Senate Budget Rebuffs Reagan on Key Goals : Chance May Be Lost to Shrink Government

Below the Senate rhetoric over the need to cut the deficit ran a deeper ideological undercurrent: The fiscal 1986 budget offered what Budget Director David A. Stockman described as the “best, last and only opportunity” to achieve the Administration’s basic goal of shrinking government.

On this score, as on the Administration’s other top priority of increasing military spending, the budget plan passed early Friday by the Senate had little success. And the Administration will probably lose further ground when the Democratic-controlled House begins its official effort to put together a budget next week.

This year’s budget votes, as Stockman indicated, are likely to be the Administration’s last chance for scaling back the role of government. Next year, House and Senate members will be up for reelection--and, therefore, unlikely to make unpopular and painful spending cuts. After that, if the history of other “lame-duck” administrations is any indication, the White House’s leverage over Capitol Hill will decline sharply.

Senators reached the targets that leading economists had said were necessary to keep the economy healthy. They voted to cut $56 billion from a 1986 deficit that had been projected to approach $230 billion. Over three years, the package would reduce government spending by $295 billion, leaving a deficit of about $104 billion in 1988.

But, to get the votes they needed to muster a tie on the package--even though the GOP controls the Senate--Republican leaders had to restore funding for the largest programs that the White House had sought to eliminate. Then, Vice President George Bush used his constitutional power of breaking a tie in the Senate, and his vote transformed the 49-49 deadlock into a victory for Republicans.

Powerful Constituencies

Senate Majority Leader Bob Dole (R-Kan.) found that he was fighting a powerful constituency for every federal program that he and the Administration tried to eliminate. One by one, he won the votes of Republican senators by agreeing to restore at least some funds for such programs as the Small Business Administration, Amtrak, postal subsidies, rural housing and mass transit operating subsidies.

“You’ve got to be realistic in addition to idealistic,” he said. “I’d rather have the votes.”

The fight now shifts to the House, where the Budget Committee is expected to begin piecing together its budget proposal next week.

“I believe the House Budget Committee can develop an even more equitable budget--one which spreads the burden of spending cuts more fairly, yet maintains a strong national defense,” Budget Committee Chairman William H. Gray III (D-Pa.) said.

Defense Controversy Likely

Once the House passes a budget plan, House and Senate negotiators will try to iron out their differences on federal spending priorities. One area likely to provoke a controversy is defense, an issue on which the House and Senate were deadlocked for months last year.

House Budget Committee Democrats already have tentatively agreed to freeze 1986 defense spending at this year’s level, not even providing the adjustment for inflation that is in the Senate package. Senate Budget Committee Chairman Pete V. Domenici (R-N. M.) has vowed to reject that level if it is sent to a House-Senate conference committee.

Budget deliberations probably will continue into the fall. Even if the House and Senate succeed in coming up with a major deficit reduction plan, their effort is merely a blueprint for spending. It is up to House and Senate committees with jurisdiction over various programs and agencies to approve legislation that sets actual spending levels.

THE SENATE BUDGET PROPOSAL

Here are the changes that the fiscal 1986 budget proposal, which the Senate approved 50 to 49 early Friday, would make in the largest federal programs:

DEFENSE: Military spending would rise only as much as inflation next year, and 3% after inflation in fiscal 1987 and 1988. President Reagan had insisted that a 3% after-inflation increase in 1986 was his “rock-bottom” figure. In his original budget, he asked for 6%.

SOCIAL SECURITY: Benefits would be frozen for one year, saving almost $3 billion. The original White House-Senate GOP plan would have saved about the same amount over three years by holding annual increases in Social Security cost-of-living raises to about 2 percentage points less than inflation, with a guarantee of at least a 2% increase.

STUDENT LOANS: Federal programs for student loans would be cut by a relatively small $200 million, which Senate leaders say should not have much effect on their availability. The Senate rejected a proposed $8,000 cap on expenses that college students could claim in applying for guaranteed student loans.

MEDICARE/MEDICAID: The Senate rejected $800 million of the $2 billion in cuts that the Administration had proposed for Medicaid. Beneficiaries who now pay $19 a month for coverage of doctor bills and outpatient care would pay $22.88 in 1988. They would have paid $24.90 under the earlier GOP package.

TRANSPORTATION: As the Administration requested, the fund from which Los Angeles hopes to finance its proposed subway system would be slashed by $1 billion, to $1.7 billion--making it extremely difficult politically for the city to get enough federal money to build the line. Subsidies for Amtrak would be cut by 12.5% in 1986 instead of eliminated.