President's way: pay now, enjoy fruits later

Now it is up to Congress, with a wary eye on the American public, to decide if President Reagan's economic recovery program is evenhanded enough -- and popular enough -- to pass muster and be put into law.

Already, like chained guard dogs straining to slip the leash, defenders are lining up to try to salvage programs due to feel the budget-cutting shears.

Anxious to offset this pressure, the President and his top aides stress the "striking benefits" that average Americans will derive from passage of the Reagan program:

* Inflation, measured by the consumer price index, will drop from 11.1 percent this year to 5.5 percent in 1984, according to White House calculations.

* Unemployment, expected to average 7.8 percent this year, will decline to an expected 6.4 percent in 1984.

* Individuals will enjoy a 30 percent reduction in income taxes over three years, with the first installment to begin July 1, 1981.

"The effect of these tax cuts on a four-person family whose 1980 income is $ 25,000," says a White House report, "would be a $153 tax reduction this year, and a $809 tax reduction for 1984, assuming no increase in income."

* To spur investment in new plants and equipment, business will write off costs faster than under present law, saving $2.5 billion in taxes this fiscal year, $9.7 billion next year, and nearly $60 billion in fiscal 1986.

* Growth of federal spending will be chopped from the 16 percent annual rate of the 1979-81 period to "about 7 percent over the next several fiscal years."

These carrots are dangled before Americans -- but only if the entire program is adopted, White House officials warn.

Tax cuts without compensatory budget reductions, for example, would stimulate inflation, send interest rates soaring, stifle economic growth, and leave the nation worse off than it is today.

To achieve his program's goals, Mr. Reagan spells out cuts in fiscal 1982 outlays amounting to $49.1 billion in savings, plus $5.5 billion in the current fiscal year.

The 1982 figure includes $41.4 billion in budget cuts, $5.7 billion in off-budget outlay reductions, and $2 billion worth of fresh revenues from "user charges."

Boat owners, for example, will pay a "user" charge, under the Reagan plan, to help defray Coast Guard and other government costs to ensure boater safety.

Altogether, says Murray Weidenbaum, chairman of the Council of Economic Advisers, the proposed tax and budget cuts are believed to be the largest in US history, as a percentage of the economy.

Because spending cuts of this magnitude require slicing into social programs, White House officials insist that the "social safety net erected in the 1930s" to protect the nation's elderly, unemployed, and poor, plus veterans, will be maintained.

"The truly needy," says Mr. Weidenbaum, "will be exempt from budget cuts."

Thus, social security -- including its annual indexing to inflation -- will not be changed, nor will a few other programs affecting 36 million Americans most vulnerable to the ravages of inflation.

These include the Head Start program, serving 375,000 children; the summer youth employment program for low-income young people; subsidized school nutrition programs for low-income children, and programs to provide meals for the elderly.

Other social programs will be trimmed, the White House reports, "to eliminate excesses, overlaps, and unintended benefits" that have developed as these programs mushroomed.

Food stamp eligibility, for example, will be restricted to families with gross incomes amounting to no more than 130 percent of the poverty level, thus removing many higher- income Americans from food stamp rolls.

Subsidies and benefits now paid to middle- and upper-income Americans -- such as free school lunches for the children of well-to-do families -- will be reduced or eliminated

Slated for "substantial cutbacks or actual elimination" are the CETA jobs program, Amtrak rail subsidies, energy research and development programs, and federal support for the arts.

Such government programs are labeled by the Reagan White House as "unessential or ineffective."

Altogether, says the President, initial scaling down of entitlement, or transfer, programs will save more than $9 billion in fiscal 1982, rising to $16 billion yearly by fiscal 1985.

Further study, according to administration officials, is likely to produce additional trims and revisions later on.

These, no doubt, will be some of the areas in which opposition to cuts will be fiercest, as affected groups fight to preserve their benefits.

Historically, says Weidenbaum, investors and financial markets always had faith that inflation would subside. No longer is that true, he says. Lenders and borrowers, anticipating higher inflation over the lifetime of their loans, notch interest rates up.

This inflationary expectation, White House officials believe, must be broken, if inflation is to be brought under control.