Deficit timing

LARGE portions of the United States may have been socked in by frigid weather the past few days. The barometer for the giant American economy, however, is looking good -- reflecting an economy basking in continuing growth. In previewing the latest reports out on the economy, as the President did at several inaugural balls, Mr. Reagan was drawing the attention of the general public to the upbeat momentum in the business cycle which had already been perceived by the business and financial community. The surge in the stock market -- with the Dow Jones industrial average climbing 34 points Monday -- was graphic evidence of rising investor confidence.

Yesterday's announcement by Washington that the nation's economy grew 6.8 percent for all of 1984, with a stronger-than-expected growth of 3.9 percent for the final quarter of the year, is further indication of the resilience in economic activity taking place throughout the United States.

Last year's economic growth, moreover, as President Reagan was also quick to note, took place against a backdrop of modest inflation, coming in just slightly below 4 percent.

One can understand Mr. Reagan's enthusiasm about such figures. Presidents invariably like to embrace favorable economic reports. Not-so-pleasant reports are as often as not explained away, resulting usually from combinations of conditions about which presidents, so they seek to explain, have only modest control. And the White House deserves to share in some of the credit for the economy's current growth.

Last year's solid gains in personal income were in part the result of the President's tax-cut policy, which returned more of taxpayers' earnings to them and thus allowed them to go on the consumer buying sprees recorded during parts of 1984.

But if that is recognized, so too must it be recognized that the administration bears some responsibility for the high budget deficits that continue to cast a pronounced storm cloud over the economy's future. The deep cuts in personal income-tax rates made back in 1981, coupled with massive defense spending, set the stage for the deficits, now projected to exceed $200 billion annually during the next few years.

The White House has yet to face up to the need to hold spending down where it is now most vital -- defense spending. In fact, by proposing that defense expenditures rise some 6 percent after inflation during fiscal year 1986, the administration has abandoned the goal it announced only last month, namely, to halve the deficit to $100 billion by 1988.

Still, the White House and the Republican-controlled Senate are now hammering out their respective versions of a ``budget freeze'' for fiscal year 1986, and that fact alone -- perhaps more than the actual numbers involved in the two approaches -- is helping to fuel Wall Street optimism that steps will be taken to reduce the deficit.

Timing, as both Congress and the White House grasp, is of crucial importance this year.

That explains why the administration began its budget deliberations with such zeal in November and December, after the presidential election.

And why GOP Senate leader Bob Dole wants a Senate budget plan on his desk by Feb. 1.

In other words, forget, for the moment, all the mandated deadlines and complicated steps in the congressional budget process. The real White House-congressional power brokering is under way. Action on a budget freeze of some type seems increasingly likely. And Wall Street has gotten the message. ------30{et