House Approves Budget Hiking Retiree Benefits

By a wide margin, the House approved a fiscal 1986 budget plan Thursday that retains next year’s cost-of-living increases for Social Security recipients and attempts to impose spending restraint on the Pentagon--both key elements that are at odds with a Senate proposal adopted earlier.

The House plan, adopted 258 to 170, would hold new Pentagon spending authority at this year’s level, not allowing even the roughly 4% inflation adjustment approved by the Senate.

Reagan Balks

President Reagan, who had requested a 6% after-inflation increase in military spending, reluctantly acceded to the Senate-passed figure but has vowed not to accept anything lower.

“We do think the (House) budget cuts too deeply into defense,” White House spokesman Larry Speakes said Thursday after the vote.

Vice President George Bush, meanwhile, declared the House plan unacceptable. “It’s time for the House leadership to put partisan interest aside and get serious about dealing with a very serious national problem,” Bush said.

Approval of the budget by the Democratic-controlled House sets the stage for a dramatic confrontation with the Republican-led Sen ate, which several weeks ago adopted a budget that used drastically different priorities to accomplish a roughly equivalent deficit reduction of $56 billion in 1986.

House Budget Committee Chairman William H. Gray III (D-Pa.), questioned about the difficulty of reconciling the two budget proposals, asserted: “All things are possible.”

But Gray hinted that the House might be willing to compromise on defense in exchange for the Senate’s agreeing to add funds for Social Security and other domestic programs. “What a person may be willing to do on Pentagon spending may be related to a decision on domestic spending or on (cost-of-living allowances),” he said.

House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) told reporters that the House-passed budget reflects growing public opposition to the Administration’s spending priorities.

Political Pendulum Swings

After citing a recent Harris Poll that showed the Democratic budget plan to be more in line with popular sentiment, O’Neill said: “The pendulum swings in American politics. . . . The enthusiasm of the American people was just not there with regard to (Reagan’s) philosophy, his policies and his budget.”

And, in a reference to Republican Pete Wilson, who was whisked by ambulance from a hospital to cast the decisive vote on the Senate budget, O’Neill observed: “That fella from California will wish he had stayed in the hospital before it’s over.”

The final vote Thursday followed the surprising rejection by the House of a non-binding amendment to the budget resolution that called for a minimum tax on corporations and wealthy individuals who have found ways to avoid paying federal taxes. Such a tax is believed to have much political appeal, and House Democratic leaders earlier had predicted that the amendment would be adopted.

Divisive Issue Avoided

The delicately worded proposal purposely avoided the issue that has split proponents of the minimum tax by leaving open the question of whether revenues from it would be used for deficit reduction or as part of broad reform aimed at lowering overall tax rates. However, it failed, 283 to 142, because some saw it as “a circuitous way” of trying to attach the tax issue to the budget, said Rep. George Miller (D-Martinez), a House Budget Committee member who opposed the amendment.

Rejected by an even greater margin, 372 to 56, was a proposal by moderate and conservative Democrats that would have added $54 billion in new taxes over three years to the budget resolution and denied next year’s Social Security increase.

GOP Plan Defeated

In addition, the House defeated, 329 to 102, a budget package sponsored by the Republican leadership that would have matched the Senate-passed 4% increase in the defense budget and made up the difference with sharper domestic spending cuts.

Negotiators have not yet set a date for a House-Senate conference on the budget, but it is expected to occur shortly after Congress returns from its weeklong Memorial Day recess.

COMPARING THE BUDGETS

The budgets that have been passed by the House and Senate each aim to cut the federal deficit by about $56 billion in fiscal 1986, which begins Oct. 1. But the Republican-controlled Senate, which fashioned its budget in careful negotiations with the White House, and the House, whose solidly Democratic majority has gone its own way, set dramatically different spending priorities in reaching their deficit-reduction goals--differences that must be resolved by the House and Senate negotiators who will meet as a conference committee in several weeks.

Here are some of the key provisions:

SENATE BUDGET

Overall, the Senate package would cut $56.2 billion from the 1986 deficit, expected to approach $230 billion. Over three years, it would slash spending by $295 billion, leaving a deficit of roughly $104 billion in 1988.

Defense: Gives the Pentagon enough new spending authority to keep up with inflation of roughly 4% in 1986, then allows 3% growth on top of inflation in 1987 and 1988.

Social Security: Denies the cost-of-living increase that Social Security recipients now expect to receive next January. Allows benefits to rise in the future as before.

Program Eliminations: Calls for the termination of 13 programs over the next few years. Among them are general revenue sharing, trade adjustment assistance, Export-Import Bank direct loans and a number of economic development programs.

Transportation: Reduces subsidies for urban mass transit, including the fund from which Los Angeles hopes to finance its proposed Metro Rail subway system.

Agriculture: Cuts programs by $3.3 billion in 1986 and nearly $15 billion over three years. Adds new program attempting to encourage U.S. sales overseas by giving away government-owned commodities to foreign customers who buy from U.S. farmers.

Student Financial Aid: Holds spending at 1985 levels, which Senate leaders say would not affect the availability of student loans for college students. However, families whose incomes exceed $60,000 a year, after adjustment for the number of children they have and other factors, would be ineligible for federally subsidized loan rates.

Medicare: Cuts $3.4 billion in 1986 and $15.7 billion over three years. Would increase beneficiaries’ monthly premiums beyond levels called for under current law.

HOUSE BUDGET The House plan, which like the Senate proposal includes no new taxes, would cut roughly the same amount from the deficit as the Senate plan in fiscal 1986 but falls short of the savings it would achieve in subsequent years. Over three years it would save $259 billion, leaving a $124-billion deficit in 1988.

Defense: Holds new spending authority to this year’s level in 1986, without compensating for inflation. Allows 3% after-inflation growth in 1987 and 1988.

Social Security: Does not touch current law, which allows Social Security recipients to be compensated fully for inflation if prices rise by at least 3%.

Program Eliminations: Terminates only general revenue sharing, the no-strings-attached federal grants to local governments, allowing it to expire as scheduled in 1987.

Transportation: Holds mass transit funding at this year’s level next year and allows it to grow at half the rate of inflation in 1987 and 1988.

Agriculture: Makes smaller cuts than the Senate plan--$2 billion in 1986 and $10.4 billion over three years.

Student Financial Aid: Allows funding for student financial aid programs to grow with inflation.

Medicare: Would not call for any increase in premiums beyond that which is already scheduled.