Reagan Seen Tapping Fund for Defense

President Reagan, facing the prospect of sharp cuts in his defense buildup, may try to blunt the reductions with a contingency fund that would almost certainly require new taxes, two key senators said Tuesday.

Senate Armed Services Committee Chairman Barry Goldwater (R-Ariz.) and ranking Democrat Sam Nunn of Georgia said also that they left a meeting with Reagan Tuesday convinced that the President had not been adequately informed of the blows that the defense budget would suffer as Congress struggles to live within the spending constraints of the Gramm-Rudman law.

Congress included the $6.85-billion military contingency fund in its fiscal 1987 budget resolution as a means of forcing the President to choose between his pledge not to raise taxes and his commitment to his defense buildup. Under Gramm-Rudman, lawmakers said, they could no longer afford both.

‘Positive Indications’

Nunn said that he and Goldwater received “positive indications they were thinking about” tapping the fund during the White House session with the President and Defense Secretary Caspar W. Weinberger.

“The question is when are they going to do it,” Nunn said. “You’ve got to do it quickly because the clock is ticking. By the end of the week, it may be too late.”

The Senate this week is debating legislation that would give the Defense Department $301.6 billion in new spending authority for fiscal 1987, which begins Oct. 1. The figure already is roughly $20 billion lower than Reagan’s request, and the Senate is expected to reduce that amount by another $7 billion to bring it closer to the ceiling established under the budget resolution.

The budget resolution left Reagan the option of adding the contingency funds to the $292.2-billion maximum established in the budget--and keeping defense spending roughly abreast of inflation--but only if he proposes and Congress approves a means of reducing the deficit enough to offset the amount added under the contingency fund.

Welcome ‘Band-Aid’

The fund “will be a Band-Aid on a major wound, but the Band-Aid will be welcome,” Nunn said.

Nunn and Goldwater suggested that Reagan does not yet fully comprehend the extent of the cuts that may be forced on the Pentagon under the Gramm-Rudman law, which would eliminate the deficit by fiscal 1991. The law could call for further and sharper reductions in Pentagon spending under an automatic formula if Congress does not bring the deficit in line with the law’s annual targets.

Goldwater said that Reagan was “rather shocked to find out some of the things we might have to do.”

Nunn added: “I don’t know that his people have completely explained to him the automatic process that takes place under (Gramm-Rudman) if we fail to meet the targets. I don’t think that point has come across very clearly.”

Although Weinberger “gave us a lecture on why (the law) was hurting defense,” Nunn said, “I reminded him that the President had endorsed the legislation” when it was passed last year.