Miller Says Economy Will Reduce Deficit

White House Budget Director James C. Miller III on Tuesday dismissed any need for either new taxes or restraint in defense spending, saying that Congress can bring the deficit close to its fiscal 1987 target by relying on a stronger economy and “correcting” the spending assumptions it has used.

“I’m not suggesting we declare victory (over the deficit) and go home,” Miller cautioned in a session with reporters. “I see this as a means to get on with the budget process.”

Miller’s comments nonetheless evoked the supply-side optimism of President Reagan’s 1984 presidential campaign, in which Reagan repeatedly contended that economic growth alone could eliminate the deficit. The assertions drew fire from both Democrats and Republicans, who insisted that it was an unrealistic effort to dodge the problem of mounting deficits.

Painful Spending Cuts

Adding urgency to the drive to tame the deficit this year is the new Gramm-Rudman budget-balancing law, which will force wide-ranging and painful automatic spending cuts in October--only weeks before this fall’s congressional elections--if Congress and the President do not enact laws that will chop the deficit to within $10 billion of a $144-billion target. That figure is almost $40 billion lower than the projected fiscal 1987 deficit without changes in government spending or taxing policies.

The Senate Budget Committee last month passed a spending package that it says will meet the target. However, its proposed budget for fiscal 1987 would add about $13 billion in new taxes to the relatively modest revenues that Reagan recommended and would cut $25 billion off the President’s defense proposal. The committee also rejected about half the domestic spending cuts that Reagan had requested.

Miller said that the committee proposal, which was in its second day of debate before the Senate, “is simply unacceptable to the President. . . . It is, in fact, a policy of tax, tax, spend, spend, except for defense.”

Debate to Continue

Almost half the Senate’s Republican majority has gone on record as agreeing with the Administration’s objections to the committee budget proposal. Debate on the plan is expected to stretch into next week.

The White House budget director argued that Congress could reach or come close to its $144-billion target without trimming Reagan’s defense request or adding new taxes, if it agrees to accept some of the Administration’s economic and policy assumptions.

For example, the budget office’s “very, very preliminary” estimate shows that an improved economy alone could reduce the deficit by about $10 billion, Miller said. He added that the Administration does not plan to spend $4.4 billion in farm subsidies included in congressional forecasts.

Finally, he said, the Administration would not spend $15 billion in already obligated defense funds in fiscal 1987, as the Congressional Budget Office has projected.

‘Cooking the Books’

“There are ways they can deal with their problems,” Miller said, although he adamantly denied a suggestion that the alternatives he mentioned amounted to “cooking the books.”

“I’m correcting the books. . . . I’m saying the books are wrong,” he said.

Miller said he invited reporters to his office to dispel contentions that the Administration, through its insistence on no new taxes and on defense spending growth, is obstructing Congress from acting on a budget.

Could ‘Move Forward’

“Don’t put that hickey on our back that we are trying to restrain the budget process,” said Miller, who added that he was trying to outline ways that Congress could “move forward” without a tax hike.

However, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said that following the strategy outlined by Miller would be dangerous. Although it would allow Congress to put off the tough choices it now faces, he said, it would heighten the risk of being forced to enact the automatic cuts envisioned under the Gramm-Rudman law.

Domenici disputed Miller’s assertion that a brighter economy can be expected to make a significant dent in the deficit and said instead that some indicators actually point to a worsening shortfall.