Another record-high federal deficit is to be the nation's fate in this tenth anniversary year of Reaganomics. The Congressional Budget Office pegs this fiscal year's shortfall at $279 billion, as against $220 billion last year, and forecasts even worse news for fiscal 1992: a deficit of $362 billion.
Contrary to assurances of Reagan supply-siders, massive tax cuts enacted in August 1981 did not increase revenues. Quite the contrary, when combined with the Reagan spending binge on the military, they led to a tripling of the national debt and converted interest costs on the deficit into the fastest-rising element in the budget. The long economic expansion of the 1980s was financed on credit, much of it foreign, leaving a burden the nation will be paying off for a long, long time.
That's past history. What is of more pressing concern is whether the tide of red ink is nearing its peak and will ebb as the next presidential term begins. The CBO thinks so. As a result of last year's budget agreement, which reversed essential elements of Reaganomics, it predicts the deficit will drop to $157 billion in fiscal 1995.
The CBO, however, has an important caveat: an improvement in the deficit outlook can come only if Congress and the White House continue to adhere to last year's bipartisan pact to put new spending on a pay-as-you go basis, bar raids on the Pentagon budget to pay for domestic programs and increase taxes despite President Bush's "no-new-taxes" campaign pledge.
The crunch time will come two years hence. At that time, the old supply-side crowd will attempt to revive Gramm-Rudman. Free-spending liberals, for their part, will try to break open the spending caps on domestic spending. Reaganites already are accusing Mr. Bush of deserting their cause. Democrats chafe at what they now regard as a trap.
Both of these contending forces should be repulsed in favor of sticking to the essential elements of the 1990 deficit-reduction pact. While it was thrown awry by the banking and thrift bailouts, the cost of Operation Desert Storm, soaring Medicaid outlays and recession-induced shortfalls in revenue, it remains the best deficit-fighting tool Washington has yet devised.
The federal budget must be controlled. Otherwise, the 20th anniversary of Reaganomics in 2001 will find the debt burdens of the go-go 1980s still dragging down the U.S. standard of living.