ON MARCH 14, President Jimmy Carter lowered the boom. At least we think he did. Announcing that the nation cannot stand any more inflation and that it must stop spending money it does not have, he proposed a five-point anti-inflation program. Number one on the agenda was bringing the 1981 federal budget into balance for the first time since 1969. His other points are: putting restraints on credit; extending his voluntary wage-price program; imposing a fee on imported crude oil that would raise the price of gasoline by about 10 cents a gallon; changing government regulations to encourage productivity, savings, and research and development. The latter could include a possible tax cut once the federal budget is balanced.

Carter certainly had reason to be concerned. January inflation reached an 18.2 percent annual rate, and the ever-increasing costs of energy and housing were spilling over into other parts of the economy. Deficits in the federal 1981 budget would go up. Meanwhile, the money market was in trouble. Interest rates were soaring as high as inflation rates, and the bond market was being priced out of existence. As president and as presidential candidate, Carter was under pressure to do something about inflation.

In Illinois, Gov. James R. Thompson put everyone on notice that the budget he had just proposed would have to be reviewed in light of possible federal budget cuts. His announcement was accompanied by high drama both before and after. But then came the counterproposals to the president's budget cuts of $15 billion. A coalition of Republicans and moderate Democrats on the U.S. House Budget Committee drew up its own $16.5 billion list of possible cuts.

Amid the competition as to who was going to propose the most in cuts, state governments, local governments and lobby groups tried to determine who or what would finally be cut. There were lists of programs that might be cut, reduced or deferred. Some said state revenue sharing, road funds or cost-of-living increases for social security. No one knew for sure. Before Carter had even announced his carefully guarded proposals, the wrangling had begun.

For all the sound and the fury surrounding it, bringing the budget into balance is a symbolic act. The cuts proposed in federal spending are a mere drop in the bucket and will hardly reduce the federal deficit this year. Economists estimate that a balanced budget might cause inflation rates to drop by 0.5 percent over the next year — a drop that could be cancelled by Carter's proposed hike in the gas tax or by the tax cuts to increase productivity recommended by Republicans.

Cutting the budget "won't solve our economy's problems. It's a signal to the economy as a whole that the government is getting its house in order," said Mark Micale, an aide to U.S. Rep. Dan Rostenkowski (D., Chicago), who says Rostenkowski will be with the president on this issue.

Nevertheless, there will be cuts, and they will be real enough to those who are effected by them. Cities, the young and the poor might bear the brunt of the cuts because they are most dependent on federal assitance. The hike in the price of gas and the pullback on credit for unsecured consumer loans will also hurt low- and middle-income wage earners. Some moneymarket analysts congratulated Carter on his voluntary program to hold down loans by large banks and other lenders. But they feared his selective restrictions, including those on credit cards, would needlessly complicate things.

If revenue sharing to states is cut and assistance is not given to cities affected by this, a big loser in Illinois will probably be the Chicago school system. In Illinois, state revenue sharing funds go for education and Chicago counts on its share to stave off financial collapse. And as one observer commented, "With the way the bond market is going today, the Chicago schools won't even have the luxury of going, bankrupt."

But balancing the federal budget — if it actually occurs — will take almost a year. The final resolution on the federal 1980 fiscal budget is due this May — and that budget is $10 billion above what it was in October. The impact of balancing the federal budget, however, will be felt gradually. A slowdown in spending funds already appropriated for the 1980 budget could make those funds available well into, the spring of 1981. Thus, Illinois will not feel the full effect of federal cuts until the state's 1982 fiscal year. Also, many cuts will be made by eliminating new programs, holding the line on scheduled funding increases or abolishing short-term projects. This will force the state and local governments to dig into their own coffers to maintain programs funded wholly or in part by the feds.

Democrats like U.S. Rep. Paul Simon (Carbondale) are sick at heart as they watch programs being carved out of the so-called "soft underbelly" of the federal budget. Republicans like U.S. Sen. Charles H. Percy want to go further and cut $25 billion in federal spending, calling for everyone to sacrifice.

But the interest groups will fight for the status quo, and those programs without strong and united constituencies will likely be cut.

Carter's budget cuts and other actions such as the deregulation of the price of natural gas and oil are major victories for the new economic view that the economy has been overregulated, overstimulated and overtaxed by the federal government, and that cuts in federal spending and changes in the tax system to improve productivity are needed in the 1980's. But it will take new coalitions to manage a belt-tightening in Washington. For the belt that is being tightened extends to the state and local governments and to all types of services and programs which have become a way of life in our nation.

2/May 1980/Illinois Issues