President Yields on Social Security : Democrats Accept Senate’s Higher Defense Spending at Budget Meeting

President Reagan, making a last-ditch effort to pull together a fiscal 1986 budget that puts a significant dent in the federal deficit, reached tentative agreement with House Democrats Tuesday over the two biggest stumbling blocks: Social Security and defense spending.

In a two-hour meeting between Reagan and congressional leaders, the President and Senate Republicans gave up their efforts to deny next year’s cost-of-living increase to recipients of Social Security and other federal retirement benefits.

House Speaker Thomas P. O’Neill Jr. (D-Mass.) told reporters that negotiators agreed that “Social Security in every phase is not on the table.” The Senate’s proposed elimination of next year’s Social Security benefit increase, designed to save $22 billion over three years, has been the greatest hurdle to an agreement.

Bookkeeping Maneuver

In return, House Democrats agreed to go along with a Senate-passed plan to allow the amount of new defense spending commitments to grow with inflation. But, in a bookkeeping maneuver to allow Democrats to say they held the line on defense, actual military outlays next year would remain at this year’s level, and the new spending commitments would translate into new spending only in future years.

But with Social Security benefits growing next year and military spending allowed to escalate in future years, the compromise on those two issues would leave House and Senate negotiators with a new problem: finding other areas of the budget in which they could make compensating spending cuts.

The House’s targeted $56 billion in savings next year would remain within reach as long as none of the new defense spending commitments translated into immediate actual spending. But achieving the House’s three-year savings goal of $259 billion would be difficult as defense spending grew in 1987 and 1988 to reflect the additional $10 billion in new spending commitments made for fiscal 1986. The House’s savings targets assume full growth in Social Security benefits.

House Majority Leader Jim Wright (D-Tex.) said after the meeting that the two sides are “very substantially closer because two of the really big stumbling blocks have been removed.”

Senate Majority Leader Bob Dole (R-Kan.), however, was more cautious. “While we did not agree on anything, I felt it was possible to put together an agreement,” he said, adding: “Until we get a total agreement, we’re right back where we were before.”

‘Near the Edge’

Moreover, while Wright and Senate Minority Leader Robert C. Byrd (D-W.Va.) agreed with O’Neill that a one-year Social Security freeze is “off the table,” Dole quipped that it was merely “near the edge.” But he conceded: “I agree with Tip O’Neill. It probably will never pass the House.”

Wright insisted: “It is my clear understanding of the sense of the meeting that the President and members of the Senate agreed that there will be no tampering with Social Security (cost-of-living increases).”

Reagan has turned his attention from his tax reform proposal to deficit reduction in an effort to force House and Senate negotiators to come up with an overall budget plan. Both sides have agreed that unless a broad spending blueprint is adopted in the next few weeks, Congress will simply enact piecemeal its regular spending bills for government agencies--an approach that makes it much less likely that Congress can rein in spending.

Reagan stepped up pressure on the House Tuesday in a speech before regional journalists. He charged that the House had passed a budget that “juggles funds back and forth between accounts, invents savings and simply wishes away massive costs--a budget that would be laughed at by bookkeepers in any well-run shop or business in the country.”

Meanwhile, Wright and other Democratic leaders stepped up their own rhetoric, producing what they said were six tons of petitions opposing any tampering with promised increases in Social Security benefits.

Leading economists have said that Congress must pare the federal deficit--now projected to approach $230 billion next year--by at least $50 billion or risk endangering the health of the economy.

Different Packages

Both the Senate--with Reagan’s backing--and the House have passed spending packages that they contend would reduce spending by $56 billion without raising taxes. However, their plans were dramatically different, particularly on Social Security and defense.

The House looked to the Pentagon’s budget for the greatest share of savings, passing a plan that would hold new military budget authority at this year’s levels while allowing Social Security and other pension benefits to grow with inflation of about 4%.

The Senate proposal would do the opposite: freeze payments to retirees but allow military spending to rise with projected inflation.