubble effect" and predicts that overall spending for the current fiscal year, which ends next Sept 30, will be no higher than the $413 billion Congress has agreed to. Advisers to Democrat Jimmy Carter think that will not be enough to counteract the shortfall. TIME has learned that several of his economists are recommending tax cuts or new federal spending for early next year, should their man win--a tack encouraged in part by the Republican underspending.

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