President's 'tight' '81 budget plan leaves lots of federal 'fat' unpared

All the pain and publicity attending Washington's bout of budget cutting may leave the impression that the federal budget has been slashed about as much as it can be.

President Carter called the proposed fiscal 1981 budget he submitted to Congress "austere," even before lawmakers unsheathed their budgetary knives.

One of the Capitol Hill budget committees stagily describes its own frugality as "dramatic."

The resulting budget is, indeed, the first without a deficit since the spendthrift 1960s.

But any notion that the $600 billion annual spending plan has been pared of all fiscal fat would not be accurate, citizen watchdog groups say. Both fiscal conservatives and many so-called big-spending liberals agree. Even some of the budgetmakers themselves, in their more reflective moments, agree.

"All the hurrah about cutting the budget is a little bit overexaggerated," says DAvid Keating, chief legislative strategist for the National Taxpayers Union. "The budget can be cut more."

What such critics are talking about is nothing as radical as gutting the defense budget or scrapping food stamps. They are simply pointing up the slack, even in this comparatively taut budget, that remains politically uncuttable -- the budgetary sacred cows, the political hot potatoes, the pork-barrel projects.

"We can't cut a penny without the support of 218 members [of the House of Representatives]," observes Rep. W. P. (Phil) Gramm (D) of Texas, a former economics professor who heads a bipartisan group pushing $5 billion worth of additional budget cuts. "We have to consider what is possible legally, economically -- and politically."

Here is a sampler of items the budget-cutters have sidestepped, as gleaned from interviews across a wide fiscal spectrum inside and outside the congressional budget process:

* The consumer price index (CPI) inflation-feeder. One of the biggest potential savings in the budget could be reaped without dismantling a single federal program, but merely by revising a government formula that virtually everyone concedes to be badly out of whack.

Nearly one-half of the government's CPI consists of housing costs, reckoned according to those prevailing in the current month. But only Americans who have just bought houses or rented apartments actually bear current costs.

The Congressional Budget Office says this miscalculation overstates the nation's monthly inflation rate by perhaps two percentage points. And, since rises in the CPI trigger cost-of-living hikes in a wide range of salaries and pensions, revising the formula could save an estimated $5 billion to $7 billion this year alone.

Why isn't it being done? Neither the President nor Congress wants to depress the incomes of so many voters so near an election.

"That was deemed 'too hot to handle' in an election year," says House Budget Committee member Paul Simon (D) of Illinois. "Too many toes would be stepped on , even though that one action would do more to slow inflation than the entire package announced by the administration."

* Water projects. The sturdy political appeal of bestowing dams, reservoirs, and other federal water-resource projects on lawmakers' home districts -- a tradition that already has withstood repeated assaults from the Carter administration -- also appears to have repelled the budget-cutters this year.

While the House Budget Committee recommends a $100 million "slowdown" in such projects (carefully pointing out that no projects is to be actually terminated), the Senate Budget Committee kicks in an additional $300 million to the $3.5 billion in water projects already in the budget. the increase was initiated by Sen. Pete Domenici (R) of New Mexico, who was less generous toward needy students whose federal loan funds he succeeded in reducing. The extra water-project money was supported by otherwise fiscally tight-fisted Republicans and moderate Democrats.

"All the budget-cutters forget about cutting the budget when it comes to water projects . . .," Sen. Daniel P. Moynihan (D) of New York remarks wryly.

* Pentagon waste. At a time of heightened international tensions, the Department of Defense emerges from the budget-cutting process as, in the words of one Senate Budget Committee member, the holiest "sacred cow."

The military sector winds up with hefty budget increases in both the House and Senate versions of the fiscal '81 defense budget: $3.1 billion in the House and $11.5 billion in the Senate.

"It was determined that defense could not be reexamined or touched in an election year," says Representative Simon.

The Senate panel, for example, passed up an opportunity offered by Sen. Donald Riegle Jr. (D) of Michigan to save $1.1 billion by billing the NATO allies and Japan for the cost of operating American military bases in their countries. It attracted just two votes.

Other cost-citting measures weren't even put forward, once lawmakers sensed the way things were going.

