GOP Says Cuts Apply to Arms Contracts

Senate Republicans, offering a new interpretation of their balanced-budget legislation, said Friday that its mandatory spending cuts would apply to all defense contracts but not to any housing assistance contracts.

The new reading could soften the resistance of many Democrats, who have complained that social welfare programs would be savaged while weapons systems would be spared.

On the other hand, the threat to weapons contracts could weaken support for the plan among Republicans and conservative Democrats--not to mention President Reagan, who has adamantly resisted slowing the military buildup.

Previously, Sen. Phil Gramm (R-Tex.), one of the plan’s sponsors, had said that all government contracts, including defense, would be spared. Gramm and other leading Republicans accepted the revised interpretation at a closed meeting Thursday.

Reagan Praises Bill

Despite the new threat to defense programs, Reagan on Friday praised the legislation, which has cleared the Senate and is facing modification by a Senate-House conference committee, as a “far-sighted and practical proposal.”

“No one should look at our energetic support of (the bill) as an indication that America’s military strength is going to be weakened,” Reagan told a citizens’ group called the Deficit Reduction Coalition. “We’ll continue spending what is necessary in this vital area but no more, no less.”

The balanced-budget bill would mandate reducing annual deficits gradually to zero by 1991 and trigger automatic spending cuts if Congress failed to meet each year’s deficit target.

Stephen E. Bell, staff director of the Senate Budget Committee, said that defense weapons contracts would be vulnerable to the automatic spending cuts because nearly all of them permit the government to cancel them or stretch out the number of years they cover.

‘Legal Obligations’

On the other hand, Bell said, contracts for housing assistance--loans and rent subsidies for public housing--would be exempt from automatic cuts because “they are legal obligations to provide payments . . . to individuals.” Bell said the automatic cuts probably also would spare most other domestic contracts, such as those for highway and dam construction.

Rep. Thomas S. Foley (D-Wash.) worried that the Defense Department could avoid exposing its contracts to mandatory cuts simply by rewriting them to forbid their cancellation or delay. Senate Finance Committee Chairman Bob Packwood (R-Ore.), the chief Senate negotiator, said that Senate Republicans are willing to revise the balanced-budget plan to prohibit such a ploy.

Nevertheless, California Rep. George Miller (D-Martinez)--reflecting widespread skepticism about the workability of the plan--questioned whether the Pentagon would have the manpower to review 15 million contracts in the event mandatory spending cuts were triggered.

‘Mindless Legislation’

By providing for across-the-board cuts, he said, “this mindless legislation . . . says nothing about the priorities of the nation and the bureaucratic maze it is about to dump” on government agencies that have to carry out the cuts.

Democrats on the conference committee are expected to propose changes in the legislation next week, but one of their chief negotiators, California Rep. Leon E. Panetta (D-Monterey), said in an interview that there is little doubt that the bill’s enforcement mechanism--the automatic spending cuts--would remain intact.

The conference committee meetings, involving 48 House members and nine senators, so far have taken on the air of a fact-finding hearing instead of a traditional bargaining session, with Republican senators and Budget Committee aides being pressed to explain the intent of legislation that bolted out of the blue only three weeks ago before winning Senate approval, 75 to 24.

The Senate attached the balanced-budget bill to legislation to lift the national debt ceiling above $2 trillion and give the government authority to borrow enough money to continue paying its bills for another year. The Treasury Department says that its current borrowing authority will expire in about two weeks, and the Senate-House conference committee is trying to write a compromise balanced-budget plan before then.