Budget Cuts May Exceed $23 Billion : GOP, Democratic Officials Hope to Reassure Wall St.

On the eve of a meeting between President Reagan and congressional leaders over the nation’s budget deficit, Republican and Democratic officials voiced hopes Sunday that the negotiations will lead to reductions well beyond the $23 billion required by federal law.

If the two sides can agree on additional cuts in the deficit, said Senate Minority Leader Bob Dole (R-Kan.), it would send “a reassuring signal” to jittery financial markets around the world that the government is serious about making long-range economic reforms.

Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, said: “I’m quite prepared to do more, and I think we could do some more,” suggesting that larger deficit cuts could be spread out by Congress and the White House over the next two to three years.

Cuts May Be Insufficient

The comments reflect a growing belief among congressional leaders that the $23 billion in cuts mandated this year by the Gramm-Rudman deficit reduction law may be insufficient. Financial analysts have expressed concern that the current $148-billion budget deficit will increase in future years without stringent budgetary reforms.

In today’s meeting at the White House, a face-to-face session that the President called in response to the stock market plunge, House Speaker Jim Wright (D-Tex.), House Minority Leader Robert H. Michel (R-Ill.), Senate Majority Leader Robert C. Byrd (D-W. Va.) and Dole will sit down with the President to discuss an issue that has sharply divided them in the past.

They will also be attempting to send a signal to financial markets that the federal government, which has been politically deadlocked over this year’s budget for months, “knows how to govern . . . that we can control this situation,” Byrd said last week.

Agreement on Target

The White House and congressional negotiators have generally agreed that they should try to meet the $23-billion target with a combination of spending cuts and new revenues. If they fail to agree on such a plan, the Gramm-Rudman law will impose deep, across-the-board cuts in numerous federal programs by Nov. 30, a prospect neither side wants.

“To let that happen would signal an abandonment of leadership,” said Sen. Lawton Chiles (D-Fla.), chairman of the Senate Budget Committee, during an appearance on CBS-TV’s “Face the Nation.” “We’ve got three weeks to put together a different package, and that’s something we really should try to do.”

There is far less agreement, however, on the ingredients of deficit reduction.

When Reagan agreed to meet with congressional negotiators, for example, he said all budgetary proposals could be discussed, including taxes, except the Social Security program. Since then, he has repeated his opposition to new taxes and blamed Democrats for the deficit.

Democrats, meanwhile, have criticized the White House for sending out mixed signals on the budget negotiations, vowing that Reagan will have to consider some kind of revenue increases to help reduce the deficit and restore investor confidence.

Freezing Expenditures

There are also mixed opinions on a proposal by Sen. Phil Gramm (R-Tex.) that the government cut the deficit by freezing expenditures at their current level for several years. While Dole expressed interest in the suggestion, Chiles dismissed the idea, saying it could harm a multitude of services, varying from law enforcement to child nutrition programs.

As negotiators begin to tackle the deficit problem, some Wall Street sources have already said that $23 billion in cuts will not reassure financial markets that the government has embarked on a long-term solution to cure its economic problems.

May Disappoint Markets

“If all we do is a one-year, $23-billion cut, one-shot cut, I think we’re going to find the markets very disappointed,” said Peter G. Peterson, former secretary of commerce and chairman of the Blackstone Group.

Peterson, appearing on the same CBS broadcast with Chiles, suggested that a major share of budget cuts come from “middle-class entitlement programs,” such as Social Security, Medicare, Civil Service pensions and military pensions, which make up roughly 40% of the federal budget.

But Democrats and Republicans alike said they are unlikely to consider such actions. They recalled that Congress agreed in 1985 to freeze Social Security for one year, only to have the White House back out of the deal at the last minute, fearing political repercussions.

Although the nation could make deep cuts in the deficit by limiting those programs, “that’s not going to happen, not now,” Dole said. “What we need is a multiyear program. The deficit has been growing and growing, and it’s not going to go away.”