Reagan Budget: Defense Hikes, Domestic Cuts

President Reagan will propose a $974-billion budget for the 1986 fiscal year that calls for nearly $40 billion in new spending cuts from domestic programs while recommending an increase of $30 billion for the Pentagon, Administration officials said Friday.

The plan forecasts a deficit of about $180 billion, added officials, who spoke only on condition they not be identified. But that assumes the President’s budget is accepted in its entirety by Congress, where opposition already is forming to many of the proposals.

The budget--the first of Reagan’s second term--contains no call for a tax increase, and the President is expected to send Congress a plan later this year to simplify the income tax code.

Follows Reagan Wishes

White House spokesman Larry Speakes said the overall plan is in keeping with the President’s wishes to freeze overall government spending.

The $973.7-billion figure would represent an increase of only 1.5% over the current year, the smallest rise in years. The Administration currently estimates total spending for the fiscal year ending Sept. 30 at $959.1 billion.

“It’s a programmatic freeze, a freeze on program outlays,” after adjusting for an increase in interest payments, Speakes said. He said the government would pay about $145 billion next year as interest on the national debt.

The President’s decision to raise Pentagon spending by nearly $30 billion within the context of a near-freeze overall means a reduction of an estimated $38.8 billion in domestic costs, including a freeze in numerous domestic programs and outright cuts and cancellations in others.

Officials have said previously that the President would recommend a sharp reduction in student loans and farm programs, a 5% pay cut for federal workers, elimination of federal subsidies for Amtrak and other transportation programs, and canceling programs such as revenue-sharing for cities and counties and the Urban Development Action Grant program.

The proposals, which run through 26 pages of program listings, also are expected to include denial of cost-of-living increases next year in federal pension programs. Food stamps and SSI, which provides aid to the very poor, would not be affected. Nor would Social Security benefits be frozen, although Reagan has said he would “look” at a recommendation to cancel that increase, as well, if Congress recommends it.

The budget proposals are certain to set off a confrontation between the White House and Congress, where many Senate Republicans have taken the lead in urging the President to accept less spending for defense than he wants as a way of winning support for some of the more controversial cuts he is proposing in domestic programs.

Under the direction of Sen. Robert J. Dole of Kansas, the new majority leader, Republicans have been working for weeks on a plan to reduce the deficit by even more than Reagan’s recommendations. Party leaders say there is widespread support to enact many of the domestic cuts the President favors, but only if that is coupled with a reduction in the Pentagon buildup.

House More Subdued

In the House, where Democrats are in the majority, there has been less vocal opposition to the President’s budget, with the party’s leaders preferring to wait for Reagan’s formal recommendations before fashioning a response.

Administration officials said that overall, the President will present a plan to reduce the deficits to roughly $145 billion in 1988, higher than the original target of $100 billion he previously set. Without any changes in policy, the Administration estimates deficits will be $215 billion next year and $248 billion in 1988.

To make even the less ambitious deficit target, Reagan’s plan calls for reductions totaling between $205 billion to $210 billion over the next three years. Most of the savings would come from domestic programs but there would be a curtailment in the Pentagon buildup of $28 billion over the three years.

Even so, Pentagon spending would rise from an estimated total of $247 billion this year to $277.5 billion in 1986, $312.3 billion in 1987 and $348.6 billion in 1988.