Reagan Has Reservations on Budget : Will Work to Bring Senate Plan to His Tax, Defense Levels

President Reagan expressed “serious reservations” Friday about the fiscal 1987 budget passed by the GOP-led Senate, and suggested that he hopes to bring its ultimate spending plan more in line with his own demands for no new taxes and higher defense spending.

“Given the Senate’s action, (Reagan) looks forward to working with the Congress to ensure more acceptable levels are reached for defense, taxes and spending reductions,” White House spokesman Larry Speakes told reporters aboard Air Force One en route from Indonesia to Japan to attend the economic summit in Tokyo.

Despite such public optimism, Reagan’s budget appears to have even slimmer chances of getting favorable treatment in the heavily Democratic House, whose Budget Committee begins public deliberations next week, than it did in the Senate.

‘More Realistic’

House Budget Committee Chairman William H. Gray III (D-Pa.), probably signaling what can be expected from his panel, said that the Senate plan is “more realistic and fair than the President’s original request.”

The Senate package--which could become the nation’s first budget over $1 trillion--passed shortly after midnight Thursday on an overwhelming 70-25 vote that included support from a solid majority of both political parties.

On the issue of higher taxes, where Congress may face its most bitter showdown with Reagan, “we have given the Democrats what they needed, and that’s a majority of the (Senate) Republicans supporting new taxes,” said Sen. Lawton Chiles of Florida, the Senate Budget Committee’s ranking Democrat.

Democrats, remembering how Reagan used the issue as a potent weapon in his 1984 reelection campaign, have been reluctant to lead the charge for a tax increase.

Reagan maintains that he will accept no major new taxes, although he had suggested about $6 billion in higher revenues to be raised through imposing additional user fees for government services and selling off federal assets.

Tax Hikes Seen

The Senate plan, on the other hand, includes more than double that amount of revenues--$13.2 billion. While the resolution leaves it up to the Senate Finance Committee to figure out how to raise those funds, it is virtually certain that such a large increase would require tax hikes beyond the limits Reagan has set.

About $2 billion of the new revenues in the Senate and White House budgets have already been enacted, in part when the Administration reversed itself and agreed to make the 16-cents-a-pack federal cigarette tax permanent.

Reagan does not have the power to veto the budget resolution that Congress eventually will produce, but he may refuse to sign into law the subsequent bills that bring federal taxes and spending in line with the overall budget’s guidelines.

On defense spending, the second critical area of the budget, it appears that the House is likely to be even more hostile to Reagan’s wishes than the Senate.

Where Reagan contended that the Senate’s budget “falls short” of what he believes is necessary to strengthen the military, House Budget Committee member Charles E. Schumer (D-N.Y.) described the Senate recommendation as “bloated” and “way out of line with the House and the thinking of the country.”

New Spending Commitments

The Senate budget would allow the Pentagon to make $301 billion in new spending commitments next year, which is $19 billion less than the 8% after-inflation increase Reagan had requested for the fiscal year that begins Oct. 1.

The Pentagon budget hike approved by the Senate apparently would allow military purchasing power to keep pace with inflation but provide little growth beyond that.

“We didn’t cut (military spending), we increased--but not as much as he wanted,” Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said.

In the face of Reagan’s criticism, Senate Majority Leader Bob Dole (R-Kan.) insisted that the Senate plan was a “responsible and balanced budget package.”

“We didn’t take the easy way out, either,” Dole added. “The Senate didn’t make defense a sacrificial lamb, nor did it cave in to the clamor for a massive tax hike.”

Increased Urgency

Nonetheless, the new Gramm-Rudman budget-balancing law has increased congressional urgency to hack away the deficit and lessened its willingness to work toward a budget compromise with the White House. Unless laws are enacted by Oct. 1 that will cut the projected 1987 deficit by about $40 billion, to $144 billion, the law will force automatic spending cuts in military spending and a wide range of popular domestic programs.

The Senate, facing fall elections that could shift control from the Republicans to Democrats, has shown little appetite for the sharp cuts in social spending that Reagan had suggested as a means of meeting the target.

The plan it passed seeks to achieve a $22.3-billion reduction in domestic spending, largely by freezing many programs at their present levels.

About $3 billion in savings would come from adjusting estimates for inflation, and thus lowering the amount the government expects to pay in cost-of-living increases to Social Security and other inflation-adjusted programs.