Panel Adopts Budget, Social Security Freeze : Senate Package Curbs Pentagon Spending, Cuts ’86 Deficit by $55 Billion, Contains No Tax Hikes

The Senate Budget Committee late Wednesday narrowly approved a sweeping package of spending cuts that aims at halving the budget deficit in three years by, among other things, denying Social Security cost-of-living increases next year.

In approving the package, which was worked out by Chairman Pete V. Domenici (R-N.M.), the committee reversed earlier votes that maintained a wide range of domestic programs at their present levels. However, it did not cut domestic spending as deeply as President Reagan had asked.

Also, the committee stood by its decision of last week to allow no growth in defense spending next year beyond inflation, which is projected at around 4%, rather than the 6% after-inflation increase Reagan had requested.

$7 Billion Below Reagan Level

The package contained no new taxes.

It would cut the deficit by $55.1 billion next year to $172.3 billion, putting it more than $7 billion below the level it would have been under Reagan’s proposal, according to economic forecasts used by Domenici.

However, Democrats on the committee charged that Domenici’s projection was too rosy and said that his package would more likely yield only $42 billion in deficit reduction next year.

The plan was adopted on a partisan 11-9 vote, with committee Republicans favoring it and Democrats voting against it. Sen. Charles E. Grassley, an Iowa Republican, and Sen. J. James Exon, a Nebraska Democrat, abstained from voting.

The vote was taken after the committee, earlier in the day, had rejected a series of alternative packages, including President Reagan’s, which was rejected, 17 to 4, with Exon abstaining.

Other Big Cuts

Among the areas slated for large budget cuts are student loans, revenue sharing, mass transit subsidies and Amtrak.

Even if the committee’s resolution is adopted by the entire Senate, it is merely a broad blueprint for spending programs. The committee will meet today to draft a separate bill that would put teeth into the budget resolution by requiring other Senate committees to live within its outlines as they put together budgets for various federal agencies and programs.

Some aspects of the proposal are certain to face stiff opposition. Sen. Donald W. Riegle Jr. (D-Mich.), saying that he was “surprised and disappointed” to see the Social Security freeze in the budget, warned committee members: “I don’t want anyone to be under the misapprehension that this is going to slip through. . . . Get ready to vote on it a lot of times.”

In his budget proposal, President Reagan had not advocated any change in Social Security benefits, but he later indicated that he might change his mind if Congress took the initiative on the issue.

Domenici agreed after the vote that the package faces “a long, tough battle” as it goes before the Republican-controlled Senate. Once the Senate adopts a budget resolution, it must negotiate a compromise with the Democratic-controlled House, which has not yet begun to draft its own budget package.

By Domenici’s estimate, the committee package would leave the deficit at $101.8 billion in 1988, compared to about $147 billion under the White House budget request. Without a deficit reduction package, the deficit that year would be $244 billion, according to Domenici.

Controversial Cuts

Other than freezing Social Security benefits, the most controversial cuts in the package include:

--Cutting general revenue-sharing grants to cities and counties by half in each of 1986 and 1987. Reagan had proposed ending the program next October, which is one year before it was scheduled to expire.

--Saving $200 million in spending for federal student loans by tightening eligibility. Details of the Senate proposal were not available, but Sen. Bob Kasten (R-Wis.) said that it was not as drastic as the cutbacks Reagan had proposed.

--Cutting mass transit subsidies by 25% rather than eliminating them, as the White House asked.

Amtrak Budget Halved

--Slashing Amtrak’s budget by half, the Small Business Administration’s by two-thirds, the Export-Import Bank’s by about two-thirds and Urban Development Action Grants by 20%. The Reagan Administration had asked to eliminate all of these programs.

--Requiring Medicare recipients to pay $2.3 billion in higher health care premiums over the next three years. The committee estimated that the package would increase the average Medicare premium by $5.60 a month by 1988.

--Eliminating a group of federal programs, including the Economic Development Administration, subsidies for Appalachia and rural housing and acquiring more oil for the Strategic Petroleum Reserve.

One program that was spared major reduction was federal agriculture subsidies. In addition, in an effort to insulate poor people from the effects of the Social Security freeze, the committee added $300 million to the Supplemental Security Income program, a major source of government aid for low-income families.