Senate Panel OKs Budget, Asks Billions in New Taxes

The Republican-controlled Senate Budget Committee, in a bipartisan 13-9 vote, Wednesday approved a fiscal 1987 budget package that would slash President Reagan’s defense request and raise almost $12.5 billion in additional taxes.

Sponsors predicted that the carefully drafted compromise, or something similar, would pass the Senate, possibly next week.

The plan drew immediate criticism from the White House, where presidential spokesman Larry Speakes said that it reaches “a desirable (deficit-reduction) goal by means of totally unacceptable methods.” President Reagan has threatened to veto the measure if it reaches his desk in its present form.

The committee’s proposed budget won the slimmest possible majorities of both Republicans and Democrats on the committee. Nonetheless, approval of the package marked the first bipartisan endorsement that the panel has given a budget package in recent years.

Committee leaders said the consensus reflected the intense pressure imposed on Congress by the new Gramm-Rudman balanced-budget law, which would mandate sweeping and painful automatic spending cuts if lawmakers cannot produce a fiscal 1987 spending plan that would cut the deficit by about $37 billion, to $144 billion. Although the law is facing a court challenge, it has framed this year’s budget debate.

The committee plan would cut Reagan’s defense spending request by $25 billion, to $295 billion, falling far short of the White House’s proposal for 8% growth in defense spending beyond inflation.

Supporters said that the panel’s plan would provide enough of an increase to allow for rising prices. Some opponents, however, insisted that the 2.8% hike from fiscal 1986 spending levels would not keep pace with inflation and would amount to a real cut in the Defense Department’s purchasing power.

The committee also called for more than $18 billion in new revenues. Reagan had recommended about $6 billion, primarily through such minor adjustments as increases in fees for government services, but the committee added $12.4 billion in “unspecified taxes.”

Sen. Dan Quayle (R-Ind.) complained before the vote that the budget proposal “goes in the absolute opposite direction of what the President suggested” and described it as an “anti-defense budget, anti-growth (with) a blockbuster tax increase.”

Budget Director James C. Miller III agreed: “There is a better way to put the nation’s fiscal house in order. It is found in the budget the President submitted Feb. 5.” The White House plan would meet deficit-reduction goals primarily through sharp cuts in domestic spending.

‘Was Not Acceptable’

However, Budget Committee Chairman Pete V. Domenici (R-N.M.), using unusually blunt language, said Administration officials “knew that their budget was not acceptable to Democrats or Republicans. . . . It appears to me that they almost acted as if they didn’t care.”

He added: “Obviously, the (White House) drumbeat has been (that) defense must be extremely high and there can be no new revenues. That’s impossible.”

Most of those who voted for the plan said they were not completely satisfied but believed that it was the best balance possible on the broad-based committee. Sen. Howard M. Metzenbaum (D-Ohio), for example, complained that it did not cut defense spending enough but added: “The majority of Republicans were willing to stand up and be counted for tax revenues. That showed they were willing to stand up to the President, and I felt they were entitled to some support.”

Domenici, negotiating privately with the committee’s ranking Democrat, Sen. Lawton Chiles of Florida, produced a plan that essentially ignored the guidelines spelled out by the White House. His decision to work to forge a compromise with committee Democrats, rather than the Republican Administration, marked a sharp departure from his strategy of previous years.

Reagan does not sign Congress’ annual budget resolution, which is a broad outline of its spending priorities, but he does have veto power over the tax and spending bills Congress passes to turn its spending blueprint into reality. Thus, White House opinion has always weighed heavily on budget deliberations.

‘Timid and Minimal’

In meeting the $144-billion deficit-reduction target, the committee plan would cut domestic spending by $14.6 billion--about half what the Administration asked--primarily through spending freezes and selective budget cuts. Spelling out domestic cuts that Miller derided as “timid and minimal,” it rejected almost all the domestic program terminations requested by the Administration.

Its proposal would allow general revenue sharing--the politically sensitive no-strings-attached federal grants to local governments--to live six months beyond its scheduled Oct. 1 termination, if Congress passes legislation providing new revenues to pay for the program.

The committee plan does not specify what types of new taxes must be raised to meet its revenue target, leaving that decision to the Finance Committee. But congressional leaders have ruled out an increase in income tax rates. Proposals being discussed include an amnesty for taxpayers who come forward with delinquent payments and a minimum tax aimed at wealthy individuals and corporations who use deductions in existing law to escape all or most of the taxes they otherwise would pay.

Some critics said, however, that the new taxes asked under the committee’s budget plan might jeopardize tax overhaul, which Reagan has demanded be accomplished without raising the nation’s overall tax burden.