BALANCING THE BUDGET THROUGH EDUCATION SPENDING CUTS AND ITS EFFECTS ON INFLATION AND STUDENTS

Federal aid to education is the latest victim in President Carter's much publicized plan to fight inflation by balancing the federal budget. As inflation has steadily worsened over the last year, the Carter Administration has refused to mount a real attack on its root causes. Instead of re-imposing controls on the price of domestic oil, establishing credit allocations designed to put scarce capital into productive investments rather than such things as silver speculation or attempting to fight back through a system of controls on profits, interest rates, rents, dividends, prices and salaries, the administration has pursued the policy that shows up in the polls most often-balance the federal budget. Budget balancing through spending cuts has much surface appeal. However, it is almost certain to produce a serious reduction in the quality of education while having no positive effect on the rate of inflation.

According to most economists, balancing the federal budget will result in a reduction in inflation of .02 percent. However, Carter's proposed 10 cents a gallon tax on gasoline will result in an increase in inflation of .05 percent.

We are being asked to sacrifice quality education in a war against inflation with a battle plan that will actually increase inflation. While cutting education funds will not have any significant effect on controlling inflation, it will have a devastating effect on schools and colleges.

The administration budget will reduce education aid by over $1.6 billion per year over the next two years. Figures have been used to defend the new Education Department which shows "only" $600 million in spending reduction for education next year. In fact, when the cuts in the budget from January are added up that figure goes over $900 million. When non-Education Department cuts such as state revenue sharing ($700 million of which is direct aid to education) are added in the figure, it exceeds $1.6 billion. Education is one of the hardest hit on the Carter list, claims to the contrary notwithstanding.

A further irony is that this budget charade is an exercise in futility. It is now clear that the "mild recession of short duration" predicted by President Carter will be one of the worst downturns in the post-war period and massive unemployment equals massive deficits for the federal budget. Every 1 percent in unemployment means an additional federal deficit of $20 billion; $15 billion in taxes not paid and $5 billion from increased costs for income maintenance programs, such as, welfare, Medicaid and unemployment insurance. Every 1 percent in unemployment adds one million new people to the food stamp program. The folly of relying on unemployment to control inflation and to balance the budget was made clear when the Congress had to appropriate $2.5 billion unbudgeted for food stamps simply to keep the program from running out of money with three months left in the fiscal year. This cost increase was due partly to the in­creased costs of food. But, most new food stamp costs were the result of new people on the rolls of the unemployed.

The result of this budget balancing charade has become clear-no reduction in inflation, a higher deficit and a reduction in the quality of education. No matter how politically popular budget balancing may be, a policy that does not result in controlling inflation or the deficit must be strongly opposed.

Balancing the budget through spending cuts has a surface appeal to many Americans, but the test of an economic policy is its results. More unemployment and a reduction in services will not translate into political support especially for the Democrats. The first round in this fight has gone to those who have little or no concern for maintaining quality education or fighting unemployment. As the recession deepens and the lines of the unemployed grew, glib solutions such as balancing the budget through cutbacks in education will make even less sense. We shall continue our opposition to this misguided policy in the Congress and in the 1980 election.