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Of Flexible Freezes and Gored Oxen

Bush and The Economy

Not knowing whose ox is going to be gored is making Congress uneasy, say House and Senate budget leaders. Until Bush announces his budget on February 9, members of Congress say they do not know from where the cuts will come.

In Cambridge, some experts have already pinpointed prime candidates for trimming. Former Nixon adviser and Lee Professor of Economics Hendrik S. Houthakker, for one, says high spending for agricultural programs and grants to state and local government could be reduced, creating a windfall to finance the deficit.

"Both of these are grossly inflated," says Houtthaker.

What troubles other experts, however, is a belief that the Bush campaign promises are irreconciliable with a balanced budget.

According to Irving, Bush's pledges to keep defense spending at the inflation rate and not to cut Social Security leaves only $28 billion in spending increases for all other programs in the 1992 budget. Moreover, Irving says, Medicare--left untouched--will cost an additional $65 billion in that year. Unless Medicare or other programs are drastically cut, she says, the budget will continue to operate in the red.

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Says Sen. Timothy E. Wirth '61 (D-Colo.), "they're not going to change defense. They're not going to change Social Security. They're not going to change federal retirees' [pensions]. So what are they going to do?"

Irving says "most of those guys just refuse to answer the question head on."

Bush supporters like Lindsey have said growth in the economy and cuts in other programs will make up the difference.

Tax increases--which have officially been ruled out by the president and several of his advisers--are on the minds of several congressional leaders.

Rep. William Lehman (D-Fal.) says Bush will probably resort to some kind of "user fees"--such as licensing fees--to bring in revenue without instituting an actual tax. "They won't be called a tax increase," says Lehman, a Business School grad.

Wirth, who will speak this month at Harvard on environmental concerns, says a tax geared towards conserving energy might be a viable policy option for the president. He says a gasoline tax would be "smart economic policy and smart energy policy."

And according to Irving, Bush might be better off politically by eating the words of his campaign rather than keeping his promises of no new taxes, considering the economic consequences of continued deficit spending.

"He would, I think, be better off biting the bullet of a tax increase," she says.

Despite the presidential-congressional sparring of the Reagan years, insiders say that Bush and the Democratically-controlled Congress will be able to reach a compromise measure for deficit reduction, even if it is a politically unpopular tax increase. Congressional leaders like Gradison, the ranking Republican on the House Appropriations Committee, note that Congress is as committed to a balanced budget as the president.

"We have institutionalized our concern about the deficit with the Gramm-Rudman-Hollings bill and saying basically if certain cuts aren't made other certain dire cuts will take place," says Gradison. "I do think there is a growing consensus that cuts across party lines that the deficit has to be brought down and that compromises have to be made."

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