Reagan Begins Work on ’89 Budget : Plan Unlikely to Cut Deficit Below $136-Billion Target

President Reagan began work Tuesday on a fiscal 1989 budget that officials said would reach between $1.1 trillion and $1.2 trillion and would meet, but not cut the federal deficit below, the $136-billion target set by the Gramm-Rudman budget-balancing law.

White House spokesman Marlin Fitzwater said that he hoped the negotiations with Congress on the new spending plan will be eased by the agreement that led to passage in December of a spending bill for the current fiscal year.

“It should be less contentious all around than it has been in the past,” Fitzwater said.

Last Reagan Budget

The proposed budget that Reagan will submit to Congress next month in effect will be his last. He will be responsible for sending the fiscal 1990 budget to Congress a year from now, but his successor will have the opportunity to alter it before the House and Senate begin work on it.

Fitzwater said that a proposed package presented to Reagan by his aides would meet the budget deficit target set by Congress for fiscal 1989, but other officials said that it did not cut the deficit below that level, despite some earlier hopes inside the Administration that it would.

Proposed spending for government AIDS programs will increase, Fitzwater said. He would specify no figures, but Otis R. Bowen, secretary of health and human services, has said that the Administration expects to spend more than $1 billion on such programs. In the last budget, Reagan originally had sought $791 million for AIDS programs, but Congress increased the figure to $950 million.

A White House official who asked to remain anonymous said that agreement has been reached with National Aeronautics and Space Administrator James C. Fletcher on proposed funding for the space agency, which the official said “comes out fine” for all involved. He refused to provide figures.

The official said that the budget would be between $1.1 trillion and $1.2 trillion. It now totals slightly less than $1.1 trillion.

Reagan reviewed the draft at a meeting with Vice President George Bush and James C. Miller III, director of the Office of Management and Budget. His decisions are to be relayed to government departments and agencies, which then will be allowed to appeal any cuts that the President has made.

Smoother Course Seen

In predicting a smoother course in Congress for the new budget, Fitzwater noted that the “markers” placed by Reagan a year ago--ruling out tax increases and demanding growth in the Pentagon budget--were altered by the budget agreement that the White House and Congress reached last month at their so-called “budget summit,” stipulating some tax increases and limits on defense spending.

“In that sense, we shouldn’t have the debate that we have had in many past years, because the Congress has worked with us in this summit agreement, where there is an agreement on the budget level of spending for defense and on the taxes,” he said.

Under current plans, the White House will dispatch the budget to Congress in mid-February, about two weeks behind the usual schedule. Administration officials have attributed the delay to the extended time spent in December working out the fiscal 1988 spending plan.

In addition to resolving that fiscal year’s spending limits, the December summit meeting produced an agreement for the Administration to trim $33 billion from the $332 billion it had intended to seek for the Pentagon in fiscal 1989, which will begin Oct. 1. It called also for $17.6 billion in tax increases, sales of certain government assets and reductions in such “entitlement” programs as Medicare.

‘Good Intentions’ Cited

With some contentious items resolved, “it should allow us to start on a much more congenial plateau than we have in the past,” Fitzwater said. “The summit agreement has left a feeling of good intentions on both sides. And, if we can get further reductions as we go through the process, we’ll try to get them.”

Under the terms of the Gramm-Rudman law, the federal budget deficit must be no greater than $136 billion in 1989, $100 billion in 1990, $64 billion in 1991, $28 billion in 1992 and zero in 1993.

Fitzwater said that the proposed budget “will be consistent with the budget summit agreement. The deficit is on a downward trend, and the 1989 budget proposal will continue that track.”