Newspaper article THE JOURNAL RECORD

Deficits Begin to Distress `Politicians' / Nation Vulnerable to After-Effects

Newspaper article THE JOURNAL RECORD

Deficits Begin to Distress `Politicians' / Nation Vulnerable to After-Effects

Article excerpt

WASHINGTON - In the 1985 fiscal year, which ended Sept. 30, the deficits of the Reagan years crossed a bewildering threshold. The four-year, $685 billion accumulation of deficits now exceeds all previous deficits, less periodic surpluses, of the 20th century.

Economists have bewailed such figures since 1981, when Congress and the Reagan administration ordered income tax cuts without making corresponding cuts in spending. But, for polticians, the budget deficit has been one of those problems, like the condition of the nation's bridges or the proliferation of toxic wastes, that seem too big or too remote to deal with.

Finally, however, the deficits are beginning to hurt in ways that distress politicians. In this year's slower economy, the nation has become vulnerable to such after-effects of the deficits as a high dollar and higher interest rates than would otherwise be the case.

The damage the deficits have begun to inflict lies behind the night-to-day shift in the Reagan administration's foreign economic policies. They also underlie the attempts of Congress to deal with them, first last summer, with the resolution putting the deficits on a declining course, and again this month, with the 65-to-24 vote in the Senate to mandate a balanced budget by 1991.

""As the debate has gone forward on trade, you see that you cannot have a good trade policy unless you have a sound economic policy,'' said Representative Lee H. Hamilton, Democrat of Indiana. ""Sowe are therefore shifting back to more emphasis on the deficits.''

The deficits now present the Government with hard political realities. One is the possibility that, as many economists expect, the country will tumble into another recession by late 1986 or in 1987. Then, because of higher Federal payments to the unemployed and reduced tax revenues from businesses and consumers, the deficit could leap to $300 billion or $400 billion.

With deficits of that magnitude, the government would be constrained in using deficit spending to help pull the economy out of the recession - the one occasion, other than wartime, when all economists consider eficit spending legitimate.

The other issue is more immediate - the political difficulties that the deficits are causing the Administration in Congress. Among those issues, the Reagan administration often cites the prospect of protectionist legislation. A more compelling example of the political issue at stake, however, may be the four-year recession in American agriculture, whose resolution may even worsen the deficit.

At first the recession affected only a tiny constituency, the nation's 5. …

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