Reagan, Congress Leaders Open Talks on Deficit Cuts

President Reagan and congressional leaders, hoping to calm the chaotic financial markets, began talks Monday on reducing the federal budget deficit, but the chances of an early compromise seemed doubtful.

The President and a four-man congressional delegation talked generally about the need to reach a budget agreement that would reassure investors that the massive deficit will be reduced, and they set the stage for sessions that will examine specific proposals, the group said.

However, despite pledges of cooperation by both sides, the House made plans to act this week on budget legislation containing tax increases that President Reagan has vowed to veto.

Citing a Nov. 20 deadline in the deficit reduction plan for this fiscal year, House Speaker Jim Wright (D-Tex.) said: “We can’t just delay the actions of government.”

“We have sent veto signals” about the legislation, White House spokesman Marlin Fitzwater said. “I don’t want to cast criticism on the Speaker. It’s his decision to proceed. Let’s leave it at that, in the tone of the new truce on critical comments,” Fitzwater said.

The concerted conciliatory tone was the chief result of the 45-minute meeting among Reagan, Wright, Senate Majority Leader Robert C. Byrd (D-W. Va.), Senate Minority Leader Bob Dole (R-Kan.) and House Minority Leader Robert H. Michel (R-Ill.). The participants took pains to avoid pessimism about the prospects for success, although their points of difference remain substantial.

“We have to be serious, all of us,” about cutting the deficit, Wright said after the session.

“We cannot look backwards, we must look ahead,” Byrd said. “We’re all in agreement, we’re going to work quickly, work hard and not look back.”

A private negotiating session will be held on Capitol Hill today by the newly dubbed “Gang of 15”--six senators, six House members and three White House representatives who will try to work out a plan for reducing spending and increasing revenues. The President has declared that every area except Social Security is subject to negotiation.

Dole said the talks will be “a high stakes game we can’t afford to lose. After all, we’re playing for all the people, not just Wall Street. We’re shooting for at least $23 billion in deficit reduction, but if we can get more we will.”

Congress and the President must agree on a $23-billion package of deficit reduction measures before Nov.20. If they fail, the Gramm-Rudman balanced budget law will force automatic spending cuts of 8.5% in a wide range of domestic spending programs and 10.5% in weapons procurement and other military spending. Exempt from cuts would be Social Security, welfare programs, veterans’ benefits and military payrolls.

The Democrats have a budget-cutting plan that the House is expected to approve Thursday. It combines $12 billion in new taxes with $11 billion in spending cuts for fiscal 1988, which began Oct. 1. This plan’s tax hikes are unacceptable to President Reagan, who prefers that virtually all of the reduction come from domestic program cuts.

Wright said the House will proceed with the Democratic legislation but simultaneously will pursue the White House negotiations.

Michel said the Republicans do not have the votes to block the Democratic plan but expressed hope for negotiations in the Senate over the budget package.

In keeping with the upbeat tone of the day, Michel delicately avoided direct criticism of the Democrats. “I would have preferred the Speaker to demur from pressing forward (with the legislation) this week,” he told reporters. “It’s a very unsettled market out there; it’s that jittery. All of us want to be careful what we say and do.”

Byrd said he was reluctant to predict a timetable for reaching an agreement.

He said there had been no discussion of freezing this year’s spending at last year’s level, an approach Reagan mentioned Friday. That would produce $11 billion in budget savings, but Byrd said: “When we deal with a budget freeze, we’re dealing with last year’s priorities.”

At Monday’s meeting, “there was not one single word on any specifics,” said Rep. Thomas S. Foley (D-Wash.), the House majority leader.

Rep. Tony Coelho (D-Merced) warned that even getting an agreement for the $23-billion cut might not convince the financial markets that the deficit problem was on the road to being solved.

“They want to see something that says we’re serious,” he said. “I don’t know what it will take to stimulate the markets. But there has to be something more than showing a willingness on our part to be civil to one another.”

Staff writer Josh Getlin contributed to this story.