Baker Wants Defense Cuts in Senate Deficit Plan

Treasury Secretary James A. Baker III said Sunday that he believes the Senate-passed plan to bring the budget into balance by 1991 can be made to work without raising taxes, but “there would have to be reductions in defense.”

President Reagan has indicated that he wants to add the Pentagon to areas exempt from the effects of the spending-reduction plan that is now before a Senate-House conference committee. But Baker said during a televised interview that he believes Reagan must have anticipated the need for some defense cuts.

The pending amendment requires that the deficit, estimated to have topped $200 billion in fiscal 1985, be reduced in annual steps until the budget reaches balance in 1991. It also mandates that the President sequester funds to meet the goals if Congress fails to act.

Some Spending Exempted

The measure, sponsored by Sens. Phil Gramm (R-Tex.) and Warren B. Rudman (R-N.H.), exempts debt service, Social Security and existing contracts--the lion’s share of which are defense-related--from the spending curbs, but would permit reductions in other military budget areas.

“I have to say that there’s no way that you can reduce spending across the board when only 50% of the budget is subject to the Gramm-Rudman amendment,” Baker said in reply to a question on NBC’s “Meet the Press.”

“When you take Social Security out and you take prior contracts out and you take interest on the national debt out, only 50% is subject” to cuts under the amendment, he said. “Clearly there would have to be reductions in defense. But I think the President must have taken that into consideration when he embraced the proposal.”

Effect of Cuts

Spending cuts under the Gramm-Rudman plan would wipe out “practically all discretionary spending,” Baker said, although “it wouldn’t eliminate all of the domestic agenda.”

When asked what specific cuts he had in mind, Baker cited two programs the Administration previously proposed eliminating, but which have been sustained on Capitol Hill. He recommended that revenue sharing, which the House seeks to budget at $3.4 billion in the 1986 fiscal year that began Oct. 1, and Amtrak subsidies, for which both houses seek about $600 million.