Big Domestic Cuts, No New Taxes in Reagan’s Budget

President Reagan’s final budget will call for another round of large domestic spending cuts and substantial sales of government assets--but no new taxes--to reach a $92.5-billion federal deficit for the fiscal year that begins next Oct. 1, White House officials disclosed Wednesday.

Reagan’s fiscal 1990 budget, which he will send to Congress on Jan. 9, proposes to narrow the deficit by $34.5 billion from where officials estimate it would be without changes in spending or tax policies.

But it also provides for more than $9 billion in new spending for defense, space exploration and a variety of small programs ranging from AIDS to the super collider project.

Proposes Trims

Elsewhere, the Administration proposes more than $38 billion in spending cuts and higher fees for the use of federal services. Moreover, it will propose an additional $6 billion in sales of government assets.

“We did not have to do a slash-and-burn budget,” said White House Budget Director Joseph Wright Jr. “It is reasonable, responsible and conservative.”

Despite the cuts, federal spending would rise to a record $1.15 trillion.

The Gramm-Rudman budget law requires Reagan to propose a budget with a deficit of less than $100 billion. Congress then must enact spending and tax bills that hold the deficit below $110 billion; otherwise, the law will trigger automatic cuts in both domestic and defense spending deep enough to reach the $100-billion target.

Incoming President George Bush has indicated that he plans a set of spending priorities that will differ from Reagan’s. He is expected to let defense spending grow no faster than inflation--Reagan proposes 2% more than inflation--so that he can pay for his “kinder and gentler” social agenda, which includes more federal help for child care and education.

Nonetheless, Reagan’s budget will underscore how substantially Bush will need to cut into federal spending to meet the Gramm-Rudman deficit target without tax increases.

As disclosed Wednesday by The Times, advisers to Bush are talking about adopting a budget strategy in which he would warn Congress soon after taking office that the new Administration is willing to swallow the indiscriminate Gramm-Rudman spending cuts rather than tolerate a tax hike.

The strategy would be designed to erase any impression that Bush might relax his campaign pledge against new taxes, and it would increase pressure on Congress to rely on spending cuts alone to avert the meat-ax attacks on defense and domestic programs that the Gramm-Rudman law would impose.

Both Bush, as vice president, and Treasury Secretary Nicholas F. Brady, who will continue in that post in the Bush Administration, have been involved in discussions of the Reagan budget proposals. But officials said that they have not tried to shape spending to reflect Bush’s own priorities. Incoming Budget Director Richard G. Darman also has received briefings on the new budget.

Wright told reporters Wednesday that the starting point for the Reagan Administration’s budget-cutting effort was his estimate that the deficit would be $127 billion in the next fiscal year without any changes in current spending and tax policies.

Deficit to Fall

That means that, even without major policy changes, the federal deficit is expected to fall substantially from this year’s projected level of $160 billion.

Reaching the Gramm-Rudman target of a $100-billion deficit for next year, Wright said, “was not easy, but it was not as tough as in prior years.”

But Congress in the past has rejected many of the program cuts that the White House is expected to propose again, and Democratic lawmakers are hoping that Bush will relent in his stand against higher taxes rather than press to meet the Gramm-Rudman targets exclusively through spending cuts.

Wright, although refusing to discuss the White House deficit target or specific Administration proposals for reaching that goal, provided reporters with an outline of the issues that budget officials faced in preparing Reagan’s last budget.

Even without higher taxes, government revenues are expected to rise above this year’s level by about $82 billion in fiscal 1990, Wright said. Spending would rise only about $49 billion.

Of the $49 billion in additional spending, $35 billion would be required just to meet the government’s obligations to finance Social Security, federal retirement benefits and medical care for the elderly and the poor. An additional $5 billion would be needed to pay for higher interest payments on the federal debt, which is expected to reach roughly $3 trillion in 1990.