Senate Budget Rebuffs Reagan on Key Goals : President Declares Compromise a Success

President Reagan declared his new budget compromise a “success” Friday, despite having agreed to a “no-growth” defense program that only a week earlier he had branded as “irresponsible.”

But “not one penny more should be taken out of that budget,” he admonished Friday, referring to his overnight agreement with the Senate to limit the increase in Pentagon spending to the basic rate of inflation.

In addition, the President, holding a 20-minute press conference before flying back to Washington to end a 10-day European trip, justified his agreement to a one-year freeze in Social Security cost-of-living increases on grounds that there was an overwhelming Senate “mandate” to do so.

Campaign Reflection

Standing between marble statuary behind the 18th-Century royal palace at which he had stayed, Reagan acknowledged that he had given many voters the impression during his 1984 reelection campaign that he would not tamper with Social Security increases.

“OK, I live with that,” he said.

The Senate-passed budget package, which Reagan lobbied for Thursday in transatlantic telephone calls to several senators in Washington, is aimed at slashing $56 billion from the federal deficit in fiscal 1986, which begins Oct. 1. Over three years, it is supposed to cut $295 billion in red ink spending.

“There’s no questioning the importance of sending a signal, not only to the world but to our own business and financial communities, that we are determined to deal with a deficit problem that has been a Democratic heritage for the last 50 years of continued deficit spending,” Reagan said.

“And, once and for all, we’re going to try to get hold of it.”

In his compromising, the President agreed to a freeze not only on Social Security benefits but on federal pensions and other such entitlement programs.

Outlook in House

A White House official, speaking on condition that he not be identified, conceded that the Administration expects the House to at least partly restore the Social Security and other entitlement cuts, leaving the final version to be decided by a conference committee.

Reagan, in explaining why he gave in on defense spending and Social Security, said that the concessions were necessary to achieve the majority of his budget goals.

“I recognize that, and the give-and-take that must take place in a system such as ours to attain more than 90% of what we asked for means that, all right, we can do some giving along the line also,” he said.

Reagan originally had proposed a 6% after-inflation increase in defense spending for the next fiscal year. A month ago, he compromised with Senate Republican leaders on a 3% hike. But, last week, the entire Senate, on a narrow vote, cut the proposed increase to the rate of inflation, tantamount to a program freeze.

Reagan, attending the economic summit meeting in Bonn, then accused the Senate of an “irresponsible act” and said that any Pentagon budget that fell below a 3% after-inflation increase would “reduce our ability to maintain security.”

White House spokesman Larry Speakes warned that it would cause cancellations of “major weapons systems.” And Secretary of State George P. Shultz said the slowdown in Reagan’s defense buildup could hamper arms negotiations.

But, trying Friday to project the latest budget development as a Reagan victory, White House officials described the President as “feeling very, very good” and “in a celebrating mood” about the Senate vote.

Reagan said Senate leaders had assured him that, if at any time during the next fiscal year he feels that zero-growth defense spending is harming national security, he could go back to Congress and ask for more money.

The compromise budget blueprint calls for 3% after-inflation increases in defense spending during fiscal 1987 and 1988.

Benefit to Be Restored

As for the freeze in Social Security benefits, Reagan pointed out that increases would be restored to their regular inflation-based rate in fiscal 1987.

The President last month proposed limiting Social Security increases to the rate of inflation minus two percentage points, with a guaranteed increase of 2%. The Senate last week voted not to cut the increases at all.

Although Reagan’s rhetoric when dealing with Congress usually is firm, he pointed out Friday that, in the end, he frequently is a flexible bargainer.

“I have always believed from all my past experiences as a (Screen Actors Guild) negotiator that you recognize that the other fellow is probably going to offer less than whatever you ask,” he said. “And I have always kind of believed in leaving a cushion there for dealing.”

A reporter asked whether Reagan might later be willing to compromise on a temporary tax increase in return for passage of a tax reform plan, which he intends to submit soon to Congress.

“No,” the President replied unhesitatingly. He said that “part of our success” in the budget compromise was an understanding that Senate leaders would not press for a tax hike.

Tax Hike Ruled Out

“They all know that I absolutely will not accept a proposal for a tax increase,” he said. “I think it would endanger our (economic) recovery, and they know that I will veto any proposal that comes to me for a tax increase.”

Reagan, on arriving at the White House later Friday, said: “How sweet it is to return with a 50-49 Senate victory for spending restraint and no tax increase.”

White House Chief of Staff Donald T. Regan, who worked closely with Senate Majority Leader Bob Dole (R-Kan.) by transatlantic telephone Thursday, said of the budget compromise: “Most Americans are being affected by this. But it has to be done if we’re going to keep this economy going.”