Where the Ax Will Fall

White House and Congress battle over how to cut spending

ABANDON HOPE, ALL YE WHO ENTER HERE. That legendary inscription over the gate of hell, as described in Dante's Inferno, appeared last week on a sign that New York Democrat Stephen Solarz posted at a meeting of the House Budget Committee. His point was to warn his fellow liberals that they have no chance of stopping a congressional drive to balance next year's budget, in part by cuts in Government social spending which the liberals find downright hellish.

Congress does seem determined to reduce spending, and in fact the legislators are talking of slashes going a bit deeper than the $13 billion that Jimmy Carter proposed two weeks ago as the keystone of his fourth anti-inflation program. But the battle over just which programs to reduce by how much--and whether to enact some relatively minor tax increases as well--is by no means settled.

The President moved last week to defuse all potential opposition. No fewer than 1,700 people--representatives of business, labor, veterans, black, ethnic, elderly and youth groups--streamed into the White House for anti-inflation briefings from Carter's senior economic officials. The President himself participated in six "Operation Outreach" meetings. One aide reported that most of the visitors expressed support for Carter's budget-cutting plans, though many businessmen complained that they do not go far enough.

The White House, however, remained vague on exactly what it was selling. Administration officials so far have identified only broad areas on which the ax will fall: revenue sharing for states and various job-training programs, for example. Critics charged that Carter was craftily withholding a detailed list of programs to be canceled or trimmed for fear that it would cost him votes in the key primaries in Illinois last week and New York this week. Ted Kennedy called the delay in recommending specific cuts "one of the most cynical aspects of the campaign." Press Secretary Jody Powell replied, "That allegation just won't hold water with anyone familiar with the budget process."

Politics aside, Carter obviously is having difficulty in steeling himself to recommend slashes in some of his own projects, though he knows he must if he is to come anywhere near balancing the budget. At midweek, the President discussed potential reductions for three hours with his top assistants in the chart-hung Cabinet Room of the White House. Said one aide: "It was agonizing for him. He was shaking his head, cutting these programs he had started." At one point, Budget Director James Mclntyre brought up an aid-to-education plan and remarked, "We know this is one of your favorite programs." Carter winced. Mclntyre argued against deep cuts in federal aid to education with more emotion than colleagues could recall the usually reserved budget chiefs ever having displayed before.

The best the White House could do was to set a target of this week for drawing up a specific list of requested cuts. Congress could not wait. Its leaders are anxious to push through budget resolutions by the statutory deadline of May 15. They hope that will counteract the efforts of Washington's myriad lobbyists to block reductions in their favorite programs.

House Budget Committee Chairman Robert Giaimo of Connecticut unveiled what amounts to his own budget. As approved by the committee late last week, it calls for the spending of $611.8 billion in fiscal 1981, which begins Oct. 1, or $16.5 billion less than Carter's estimate of early March. It assumes revenues of $617.3 billion and a surplus of $5.5 billion, the first since 1969 and the largest since 1951.

The committee proposed a long list of specific cuts. Among them: $1.7 billion in revenue-sharing money for states, $1 billion in antirecession aid to cities, $1.4 billion to be whacked from defense spending. Lesser but significant reductions would be made in a wide variety of highway, youth employment and health programs and in payments to federal retirees. In a show of self-sacrifice, the committee even suggested delaying cost of living pay increases for Congressmen. In addition, Giaimo proposed $3.5 billion in new taxes, to be chosen by the House Ways and Means Committee from a "laundry list" of possible new levies. Among them: higher "sin" taxes on cigarettes and liquor; lower business entertainment deductions; an income tax surcharge on high-salaried people.

For all this show of resolution, votes last week foreshadowed loud wrangling to come. Republicans on the committee pressed for a much deeper cut in spending ($26 billion) and a $20 billion tax cut as well; they were beaten 17 to 8 on a straight party-line vote. Liberals, with Carter's approval, moved to restore $500 million in aid to hard-pressed cities and lost by the narrowest conceivable margin: a 12-to-12 tie. The Republicans voted for the final resolution, which goes to the full House this week, but six liberal Democrats voted no. David Obey of Wisconsin promised to offer a liberal substitute for the Giaimo budget in House floor debate, and Carter, seeming to waver on his own budget-cutting resolve, vowed to back more aid to cities.

The battling is sure to get louder. White House aides believe that the House and Senate budget resolutions will embody most of the President's recommendations for expenditure cuts, whatever those recommendations finally turn out to be. "When we get to the appropriations process, though, everything is going to be in jeopardy," says one Carter strategist. The budget resolutions merely set a target; congressional committees can and often do vote more money for specific programs than the budget resolutions allow. It is to the appropriations committees that lobbyists probably will make their loudest cries of anguish.

One very influential lobby that is already being heard from consists of the nation's Governors and mayors. Says New Hampshire Governor Hugh Gallen, whose strong support helped Jimmy Carter win a decisive primary victory: "I've been on the phone directly to the White House talking about the possible shortage of $5.8 million to this state in revenue sharing and pointing out how clearly dependent New Hampshire is on this money. Other Governors also will bring the necessary weight in Congress to stop this approach." Mayor Coleman Young of Detroit warned of a "long, hot summer" if Congress votes to chop federal programs that help cities. Said Young: "If there must be pain, let it be spread across the whole budget. Let it be felt in the Defense Department as well as the summer jobs program."

Collectively, the states can afford a cancellation of revenue sharing; the 50 states are expected to pile up an aggregate surplus of $7.5 billion this year. But the Governors, and the mayors to whom they pass much federal cash, argue that revenue-sharing grants, which can be spent in virtually any way the recipients please, give them needed flexibility to meet local requirements. Says Pennsylvania's Republican Governor, Richard Thornburgh: "The President proposes to cut the kinds of programs best adapted to changing times, such as general revenue sharing, while retaining rigid categorical grants [those that finance specific activities like vocational education and the running of mental health centers] that have been festooned on the federal Christmas tree by special interests. This may be good political strategy, but it is poor public policy." Indianapolis Mayor William H. Hudnut III counts 498 federal programs that benefit cities and adds sarcastically, "There are 497 of these less important than general revenue sharing. It is the glue that holds the city's budget together."

Some sectional bitterness is appearing too. Governors and mayors in the Northeast, an area of aging industries, feel discriminated against. Philadelphia, for example, is struggling to close a projected $137 million budget gap by laying off police and firemen. Finance Director Edward De Seve figures that an end to revenue sharing would cost the city an extra $50 million to $55 million; making up that sum might require a 17% increase in city real estate taxes, on top of a 20% jump already contemplated. De Seve insists that Carter and Congress should target budget cuts on what he derisively calls the "OPEC states," principally Alaska, California, Louisiana, Oklahoma and Texas, which are collecting huge revenues from oil production.

That angry cry is only a forerunner of the cacophony to come. In principle, almost everyone agrees that a balanced budget is a national necessity as a first step toward lowering 18% inflation. In practice, just about every interest in the country will be battling to shift the burden of the spending cuts onto someone else. Congress is off to a fast start in slicing the budget, but maintaining that momentum will be something quite different.

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