Deficit Plan Hits a Snag on Cutbacks : White House Objects to Curb on Flexibility in Trims for Defense

Efforts to wrap up a long-sought compromise on balanced-budget legislation hit a snag Monday as the White House said that it had “major problems” with the measure, despite a deal forged by House and Senate negotiators last week.

But key Democrats and Republicans, while expressing dismay over the latest problem, said they did not think that it was insurmountable and probably would not prevent final approval by Wednesday, when the measure must pass or the government will run out of cash to pay its bills.

‘Talking Between Ourselves’

“I don’t think that’s a factor with us now,” Senate Finance Committee Chairman Bob Packwood (R-Ore.) said when asked about the White House reservations. “We’re talking between ourselves . . . . Let the White House make up its own mind.”

The budget plan, an elaborate and controversial scheme designed to eliminate federal red ink in five years, is tied legislatively to a bill raising the national debt ceiling to $2 trillion from $1.8 trillion.

Wrangling over competing Republican and Democratic versions of the bill has continued for more than two months, twice forcing the Treasury Department to raid the Social Security trust fund and other pension accounts to keep the government operating. Treasury officials say that they once again will run out of cash at midnight Wednesday unless they get new borrowing authority.

House and Senate negotiators announced Friday that they had reached tentative agreement on a plan that would require the deficit, now hovering around $200 billion annually, to be trimmed by about $36 billion a year until it reaches zero in fiscal 1991.

Across-the-board spending cuts--about half from Pentagon accounts and the rest from domestic programs except Social Security and a few poverty programs--would be triggered automatically if spending exceeded the annual targets.

White House spokesman Larry Speakes said that the Administration still has “major problems” with the compromise, but refused to say whether President Reagan has decided to veto or sign the bill in its present form.

Amplifying on those comments, Budget Director James C. Miller III told reporters that the Administration still is troubled by the enormity of spending cuts that would have to be implemented within only a few months, as well as by provisions restricting flexibility on how to apply mandatory defense spending trims.

Sees Lack of Rationale

“I’m not trying to avoid substantial reductions in spending. But the problem is we have a Congress that has been so permissive in spending in the last few weeks, and we come up and say, ‘Well, we are going to hit about $20 billion,’ ” complained Miller. “There doesn’t seem to be an evenness, a rationale for what’s going on up there.”

As Miller spoke, aides distributed copies of a memorandum instructing department heads to hold up checks and send home non-essential employees in the event of a government shutdown at the end of the week.

The shutdown threat, one that has occurred frequently over the last few months, was made in response not only to the impending debt crunch but also to a Thursday deadline for extending spending authority for most federal agencies. Reagan has threatened to veto as too expensive a $480-billion omnibus package passed by the House last week that is designed to fund most of the government through Sept. 30. The Senate on Monday continued to debate an even more expensive version of the bill.

Meanwhile, a House-Senate conference committee vote on the final budget-slashing package was called off Monday as a small knot of party leaders from both chambers worked to fine-tune the accord worked out Friday. House Assistant Majority Leader Thomas S. Foley (D-Wash.) said that the delay “should not be taken as a signal of a problem” and insisted that the framework of the deal is solid.

“Nobody’s backing up on any agreement we reached Friday night,” Foley said.

More Leeway Urged

As part of that compromise, Democrats agreed to give the Pentagon initial flexibility in deciding how to distribute mandatory cuts that are sure to be ordered in defense spending under the budget-cutting measure. But the White House indicated that the program still is too restrictive and pressed for authority to apply cuts earmarked for some programs or weapons systems to others.

One White House official, who refused to be identified, denied charges from skeptics in Congress who contend that the flexibility demand is designed to help the Administration preserve funding for pet projects such as its Strategic Defense Initiative, commonly known as “Star Wars.”

“If you do something that knocks out all the bolts, then you don’t get the airplane,” this official insisted. “You can’t do much with 85% of an airplane.”