President Returns to ’81 Themes : But Blueprint for ’86 Creates More Red Ink, Unease

President Reagan, launching his second term with a $974-billion budget that revives his crusade against government spending on social programs and continues his massive military buildup, is returning to the major themes that marked his sweeping blitz of Congress four years ago.

But the President’s spending blueprint for fiscal 1986 leaves the government awash in red ink, and the growing uneasiness over his failure to reduce the swollen deficits may weaken his ability to overwhelm his opponents the way he did in 1981.

The White House spending plan, according to budget documents obtained from congressional sources Saturday, proposes deep cuts in farm subsidies, Medicare, student loans and many other programs that benefit the middle class. But it avoids any limits on Social Security, the largest and most entrenched domestic program of them all.

Shifting the Burden

The budget for fiscal 1986, which begins Oct. 1, also proposes to shift more of the burden of public services to local governments and their direct users. It again asks Congress to end several programs, such as mass transit operating subsidies, that Congress refused to eliminate during Reagan’s first term.

Reagan, pointing out in his weekly radio talk on Saturday that his budget will contain no proposed tax increase, said the aim of his budget is “to cure government’s overspending once and for all.”

Despite the domestic austerity, the budget will allow the military to accelerate its spending on nuclear weapons such as the MX missile and nearly triple research outlays for its “Star Wars” anti-missile defense.

Rise in Military Pay

Military pay would continue to increase steadily and the military retirement program would remain unchanged except for a one-year freeze on cost-of-living increases, according to the budget documents. However, civilian government workers would be called on to accept a 5% pay cut next year, as well as changes in their pension program that would limit benefits and raise the retirement age for full benefits from 55 to 65.

Even though the President will call for the most massive spending cuts since he proposed to slash $49 billion from domestic spending in 1981, his budget will still fall short of his own deficit reduction goals, leaving the federal government with a projected deficit of $180 billion next year and $144 billion in 1988. Until recently, he had intended to reduce the flow of red ink in 1988 to $100 billion.

Senate Republicans, in an effort to develop a more politically palatable budget package, already have launched their own effort to hold down Reagan’s defense buildup and to lessen the impact of some of his proposed domestic spending cuts.

The Senate proposals underscore the deep divisions within the Republican Party over Reagan’s budget priorities and suggest to some analysts that a final budget package is likely to leave even larger deficits than Reagan is proposing.

“The groundwork has been laid for a deficit reduction package and most of the options are on the table,” said Jim Capra, a former official with the Congressional Budget Office and now a budget analyst for Shearson Lehman Bros. in New York, “but the Administration appears to have lost the initiative in the budget process. The likelihood of an early presidential media blitz that would achieve quick approval of a bold budget package appears smaller with each passing day.”

Formal Unveiling

Although the White House budget will not be formally unveiled until Monday afternoon, copies of the documents were distributed to some members of Congress and news organizations Saturday. Nearly all of the important actions proposed in the budget were disclosed several weeks ago as part of the Administration’s efforts to drum up support on Capitol Hill for its spending cuts.

Thanks in part to those efforts, preliminary congressional reaction to Reagan’s budget proposals was relatively muted. But there were hints of the mine field that awaits them.

House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) coyly invited the President to “tell the American people exactly what he has in mind for them.” He urged Reagan “to make clear to the people what programs he wants to cut, to spell out what is wrong with these programs and why they should be cut or abandoned.”

‘Outlandish Numbers’

California Rep. Vic Fazio (D-Sacramento), a member of the House Budget Committee, complained that it is the President’s job to present “a realistic budget. Yet the pattern with this Administration is to propose the most outlandish set of numbers, have the thing sent up to the Hill only to be called ‘dead on arrival’ by members of his own party, and then go around the country blaming Congress.”

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), after meeting for an hour and a half with Reagan Budget Director David A. Stockman and Senate Majority Leader Robert J. Dole (R-Kan.), promised to speed the budget to an early vote in the Senate. But he said it would be “very, very difficult” for Senate Republicans to reach their target of reducing the deficit by $50 billion in fiscal 1986 “with the defense outlays that are proposed in the President’s budget.”

The Reagan budget, according to the documents obtained from congressional sources, would cut about $51 billion from the 1986 federal outlays that were given as projections in the 1985 budget. The $51- billion total comprises $39 billion in savings from the spending levels that domestic programs would otherwise reach, $9 billion in reductions from Reagan’s planned military buildup and $3 billion in lower borrowing costs.

Domestic Cuts

On the domestic side of the budget, farm programs, Medicare, energy and housing would absorb the largest cuts.

Total outlays for agriculture would be cut $5 billion from the levels that would be reached under current laws, with most of the reductions coming from lower subsidy payments to farmers as a result of cutting price support levels.

Medicare, which provides health care to the nation’s elderly, would be subject to a $4.1-billion reduction in 1986. The changes would include a one-year freeze on Medicare payments to doctors and hospitals (doctors’ fees are already frozen), along with modest increases in beneficiaries’ premiums and co-payments.