Reagan's '88 budget makes cuts in sensitive areas. Goes after farm aid, medicare, veterans' benefits

The US budget has moved another yard closer to the status of political football. President Reagan on Tuesday signed off on a fiscal 1988 budget which attacked the deficit in areas which are politically sensitive, such as farm supports, the Veterans Administration, and medicare. The Reagan proposal for the fiscal 1988 budget will chop a total of $52 billion from the deficit, theoretically allowing it to meet the Gramm-Rudman deficit target of $108 billion.

To meet this goal, President Reagan is proposing $30 billion in new cuts, including $12 billion off entitlement programs. Through user fees, asset sales, privatization, and other revenue-raising plans, the White House hopes to raise $22 billion. There will be no new taxes, however.

In a breakfast meeting with reporters, James Miller, director of the Office of Management and Budget (OMB), admitted that congressional ``screaming and hollering is going to be terrible.''

Among the cuts, Mr. Miller said the President will propose to the new Democratically-controlled Congress:

Cuts in veterans benefits totalling about $500 million. To save money, the government will include an income-level test for vets receiving medical care. Those earning more than $15,000 who have non-service related illnesses will be asked to contribute toward their medical costs.

A change in farm-subsidy programs. Currently, the government limits subsidies to a total of $50,000 per farm. However, some farmers get around that limit by registering part of their farms in a relative's name. The new budget will ask for legislation closing the loopholes. At the same time, the Reagan budget will try to unlink subsidies to such crops as rice, feed grains, and cotton that are currently based on the size of production. To get a larger subsidy, a farmer has to produce more. Instead, the new budget will ask for legislation which will give subsidies based on the historical size of production.

Miller believes Congress will approve these changes because the cost of the farm programs over the past three years is $76 billion, or $25 billion higher than anticipated. However, he admits the changes would not result in large savings in fiscal year 1988.

Changes in medicare. The government hopes to extend medicare coverage to state and local employees since many of these workers currently get medicare without paying for it. This might save as much as $1.5 billion. The rules will also be changed for the way hospital personnel such as radiologists are paid and the government will ask for changes in the way medicare pays for hospital capital outlays.

At the same time, the Reagan proposal envisions a $22 billion rise in revenues. These will come from $3 billion in user fees, $5 billion in funds from selling government properties to the private sector, $8 billion from loan asset sales, and $6 billion from such things as increased Internal Revenue Service enforcement.

Miller admitted revenues will be reduced by several billion dollars as a result of a lower economic forecast. The administration is predicting a 3.2 percent growth rate for 1987, down from a 4.2 percent forecast in October. In fact, Miller said he had informed the President of OMB's lower forecast prior to the election at the same time President Reagan was assuring the nation the economy was picking up.

The new budget will also include some areas of increased spending, including a real 3 percent rise in defense spending to $308.7 billion. In a supplemental budget request for this year's budget, the President also called for a $500 million increase for SDI, the strategic defense initiative.

The administration also will propose increased trade-related spending for workers who have lost their jobs because of imports. And, there will be a significant increase in spending on AIDS research.

Finally, the President will chop $3 billion off the budgets of agencies controlled by the executive branch. This includes such programs as the Economic Development Administration.

Skeptics believe the Reagan plan will be treated badly by Congress. By leaking portions of it to the press, says Stanley Collender of Touche Ross, an accounting firm, ``it will be rejected sooner, allowing Congress to start on its own budget.'' In fact, House speaker Jim Wright (D) of Texas, recently suggested the need for either a tax increase or a change in the deadline for meeting the deficit reduction target. Miller rejected both ideas.