Reagan, Senators Agree on Budget : GOP Accord Would Limit Increases in Defense Spending, Social Security

President Reagan and Senate Republican leaders struck a budget compromise Thursday under which Reagan agreed to give up half of his after-inflation increase in defense spending and to scale back next year’s scheduled increase in Social Security benefits.

In exchange, the senators gave Reagan three-quarters of the domestic spending cuts he had sought in fiscal 1986, which begins Oct. 1.

Under the agreement, the product of 10 days of intense negotiating between top White House aides and key Republicans in the Senate, the defense budget would grow by 3% a year, on top of inflation, for each of the next three years.

Next year’s regular cost-of-living adjustment in Social Security benefits would probably be limited to 2 percentage points less than inflation. For example, if the inflation rate were 4%, Social Security payments would increase 2%.

SBA Gets the Ax

Beyond that, the agreement would terminate revenue sharing, the Small Business Administration, Amtrak subsidies and 14 other popular federal programs. More than two dozen additional programs, including federally insured student loans and the fund from which Los Angeles hopes to receive aid for its proposed subway system, would be sharply cut back.

Most programs for the poor would be allowed to grow with inflation.

Senate Majority Leader Bob Dole (R-Kan.) said the package “attempts to strike a balance and treat all programs in a similar fashion.”

The agreement, if ultimately accepted by the full Senate and the Democratic-controlled House, merely would set broad outlines for federal spending. Only by enacting subsequent legislation would Congress actually trim or abolish federal programs.

In all, the package--expected to go before the entire Senate the week of April 22--would cut next year’s projected federal deficit by about $52 billion to a total of $176 billion. It would put federal spending on a course that would leave the deficit below $100 billion in 1988.

In those broad features, the new Republican budget compromise resembles the budget approved several weeks ago by the Senate Budget Committee with the support of all but one of the committee’s Republicans. But the White House had sharply criticized the committee plan for cutting too deeply into defense and not enough into domestic spending.

Senate Republican leaders, believing that Reagan’s opposition would derail any deficit-reduction package, then sought to win his approval of a compromise between his own budget request and the Budget Committee’s proposal.

The result was Thursday’s package, and White House Chief of Staff Donald T. Regan, who led the Administration’s negotiating team, said Reagan “is committed to this package, and he intends to fight for passage in both houses.”

Committee Chairman Pete V. Domenici (R-N.M.) also warmly endorsed the package as “tough medicine for a tough time.”

Social Security provided negotiators with their final stumbling block. Senate leaders had hoped to eliminate next year’s scheduled cost-of-living adjustment in Social Security benefits, but Reagan resisted any tampering. The final agreement would provide a cost-of-living adjustment 2 percentage points smaller than actual inflation, with a guarantee of at least a 2% increase.

Retirees Angry

Cyril Brickfield, executive director of the American Assn. of Retired Persons, promptly charged that Reagan was reneging on a pre-election pledge not to tamper with Social Security. “We think he ought to be ashamed,” he said.

Budget negotiators had less trouble on defense, reaching a compromise that would allow the defense budget to grow by 3% after inflation in each of the next three years. They split the difference between the Budget Committee’s recommendation of no real growth next year and the Administration request for 6% beyond inflation, which is expected to be 4% to 5% next year.

The agreement would cut $9 billion from Reagan’s defense outlay request for 1986 but is believed to leave enough to fund all the major weapons systems the Pentagon has on its drawing board.

Gave Ground on Defense

“Obviously, we gave a lot of ground on defense,” David A. Stockman, Reagan’s budget director, told reporters. “The President obviously would have preferred not to treat the Social Security matter in this way, but that became necessary to glue the package together in a fair way.”

What the Administration won, he said, were dramatic cuts from a host of social programs that the Senate Budget Committee had wanted to freeze at current spending levels.

Among the most controversial provisions in the package are proposals to:

--Cut about $14 billion over the next three years from federal farm-price supports and farm credit. The reductions, at a time when agriculture is facing a severe financial crisis, could spell political doom for farm-state senators and representatives who vote for them.

--Tighten eligibility requirements for college students who receive federally subsidized loans, at a savings of more than $2.5 billion over three years.

--Phase out mass transit operating subsidies over five years, slower than the immediate termination initially proposed by the White House.