Defense Outlays Hamper Budget Accord

House and Senate negotiators prepared Tuesday for what could be several days of marathon sessions as they push toward agreement on a fiscal 1987 budget, but their differences over defense spending remained wide as they began their second week of talks.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said he is waiting for a go-ahead from the White House on his proposal that President Reagan agree to accept a tax increase that would be used for defense spending growth. However, White House spokesman Larry Speakes said Reagan remains adamantly opposed to any new taxes beyond the $6 billion included in the Administration budget.

Won’t ‘Wait Around’

Domenici still expressed some hope that the White House might agree to his proposal, but he added: “We’re not going to wait around.” He has suggested that he will move ahead on his own if Reagan refuses to agree to his proposal, which he said offers the only hope of an increase next year in defense spending.

Even if Domenici could obtain Reagan’s approval of such a plan, House Majority Leader Jim Wright (D-Tex.) said, “it would be very hard to sell to the House.” Both the House and Senate plans include more than double the amount of taxes proposed by Reagan, but the House has insisted that those new revenues be used for deficit reduction.

Where Reagan asked for authority to spend $320 billion, providing an increase of roughly 8% beyond inflation, the budget passed by the Democratic-led House would reduce the Defense Department’s purchasing power by about 5%, to $285 billion. The Senate’s plan would strike a middle ground at $301 billion, allowing just enough growth to compensate for inflation.

House and Senate conferees, meanwhile, continued to slog through other parts of the budget, finding it relatively easy to resolve their minor differences over spending on domestic programs.

Intense Pressure

Both sides are under intense pressure to produce a budget plan that cuts the deficit to $144 billion. Unless Congress passes legislation that brings the projected deficit within $10 billion of that target by the Oct. 1 beginning of fiscal 1987, the new Gramm-Rudman law will force automatic spending cuts in hundreds of popular and vital federal programs.

Each Side ‘Desperate’

“Each side is pretty desperate,” said California Rep. Barbara Boxer (D-Greenbrae), one of the House negotiators. “There’s tremendous incentive for (the negotiations) not to break down, more than ever before.”

However, Rep. Jim Slattery (D-Kan.) told reporters that, without a defense spending plan, the two sides might be forced to break up the talks until after Congress passes tax overhaul legislation, which could bring in a $22-billion windfall of new revenue. Slattery suggested that the additional funds could ease the pressure for both higher taxes and defense cuts as a means of reaching the Gramm-Rudman target and thus would make it easier for the House and Senate conferees to reach an agreement.