Balanced budget plan

Press, 13 December 1985, Page 6

Balanced budget plan

NZPA-Reuter Washington The United States Congress approved and sent to President Reagan yesterday a landmark plan to balance the United States Budget by 1991 and end years of huge Federal deficits.

Mr Reagan said that he would sign it into law.

The Senate, which originated the plan for broadscale cuts in defence and domestic spending two months ago, passed it on a 61-to-31 vote and sent it to the Democrat-controlled House of Representatives, which then passed it, too, by 271 to 154.

Although the Pentagon said that it would send a “message of comfort” to the Kremlin because of prospective defence cuts, Mr Reagan was ready to sign it into law.

The measure, attached to a mandatory bill to increase United States borrowing authority to finance debt,

could end deficits by 1991. The last balanced Budget was in 1969. The Defence Secretary, Mr Caspar Weinberger, and the Secretary of State, Mr George Shultz, waging a behind-the-scenes battle, managed to win some flexibility from Congress in allocating defence spending cuts for 1986. The bill requires deep, across-the-board cuts in spending, split between the military and social programmes, to meet gradually lower annual deficit ceilings to reduce the deficit from SUS2OO billion ($354 billion) to zero by 1991. The Budget plan was originated in the Senate by two Republicans, Phil Gramm (Texas) and Warren Rudman (New Hampshire), and Mr Reagan quickly threw his backing into it to reduce deficits. Mr Reagan was elected in 1981 on a campaign to balance the Budget. His predecessor Jimmy Carter, left a

SUS 79 billion ($139.83 billion) deficit in his last year. But since he took office the most conservative President in more than 50 years has broken all deficit records, running up a total of about SUSIOOO billion ($1770 billion) in public debt — more than all other Presidents combined. This forced up interest rates, drew foreign capital to the United States and pushed up the dollar on exchange markets.

Mr Reagan has promised not to raise income taxes but wants to reduce spending by cuts in domestic programmes. Many economists believe that he will have to raise taxes.

They also say that the increasing debt could be a ticking time-bomb, ready to devastate the growing American economy, by propping up interest rates and the dollar and pricing U.S. goods out of world markets.