Budget Chief Misquoted, Reagan Says : Stockman Reportedly Urged Tax Hike in Off-Record Speech

President Reagan lashed out today at a report of a speech budget director David A. Stockman gave saying a tax increase is needed because the nation’s books are “wildly, dangerously and intractably out of balance.”

Stockman delivered the off-the-record dinner speech June 5 to a Washington meeting of the directors of the New York Stock Exchange. The New York Times in its report on the speech said several guests at the dinner confirmed the accuracy of Stockman’s remarks.

Reagan, asked about Stockman today at a luncheon with community leaders in Chicago Heights, Ill., responded vehemently: “He didn’t say it. The story is fallacious. We have the speech. We know what he said. . . . This has been a definite and deliberate misquote.”

To Keep Stockman

Reagan also said he intends to keep Stockman as his budget director.

Earlier today, White House spokesman Larry Speakes, traveling with Reagan to Illinois on Air Force One, said the newspaper story “is totally off base” and Stockman was not advocating a tax increase.

Speakes said the speech was given to the newspaper by Stockman aide Edwin Dale, a former New York Times economics reporter, “to show what the Administration position was.”

Dale said the budget chief’s comments were “completely distorted” and Stockman was “upset” about the story.

Stockman attended a senior staff meeting early today at the White House and Dale said Stockman was content he had “at least along notes” on his remarks.

House, Senate Attacked

Portraying himself in the address as “a mere bookkeeper,” Stockman made pointed jabs at budget proposals offered by the House and Senate. The House plan, he said, was “riddled with gimmicks and phony savings” and the Senate blueprint “rests on some pretty optimistic assumptions” about economic growth.

“Our books as a nation are wildly, dangerously and intractably out of balance,” Stockman said. “As a policy matter, it is obvious enough that to close this threatening $200-billion budget gap, we must either massively cut spending or raise taxes by large, unprecedented magnitudes.”

Stockman was quoted as saying that until the White House and the Senate Republican leadership settled upon a budget proposal that would reduce the fiscal year 1986 deficit by $56 billion, “Our side had not come clean on holding the line on taxes.”

Reagan has said taxes would be increased over his “dead body.”

Stockman has been in hot water with the White House before for remarks on economics. In 1981 he offered to resign but Reagan instead called him on the carpet, a meeting Stockman characterized as being taken “to the woodshed.”

A spokesman for House Speaker Thomas P. (Tip) O’Neill Jr. said Stockman’s situation today “sounds like another call to the woodshed. We all wish that the real David Stockman would stand up.”