Deficit Growing, New Congress Told : Session Opens in Mood to Slash Debt, Hears Outlays Must Be Cut $54 Billion

The 99th Congress convened Thursday in a deficit-cutting mood and learned from Budget Director David A. Stockman that next year’s projected deficit is even larger than originally expected.

Stockman, holding an unusual briefing for Republican senators, disclosed that a recent slowdown in the economy has forced him to raise his deficit projections for the next three years.

His deficit estimates--based on current budget and tax policies--now have risen from $214 billion to $225 billion for fiscal 1986, which begins Oct. 1; from $232 billion to $240 billion for fiscal 1987, and from $232 billion to $235 billion for fiscal 1988.

As a result, Stockman told the senators, the Congress and the Reagan Administration are faced with the task of cutting $54 billion from projected spending in fiscal 1986 to bring the deficit into a range viewed as acceptable by President Reagan.

‘Worse Than I Thought’

“It was worse than I thought,” Senate Majority Leader Robert J. Dole (R-Kan.) said after the meeting. “The numbers were bigger than I thought.”

At the same time, parts of Stockman’s document were criticized as too optimistic. Several senators ridiculed his projection that interest rates would fall to 5.5% by fiscal 1988. “That’s optimism we’ve been addicted to for too long,” Sen. Charles E. Grassley (R-Iowa) said. “We have to get away from it.”

It was highly unusual--if not unprecedented--for Congress to be dealing with budget matters on its first day in session. The President’s proposed budget for fiscal 1986 will not be submitted formally to Congress until Feb. 4.

Dole, vowing to make deficit reduction his primary goal, said that no budget item will be off limits when it comes to trimming federal spending--not even the cost-of-living increases for Social Security recipients that Reagan has promised to preserve.

“It may be we do nothing” about the benefit increases, he added, “but I don’t believe we say it’s off limits to start with.”

Sen. Alan K. Simpson of Wyoming, the assistant Republican leader, was more emphatic on the subject of budget cuts.

Cuts Must Be Dealt With

“Somewhere along the line, I think the American people have to know that cost-of-living allowances and defense cuts . . . are going to have to be dealt with in a tough, gut-hard way,” he said. “The President is going to have to be involved deeply. We’re all going to . . . have to jump off the cliff several times.”

To demonstrate their resolve, Dole and Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) introduced a largely symbolic bill that would require the deficit to be trimmed to a level equivalent to 2% of the gross national product by fiscal 1988--about $138 billion below the Administration’s current deficit projections for that year.

Dole said that the legislation was introduced as Senate Bill No. 1 to illustrate that deficit reduction will be the first priority of the Republican legislative program in the 99th Congress.

“We really want to get out front,” he said. “We want to tell the President early on he doesn’t have to pull us--we want to go.”

In the House, Thomas P. (Tip) O’Neill Jr. (D-Mass.), who was elected to his fifth term as Speaker, indicated that he agreed that deficit reduction should be the No. 1 goal of Congress in the coming months.

“These deficits will not take care of themselves,” he said. “It is up to the President and to the Congress to take them on. No doubt the public will judge the success of this Congress by our willingness to make the tough decisions to get our fiscal house in order.”

One proposal for cutting federal spending that appeared to be gaining popularity in Congress is a one-year, across-the-board spending freeze at current levels. A freeze proposal was introduced Thursday by a group of senators and House members led by Sen. Nancy Landon Kassebaum (R-Kan.).

Stockman Against Freeze

Stockman and other Administration officials have rejected the freeze on grounds that it would not curb spending as drastically as the President wants. Sponsors of the measure estimate that it would trim $35 billion in fiscal 1986, $57 billion in 1987 and $76 billion in 1988.

Supporters of the freeze argue that it is the only way to achieve early, bipartisan action on deficit reduction that will instill confidence in the financial markets. “It is essential not to get caught up in months of argument over selected budget cuts,” Kassebaum said.

Dole said that the freeze would be the “centerpiece” of the Republican deficit reduction program, although it will be combined with other cuts.

No mention was made of a tax increase to balance the budget. Dole said that Congress must “attack spending first and foremost as a means of controlling deficits,” but he did not rule out consideration of “other options” in the future. Reagan is opposed to a tax increase, except as a “last resort.”