A little digging turns up reasons for optimism on deficit

IN financial circles, it often is more fashionable to be pessimistic than optimistic. That's the case today for the federal budget deficit. A gloomy view is considered realistic; a cheerier opinion fanciful. The Conference Board, for example, says it ``appears likely'' that the deficit will jump to $186 billion in the current fiscal year from $148.1 billion in the fiscal year that ended Sept. 30, 1987. Other analysts are moderately more hopeful. They expect the 1988 deficit, even after the passage by Congress of measures to trim it by $33 billion, to approximately equal the deficit of fiscal 1987.

Deficits, however, are extremely hard to predict accurately. That's partially because of the mathematics involved. Small percentage changes in government revenues or expenditures can result in proportionately larger shifts in the deficit.

So far this fiscal year, however, the news is not bad.

The Treasury reported December 21 that the government ran up a $25.77 billion budget deficit in November, bringing the shortfall in the first two months of fiscal 1988 to $56.51 billion. The two-month total was $4.13 billion, or 8 percent higher than the comparable period for fiscal 1987, the Associated Press reported.

The news report didn't note that the deficit for the first month of the fiscal year was 20 percent beyond the figure for October of 1986, or $5.45 billion more. That jump in the October deficit was not unexpected. The government had postponed some spending to make fiscal 1987's deficit look better. For example, nearly $3 billion in the wages of 2.1 million military personnel was deferred by making their payday Oct. 1 instead of Sept. 30.

However, in November the deficit of $25.77 billion was less than the $27 billion of the same month in 1986. So, even without Congressional action to reduce the deficit in place, the deficit was shrinking.

Of course, there are 10 months of news on the budget deficit yet to go. Analysts often note that tax law changes produced extra revenues in fiscal 1987 that will not be repeated in fiscal 1987.

Nonetheless, optimism at this point seems as justified as pessimism.

So far this fiscal year the economy has been growing faster than most economists expected. Government revenues have been running above projections. Corporate profits rose 6 percent in the third quarter of 1987 and some economists expect continued good performance in the fourth quarter as manufacturers boost their exports and capacity utilization reaches new heights. The increase in federal spending (1.2 percent in fiscal 1987) has at last been brought below the growth in national output. The stock market crash lowered interest rates. Unless the Federal Reserve System pushes the economy into a recession with excessive monetary stringency, it just could be that the deficit might end up around $120 billion or $130 billion in fiscal 1988.

In any case, too much is being made of the deficit. It's not that the deficit is desirable or that the Reagan Administration and Congress shouldn't strive to trim that deficit. But its significance should be held in proportion.

If the state government surpluses are taken into account, the deficit for all levels of government would be decidedly less. The Commerce Clearing House reports that in fiscal 1986 (the latest complete statistics available), state governments enjoyed a $57 billion surplus. If that surplus grew slightly in fiscal 1987, as some analysts guess, it could be, say, $65 billion. That would mean the total government deficit for fiscal 1987 was ``only'' $83 billion.

Today's deficit is not huge from an economic standpoint. The Organization for Economic Cooperation and Development in its latest ``Economic Outlook'' figures the United States deficit in 1987 was about 2.4 percent of gross national product (GNP). That compares with deficits amounting to 4.4 percent of GNP for Canada, 10.3 percent for Italy, and 2.8 percent for France. The deficit for the United Kingdom was 2.1 percent, for West Germany 1.7 percent, and for Japan 1.2 percent, all somewhat lower.

Nor is the outstanding federal debt as ``crushing'' as some believe. As a percentage of GNP it ran about 37 percent in 1987, up from a low point of 18 percent in 1974, but below the 46 percent in 1960 or 107 percent in 1945.

Another statistical note: the ratio of federal outlays to total national output in fiscal 1987 was 22.7 percent, the lowest since the 22.2 percent in 1980 and well below the average of some 24 percent for this ratio in the years 1981 to 1986.

Depending on many factors, it just could be that the US will continue to make solid progress in reducing its budget deficit this fiscal year.