Carter White House: no easy budget cuts left '81 for Reagan

"Two years ago," said a senior White House official, "we tried to cut entitlement programs and got massacred." This official, centrally involved in shaping President Carter's budgets, made the point that without the consent of Congress, Ronald Reagan cannot trim benefit programs on which many millions of Americans depend.

Yet, as the President-elect confers in Washington with his economic advisers, he is hearing that such programs must be cut if Mr. Reagan is to get a handle on inflation.

"Already," said the White House official, "Carter has squeezed fat out of many discretionary items in the budget, such as the Coast Guard and border patrols."

What is left, if significant amounts of money are to be saved, the official said, "are the so-called untouchables" -- the vast array of programs providing benefit payments to individual Americans, which eat up more than 40 cents of every budget dollar.

In his fiscal 1980 budget, said the White House aide, Mr. Carter tried to slice at least marginally into these payments by proposing that two minor parts of social security -- payments to students in college and lump-sum death payments -- be phased out.

Congress rebuffed him. This year, in the fiscal 1981 budget, Carter tried again, proposing that cost-of-living increases on federal pensions and some other government obligations be computed once a year, instead of twice, for a savings of $780 million. So far, no approval has come from Congress.

On Jan. 3, Carter's top budget aides unfolded the frustrations and lessons of the past four years to the man who is about to grasp the budget reigns for Reagan -- Rep. David A. Stockman (R) of Michigan.

Carter budget aides found Mr. Stockman, director-designate of the Office of Management and Budget, "very realistic," sources said, "aware that real savings will have to wait until fiscal 1982, but realizing that he has to do something about fiscal 1981."

That "something" is somehow to cut a deficit that now has ballooned to an estimated $60 billion for the fiscal year ending Sept. 30, 1980 -- a far cry from the balanced budget on which Carter originally had set his sights.

Carter officials see two of Reagan's priorities conflicting with each other. The President-elect wants to trim huge sums from federal spending, but he also says he will do nothing to hurt really needy people.

"You can't do that," a Carter aide said, "by trimming marginals from social programs. You have to cut deeply, especially if you are going to boost defense spending."

From his own budget-wrestling experience, a senior Carter administration official lists possible ways to trim spending on social programs -- none of them painless:

* Congress could give the President authority to set an annual cap on benefit spending -- to dictate, in other words, how much such payments would grow each year, as the President now does with federal salaries.

Congress then would have to act, if it wished to reverse him. Under current law, it is Congress that decides on any changes in benefit payments.

* The consumer price index (CPI), to which social security and other benefit programs are indexed, could be made more realistic, by reducing the weight of housing costs, principally mortgage interest, in it.

The CPI, in its measurement of inflation, act as though the entire population is buying or selling homes, whereas only a small percentage of Americans does so each month.

"Correcting the housing element in the CPI," said a White House source, "would save $2.5 billion a year." Effectively, however, this would lower the annual increase in social security benefits received by more than 35 million Americans.

* Finally, said a top official, all cost-of-living increases now computed twice a year could be annualized -- something Carter tried to do at least partially in his 1981 budget.

"If Reagan and Congress would bite the bullet and do all these things," said the offici al, "billions of dollars would be saved."