Reagan to Ask Budget Cuts Rejected by Congress in ’85

More than half the deficit reduction that President Reagan will propose for fiscal 1987 will represent recycled proposals that Congress rejected last year, and about 40% will be such new ideas as selling government property and loans, White House Budget Director James C. Miller III told congressional leaders Tuesday.

But congressional leaders insisted that Reagan, if his spending cuts are to win approval this year, must drop his opposition to a tax increase.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) told reporters that higher taxes are needed to “glue the package together” and reach deficit-reduction targets spelled out by recently enacted balanced-budget legislation.

Some in Congress have predicted that Reagan’s budget, which he will submit formally next month, will be “dead on arrival” in Congress, particularly if he presses for cuts that Congress previously rejected. But Miller has argued that Congress will be more inclined to accept the proposals this year, when it faces the constraints of the new Gramm-Rudman law, which mandates a balanced budget by 1991.

Edwin L. Dale Jr., a spokesman for Miller, said that more than one-third of the new budget’s proposed deficit reduction would be accomplished by terminating government programs.

About one-fourth, he said, would result from selling government assets and charging new or increased fees for government services. The remainder of the savings would come from trimming government programs and making them more efficient.

However, there were few indications Tuesday that Congress, returning to Washington for the opening day of its new session, is likely to accept Reagan’s deficit-reduction formula. Instead, congressional leaders immediately squared off with Reagan for the budget battle that promises to dominate all other issues this year.

House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) bluntly labeled Reagan’s forthcoming budget proposal--which is expected to protect defense spending growth by cutting domestic programs--a “nonsensical, crazy budget.”

“The time for hard knocks has come for Mr. Reagan,” O’Neill insisted, adding that House Democrats will be trying to focus public attention on the severity of the domestic cuts proposed in the Administration’s budget.

Tax Cuts Blamed

O’Neill noted that Reagan has enjoyed public approval since 1981 for engineering deep tax cuts, which many economists cite as contributing to a record budget deficit that reached a record $212 billion last year. “He got credit for the tax reduction,” O’Neill said. “Now is he going to take credit for the cuts (required under the balanced-budget law)?”

Congressional Republicans were more restrained. Rep. Silvio O. Conte (R-Mass.), emerging from a White House meeting between Reagan and GOP congressional leaders, told reporters that only “a magician” could accomplish Reagan’s goal of cutting the deficit down to the Gramm-Rudman act’s target--a $144-billion 1987 deficit--without raising taxes or cutting defense spending.

White House spokesman Larry Speakes replied that Reagan remains committed to his budget strategy. “Some voices on Capitol Hill have been saying that the deficit could not be reduced unless taxes go up and military spending goes down,” Speakes said. “Well, they’re wrong, and the President says he is going to prove it.”

Law Mandates Cuts

The Gramm-Rudman law, named for sponsoring Sens. Phil Gramm (R-Tex.) and Warren B. Rudman (R-N.H.), requires across-the-board cuts in many defense and domestic programs if Congress and the President cannot agree upon budgets that steadily hack away at the deficit.

Unless the two branches of government can settle their differences over taxes and spending, more than $50 billion in spending cuts will probably be required when fiscal 1987 begins on Oct. 1, just before November’s congressional elections.

The law faces a legal challenge of its constitutionality, but until the litigation is settled, the government is carrying it out.

The process of implementing automatic cuts to take effect March 1 already has begun, and it moved ahead another step Tuesday as the head of the General Accounting Office issued a slight revision of the $11.7 billion in reductions that were unveiled last week by the White House Office of Management and Budget and the Congressional Budget Office.

Although Miller has said that the first round of spending reductions will not be disruptive, officials in various agencies have forecast hiring freezes, employee furloughs, training cutbacks and other measures. Among the potential consequences, they have said, will be fewer children receiving vaccinations, shorter operating hours at national parks and fewer investigations by the Secret Service.