Senate Budget Committee member Howard Metzenbaum (D) of Ohio, for one, would like more Pentagon contracts to be awarded by open competition instead of sole-source bidding, a step that the General Accounting Office (a congressional agency) claims would save taxpayers millions of dollars.

Mr. Metzenbaum also eyes controls on open-ended defense contracts to curb the department's cost overruns. At last reckoning, two years ago, Defense led all other agencies, with total overruns of $85.2 billion on 147 military projects.

A package of amendments embodying these proposals is being prepared for consideration when the full Senate takes up the budget this week.

* Veterans benefits. Another area of federal largess to generally escape the Capitol Hill economizing drive is the $21.8 billion-a-year set of benefits for the nation's 30 million military veterans -- one of the best organized and most effective lobbies in Washington.

While slashing fund for indigent and jobless Americans, the budget committees votes only a token $600 million in cuts in programs for veterans. And even these modest reductions are likely to be restored later by the veterans committees.

The House budget panel, for example, gingerly recommends that savings "could be achieved" by forcing insurance companies to reimburse the Veterans Administration for health care for veterans already covered by private health insurance (estimated savings: $200 million to $300 million); halting subsidized, recreational flying lessons for veterans ($60 million); ending free travel for veterans seeking nonemergency care for nonservice-connected ailments $50 million).

But all three efforts to tighten up veterans' aid have been tried before, and failed -- even without the added disadvantage of an election year.

* Farm programs. Congressional belt-tightening does not seem to apply, either, to the farm belt.

Although agriculture ranks as one of the most governmentally protected industries in the country, federal agricultural programs are being budgeted uncut from the $2.3 billion they are receiving this year.

Crop-support programs remain an article of political faith among farm-state lawmakers -- even those who are leading advocates of cutting back other domestic spending.

The Senate Budget Committee gamely debated whether to continue paying $200 million a year to support the price of tobacco at a time when the government officially discourages smoking. But the tobacco supports were spared the budgetary ax after an impassioned speech by Sen. Ernest Hollings (D) of South Carolina, who had championed cuts in other social programs, on the grounds that to cut them would "destroy the agricultural backbone of 16 states." He promptly dispatched press releases hailing his legislative victory to the tobacco-growing state where he is up for re-election this fall.

* Miscellaneous. Burried elsewhere in the $600 billion budget are plenty of other candidates for cuts conspicuously overlooked.

These include the millions of dollars in federal grants paid to large airports that would be financially self-sufficient without the Washington handouts. The Atlanta airport used part of its last grant to buy a statue and an electric flagpole. Another airport operator, the New York-New Jersey Port Authority, uses the excess revenues generated by its federally aided airports to help defray the losses on its World Trade Center.

As rare as it is for a congressional committee chairman to suggest scuttling a federal aid program that is part of his own legislative empire, Senate Commerce Committee chairman Howard Cannon (D) of Nevada says ending the grants to 72 big airports would save taxpayers $1.5 billion to $2 billion (depending whether done immediately or phased out over five years).

He wonders why the President's budget "does not even consider taking the federal grants away from these self-supporting, monopoly landlords, while it does require real and measurable sacrifices by cities, states, and, most importantly, the people in this country who need help the most."

The answer may be that politically influential airport operators are fighting hard to keep their Washington aid flying.

Another budget-swelling subsidy program tenaciously protected by a powerful political constituency is the several hundred million dollars in extra wages paid every year to construction workers on federally financed projects under the Davis-Bacon Act. This depression-era law requiring construction workers to receive locally prevailing wages has been overtaken by the newer protections of minimum wage laws, overtime provisions, labor contracts, and unemployment compensation.

"Designed to protect workers under severe economic conditions, the Davis-Bacon Act appears to have outlived its usefulness," says Common Cause, the self-styled citizens' lobby. But pressure from organized labor succeeds in keeping the costly law on the books -- and in the budget.

Then there is the $1 billion to $2 billion a year that the federal government spends on consultants. Congress was told by the General Accounting Office last month that much of the money is wasted on unnecessary projects, shoddy workmanship, late delivery, and contracts given to lone bidders -- sometimes to former employees of the agencies involved.

Yet while the budget committees of both houses recommend an across-the-board cut in goverment administrative costs ($1 billion by the House and $2.9 billion by the Senate), they fail to target the problem of well-connected consultants.