Deficit Talks Stalled Again : 2-Year Reduction Plan Attacked by Republicans

After four weeks of marathon talks, White House and congressional negotiators Wednesday tentatively settled on key elements of a two-year, $75-billion deficit reduction package but once again stalled short of an agreement amid an outburst of criticism of the plan.

Facing a Friday deadline that would trigger automatic, across-the-board spending cuts, negotiators forged a plan that would trim the deficit by $30 billion in the 1988 fiscal year, including $9 billion in tax increases and funding cuts for Medicare, farm price supports, student loan programs, defense projects and other programs, sources said. An additional $45 billion in deficit reduction was projected for the next year.

Approval Questioned

However, several leading Republicans immediately attacked the plan and questioned whether it could be approved.

“It’s pretty weak. A pretty weak package unless you like taxes,” said Senate Minority Leader Bob Dole (R-Kan.), who said that many Republicans would be hard pressed to vote for it.

“It is so marginal as to be embarrassing,” said Sen. Bob Packwood of Oregon, one of the negotiators and the ranking GOP member of the Senate Finance Committee.

However, negotiators expressed optimism that an agreement would be reached today.

“We know what we have to do. . . . I think we are getting close to an agreement,” said Rep. Trent Lott (R-Miss.). Added House Majority Leader Thomas S. Foley (D-Wash.): “We’re continuing to work. The closer you get, the more you have the hard issues that remain to be worked out.”

The grim resolve to continue working contrasted with heady expectations only hours earlier that a final plan was imminent.

Balking at Promises

Capitol Hill aides said that Republicans were balking at approving a package that only promises spending cuts in the next two years without a mechanism for enforcing them.

Both Democrats and Republicans expressed disappointment that the $75-billion package would fall well short of the more than $100 billion in reductions that were hoped for to reassure shaky financial markets of the government’s commitment to curing the deficit.

“It will be disappointing to anyone who expected something dramatic,” House Speaker Jim Wright (D-Tex.) acknowledged, but he said that it might be the only thing achievable.

“We had a chance for beefsteak, and we ended up with gruel,” Packwood said. Senate Finance Committee Chairman Lloyd Bentsen (D-Tex) said the negotiators “missed an opportunity” to make substantial reductions in the deficit.

‘Better Than No Food at All’

But, Foley observed without enthusiasm, “gruel is better than no food at all. It’s either this package or sequestration”--the automatic $23 billion in cuts that would occur Friday under the Gramm-Rudman deficit reduction law.

“After all,” Wright said, “we have to get something you can pass in both houses” of Congress.

Wright said he may visit the White House today to seek the President’s endorsement of the politically sensitive plan. The pact must get “support and public backing from Reagan,” he said.

The combination of tax increases and spending cuts in the emerging package would be slightly less than $25 billion, providing a slight cushion above Gramm-Rudman’s $23-billion target. An additional $5 billion from the sale of federal assets would bring the total package to $30 billion for fiscal 1988, which began Oct. 1.

No specifics were set on the cuts in Medicare, student loans, agriculture and other programs, but officials indicated that the Medicare cuts would be in federal reimbursements to doctors and hospitals rather than to beneficiaries.

The negotiators were forced to abandon plans to gain several billion dollars in savings by delaying cost-of-living increases for Social Security recipients and federal retirees.

The deadline for the Gramm-Rudman automatic cuts now seems certain to be pushed back through emergency legislation to provide time for enactment of the budget and tax changes included in an agreement.

Democrats stressed that Republican leaders must acknowledge that difficult choices have to be accepted. Democrats will “not walk out on the plank alone,” said Rep. Pat Williams (D-Mont.). Without equal sacrifices of Republican priorities, he said, Democrats are “unwilling to sign a deal to cut spending and lose the next election.”

The White House and Republican leaders have been pressing for minimum cuts in defense spending and small tax increases. Democrats, wary of a public backlash, have been working to avoid deep cuts in popular domestic programs and have called on Reagan to agree not to veto domestic spending measures that would be covered by the agreement.

The Republicans are also demanding that the agreement include explicit directions on each program reduction so that congressional committees could not later seek ways to circumvent them.

The deficit negotiations, now in their fourth week, began immediately after the Oct. 19 stock market crash. Despite the sense of urgency because of uncertainty in the stock markets, the recent round of budget talks has become mired in the same disputes that have marked most of the Reagan Administration, with the President insisting on domestic spending cuts and Congress’ Democratic majority demanding tax increases and defense spending cuts.