Miller Says Tax Hike May Be Necessary : Nominee for Budget Director Discusses Deficit at Hearing

James C. Miller III, President Reagan’s nominee as budget director, said Tuesday that he would not rule out increasing taxes to help shrink the nation’s $175-billion annual budget deficit.

During his confirmation hearing, Miller told the Senate Governmental Affairs Committee that he also would consider cutting Social Security programs and slashing defense spending when, as expected, he succeeds David A. Stockman as head of the Office of Management and Budget.

Miller’s comments, which surprised some committee members, put him in apparent conflict with Reagan’s pledges not to raise taxes or to cut defense spending and so-called entitlement programs, such as Social Security and Medicare.

“Some restraint in entitlement programs might well be looked at by the President and Congress,” Miller said, describing the options that he would consider as Reagan’s chief budget adviser. Several minutes later, responding to questions from senators, Miller said he would also consider revenue-increasing measures--taxes--and defense cuts.

Flexibility Praised

Sen. Carl Levin (D-Mich.) praised Miller’s willingness to be flexible on economic issues, especially taxation proposals, but asked, “Does the President know this?”

“Yes, I think so,” Miller answered, pledging to “follow (Reagan’s) lead” on budgetary issues. He stressed that the nation should not try to “precipitously” wipe out the budget deficit by imposing large tax increases.

The White House failed to return repeated telephone calls seeking reaction to Miller’s remarks.

Miller, now chairman of the Federal Trade Commission and a staunch advocate of economic deregulation, also seemed to clash with Reagan’s policies when he said that it is “unreasonable” to believe that economic growth alone will end the nation’s deficit problems.

However, Miller strongly backed Reagan’s proposal for a constitutional amendment to balance the budget. Such a proposal, he said, should not take effect during the present Administration but instead should be phased in over the next several years.

Miller, 43, is expected to win easy confirmation by the full Senate in several weeks and to assume control of an office that wields immense political power and influence. The OMB directs the budget process for the President, sets nationwide spending priorities and establishes hiring ceilings for a multitude of federal agencies.

Since Reagan took office, the agency has grown even more powerful through a series of executive orders giving it the ability to review all proposed regulations for federal agencies. In many cases, these laws cannot take effect until the OMB approves the regulations.

Miller, who helped initiate these procedures when he worked for the budget office in 1981, said they were designed to cut down on the “onerous and costly” regulations that have bogged down federal regulatory agencies.

Questioned by Senators

On Tuesday, however, he was grilled by several senators who charged that the budget office has used these powers to block the implementation of laws--particularly environmental statutes--with which the Administration disagrees.

Sen. Albert Gore Jr. (D-Tenn.) said the budget office has used the procedures to delay enforcement of a law requiring tough standards for the manufacture of infant feeding formulas.

He charged that the office has been trying to “hijack” Congress’ legislative powers, adding that the constitutionality of such actions is “highly questionable.”