Darman's Duet With Congress Hits Rough Note

RICHARD DARMAN, director of the Office of Management and Budget (OMB), must be wondering if there is no gratitude in Congress. On July 18, Mr. Darman presented Congress with what he termed an optimistic but ``credible'' economic forecast. Furthermore, his budget numbers for fiscal year 1990 showed Congress within $500 million of meeting the Gramm-Rudman deficit-reduction target.

In return, some members of Congress lambasted the White House for a recent bit of budget gimmickry. In order to meet his budget, Secretary of Defense Richard Cheney shifted a $2.9 billion defense payroll ahead by two days - thus moving money from the FY 1990 budget back to FY 1989.

Rep. Marty Russo (D) of Illinois asked Mr. Darman why Congress should not do the same thing to help fund $6.5 billion for catastrophic health care. ``Why not have the elderly treated the same way as the military?'' Representative Russo asked.

Rep. Leon Panetta (D) of California, chairman of the House Budget committee, said the pay shift was hurting his attempts to hold Congress to the budget agreement reached last fall with the Reagan administration. ``They [members of Congress] feel the pay shift is a violation of the agreement,'' Mr. Panetta said.

Complaints about the pay shift were not exactly news to Darman, who said an agriculture committee had queried him about the possibility of providing additional funds to the farm sector the same way. ``Our policy is no new pay shifts,'' he intoned.

The debate over the pay shift - something the Department of Defense has done before - illustrates the touchy nature of the budget process this year. Congress would like to fund additional programs. It is constrained, however, by the Gramm-Rudman deficit-reduction target that mandates an FY 1990 budget deficit of $100 billion (with a $10 billion cushion).

Based on the current ``congressional budget path,'' Darman projected a deficit of $110.5 billion. Earlier on Tuesday, at a press conference, Darman warned ``Congress is cutting it very, very close.''

The government's budget balancing act will get little help from the US economy. The White House on Tuesday predicted only modest growth for this calendar year. The economic ``troika'' of the Council of Economic Advisers, the Treasury, and the OMB is predicting that the gross national product (the nation's output of goods and services) will grow by 2.7 percent after inflation - lower than the 3.5 percent forecast by the administration in February.

The White House also raised its inflation forecast by one-half of a percentage point to 4.2 percent (GNP deflator) and raised its short-term interest-rate estimate to 8 percent from 7.4 percent. The forecast is important because it becomes part of the economic assumptions used later for the budget process.

Meeting the budget targets for FY 1991 will be even tougher since the deficit must come down to $64 billion. If Congress were to enact President Bush's budget, Darman projected it would still be $21 billion short. This sparked questions over whether President Bush would alter his ``no new taxes'' pledge. Darman said the President would still not propose taxes. But he adds Bush would negotiate with Congress if it put taxes on the table. ``I would not kick the table legs out,'' Darman said.