‘87 Budget Approved by Congress : President Unhappy With Defense Cuts in $1-Trillion Plan

Congress early today approved a fiscal 1987 spending plan that offers President Reagan a difficult choice between standing by as Congress chips away at his defense buildup or giving up his opposition to higher taxes.

The budget resolution, which limits total government spending to just under $1 trillion, marks Congress’ most dramatic repudiation yet of President Reagan’s spending priorities--his demands for defense increases and domestic spending cuts. The House approved the plan 333 to 43. The Senate adopted it on a voice vote with only a handful of senators present.

In Santa Barbara, Calif., where Reagan is vacationing, a White House spokesman said that the President “finds the overall conference agreement generally acceptable” but is unhappy with the way it “would alter (his) priorities.”

Lack of Tax Hike Cited

“For example, it cuts too much from defense and international affairs in fiscal year 1987 and is way too limiting,” the spokesman said. “Moreover, it increases domestic spending by more than the President recommended. However, the conference report does not call for a tax increase, as did both earlier resolutions.”

To a large extent, Capitol Hill’s boldness in opposing the enormously popular President reflects its fears of the fiscal and political chaos that it may trigger if it fails to meet the deficit-reduction goals of the new Gramm-Rudman law.

“In light of the political realities, in light of the Gramm-Rudman target of $144 billion, I believe this (budget) does represent a credible approach and does require some hard choices,” House Budget Committee Chairman William H. Gray III (D-Pa.) said. “I believe, if we are going to dry up the sea of red ink, the only way to do it is to make these tough choices.”

‘Acceptable Vehicle’

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said that he expected the White House to “reserve judgment” on the individual elements of the budget but to find it an “acceptable vehicle” for moving toward deficit reduction.

Although the budget officially puts the deficit on a track toward Gramm-Rudman’s target of $144 billion in fiscal 1987, there remains significant concern among lawmakers that, between now and the law’s Oct. 1 deadline, a sluggish economy may reduce revenues below the budget’s optimistic projections.

Some said also that the budget was overly optimistic in its deficit-reduction estimates and argued that Congress would never be able to actually implement some of the specific deficit-reduction measures anticipated by the spending plan.

“We can’t stand here and tell you we’re certain we’re going to get the job done,” Domenici said.

Military spending was the chief target as lawmakers searched the budget for spending cuts. Pentagon spending roughly doubled during the Reagan Administration’s first six years, but the budget proposed for next year would cut it to below the level that would keep it abreast of an expected 3% inflation rate.

Total defense spending is set at $292 billion in the budget, a cut of $28 billion from Reagan’s request for $320 billion, or 8% after inflation. Negotiators took a middle ground between the Senate proposal to spend $300 billion, or about enough to compensate for inflation, and the House plan calling for $285 billion, a 5% cut in real terms.

Could Hike Defense Funds

Under the budget guidelines, Reagan could add enough money to prevent a real cut in military purchasing power, but only if he proposes and Congress accepts a means of offsetting the additional spending.

“There won’t be any additional defense unless there’s the means to pay for it,” House Majority Leader Jim Wright (D-Tex.) said. “That’s the bottom line.”

There is strong resistance in Congress to all the deficit-reduction options endorsed by the Administration--further cuts in domestic programs, selling off government assets and raising fees for government services. Thus, the only alternative that seems feasible is higher taxes.

However, Reagan has promised to veto any new taxes beyond the $3 billion in his own budget, an amount already included in the congressional budget resolution.

Also hit in the budget is Reagan’s request for foreign affairs spending, which Congress would slash by roughly one-quarter. The only foreign spending initiative that it would spare is Reagan’s program for increasing security at U.S. embassies.

Domestic Cuts Rejected

In addition, the budget rejects the deep domestic cuts that Reagan had sought. Instead, it allows most social programs to continue operating at this year’s levels and even provides selective increases in programs that have been deemed high priority, such as House-initiated hikes in spending for programs that benefit children.

Where Reagan had proposed that more than 40 domestic programs be eliminated, the only major program slated for termination in the resolution is general revenue-sharing, the no-strings-attached federal grants to local governments that were scheduled to expire next year anyway.

The plan would cut spending in some mass transit programs, but Rep. Vic Fazio (D-Sacramento), a member of both the House Appropriations and Budget committees, said that it would allow continued funding of Los Angeles’ proposed Metro Rail subway system.

Reagan does not have the power to block the budget resolution, which is merely a set of spending priorities for the year that begins Oct. 1. He may, however, veto subsequent spending and tax bills that carry out the budget’s guidelines. In practice, the spending levels recommended in the budget resolution act as a ceiling for the legislation that ultimately becomes law.

Months of Negotiations

The budget resolution, which every year requires months of intense negotiations that involve almost every political faction, is a relatively recent addition to the Capitol Hill agenda. Until the mid-1970s, Congress enacted spending and tax bills without an overall guide, and, therefore, had no means of gauging where the deficit was headed.

Next year’s budget is intended to produce a $142.6-billion deficit, which falls below Gramm-Rudman’s $144-billion target and is a significant reduction from the $200-billion deficit that would otherwise be expected this year.

Unless Congress cuts the deficit to within $10 billion of that $144-billion goal, the law would force extensive automatic spending cuts.

“I don’t know whether we’ve given ourselves a wholly adequate cushion” against an economic downturn that could add more than $10 billion to the deficit, Wright said.

Rep. Bill Gradison (R-Ohio) said that the budget “almost assures” the threat of the automatic cuts “unless the economy takes off in the next few months.”

The Supreme Court has agreed to review the constitutionality of Gramm-Rudman and might strike down the feature of the law making the cuts automatic. Even then, however, Congress must reach the target or be forced to take a vote on whether to make the cuts. That would put lawmakers in the no-win position of reducing popular federal programs only weeks before this fall’s election or appearing to have little regard for reducing the deficit.

Final details of next year’s plan were worked out by key House and Senate negotiators several hours after midnight Wednesday and were approved late Thursday night by a conference committee that had been meeting off and on for four weeks. The budget was then rushed to the floor of each house, and it was adopted shortly before Congress adjourned for its two-week Fourth of July recess.

Threat by Waxman

A final hitch in House-Senate negotiations was the insistence by Rep. Henry A. Waxman, the powerful Los Angeles Democrat who heads the House subcommittee with jurisdiction over health issues, on spending $250 million to limit scheduled increases in the out-of-pocket hospital costs paid by Medicare recipients.

The deductible, now $492, would rise to $572 next year without the additional funds, which Waxman obtained after threatening to stall a vote on the entire budget.