The $42-billion unsure thing
By EDITOR Thomas Moore REPORTER Michael Rogers

(FORTUNE Magazine) – After a week of furrowed brows, leaks to the press, and symbolic gestures to major-domos of Congress, President Reagan unveiled a list of $42 billion in budget cuts that were pretty much what Budget Director David Stockman had proposed. Hoping to reduce the deficit to $170 billion in fiscal 1986 and $99 billion by fiscal 1988, the President called for eliminating some two dozen programs, including the Small Business Administration, the $4.5-billion revenue-sharing program with localities, and rural housing subsidies. He wants to end Amtrak subsidies, saving $2 billion in three years, and cut the Medicare budget by $2.8 billion. Even the sacred defense budget was supposed to take its lumps, but then Secretary of Defense Caspar Weinberger mounted a stubborn goal-line stand to protect it. The last time Reagan asked for cuts of such magnitude was a month into his first term in office, when he proposed chopping $41.4 billion from Jimmy Carter's fiscal 1982 budget. The President fell short of the mark, however, getting through Congress about $23 billion in actual cuts, plus $10 billion in creative accounting changes. Achieving even that much this time around will be a formidable feat. Each program designated for cutting has its share of lobbyists and supporters who will try to blunt the Administration's scalpel in Congress. For instance, chopping $6 billion in farm subsidies over the next three years out of programs that have cost $37.7 billion over the past three years is certain to run into heavy if not insurmountable resistance. Despite the subsidies, farmers have been hurt badly by bumper crops, falling demand, and high interest rates, which have increased their heavy financing costs. Farm debt was projected to rise to $232 billion by the end of 1984, and 20% of the $25.2 billion in outstanding loans that the Farmers Home Administration holds are delinquent (more than twice Continental Illinois's nonperforming loan rate last summer). ''Some of the farm lobbies are pretty strong,'' says Gary Lucier, an economist with the Department of Agriculture. ''Any debate over farm policy is going to be a wicked one.''