Final Reagan Budget Totals $1.2 Trillion

President Reagan, battered but unrepentant from his frequent battles with Congress over budget priorities, will submit a final $1.2-trillion spending blueprint Monday aimed at sustaining a military buildup while still attempting to ax dozens of programs he has failed to kill in the past and to slow down fast-rising outlays for health care and federal workers’ retirement.

Reagan’s budget for the fiscal year that begins on Oct. 1, officials said Saturday, is going to be the starting point for President-elect Bush’s own spending plans, which he will sketch out to Congress within a few weeks after taking office on Jan. 20.

While many lawmakers say they are going to ignore Reagan’s budget, it will be difficult for either Bush or Congress to deviate far from it without raising taxes if they are going to meet the $100-billion deficit target called for under the Gramm-Rudman budget law.

Aid for Social Programs

Bush has suggested he will curb Pentagon spending somewhat and boost aid for child care and other social programs--but he has vowed repeatedly to oppose any tax increase. Most Democrats on Capitol Hill have said they will not flirt with political suicide by proposing any significant revenue increase unless the President-elect publicly agrees to reverse course on taxes.

White House spokesman Marlin Fitzwater acknowledged Friday that “there isn’t a lot of leeway there to make differences” between Reagan’s budget and Bush’s. Fitzwater, who will have the same job under Bush, added: “Undoubtedly, there will be some restructuring of priorities. But by and large, (Bush) will have a budget that does not raise taxes and meets the Gramm-Rudman-Hollings target.”

Reagan, in a prerecorded radio speech Saturday, said his budget “provides for the needy, does not raise taxes, and, by controlling the growth in spending, reduces the deficit next year by nearly $70 billion.”

Under his plan, Reagan said, there would be more resources available to improve air safety, house the poor and fight the war on drugs. Funding for AIDS research and prevention is scheduled to rise sharply by 24% and money to clean up toxic waste would go up by a fifth. Reagan also added some money to help bail out failing savings and loans, upgrade aging nuclear weapons plant sites and advance the space program.

Aides said Reagan’s program calls for a rise in defense spending authority to $315.2 billion, up 2% after inflation, while trying to hold Medicare spending on the elderly to roughly $106 billion, up about $8 billion but still a cut of about $5 billion from what is projected to occur with no changes in current law. The cuts would hit providers of medical services rather than directly affecting the elderly. Social Security, which provides income to the elderly and disabled, would increase by about $13 billion to keep pace with inflation and an increase in recipients.

As previously disclosed, the budget projects a deficit for fiscal year 1990 of $92.5 billion, down sharply from the expected deficit this year of about $160 billion. Last year’s federal deficit was $155 billion.

Optimistic Assumptions

The Reagan budget, however, relies on relatively optimistic economic assumptions, counting on the economy to grow, after inflation, by 3.2% in 1989 over last year as interest rates fall sharply from their current levels. In the unlikely event that Congress approved his spending cuts and the economy continued to perform as well as his Administration projects, the budget would finally register a modest surplus of $2.3 billion in fiscal year 1993, according to White House aides.

But the nonpartisan Congressional Budget Office is more pessimistic about the possibility of balancing the budget within four years, as called for under the Gramm-Rudman law. Because of considerably bleaker economic assumptions, the budget office recently projected a deficit of $129 billion in 1993 if current spending and tax policies are not changed, far above the equivalent $37-billion deficit base line expected by the White House for the same year.

Biggest Battlegrounds

During the budget tug-of-war that should drag on through most of this year, the two biggest battlegrounds between the Bush White House and the Democratic-controlled Congress are likely to revolve around the Pentagon and the Medicare program for the elderly.

During the last decade, said Rudy Pennar, an Urban Institute economist who formerly was head of the budget office, Reagan and the nation “ignored the basic conflict (between military spending and the elderly). We haven’t really started the debate yet. It’s the Gray Panthers against the admirals and the generals. As a nation, we still haven’t decided who should win or whether we should finance them both.”

Proposes Cuts

The Reagan Administration would achieve more than $15 billion of its overall $36 billion in spending cuts by paring back payments to doctors and hospitals, reducing support payments for farmers by $2 billion, and requiring government employees to pay more for health insurance and retirement.

About $6 billion of the deficit reduction is derived by selling various government assets, such as federal loans and regional power marketing bureaus. Another $1 billion would be raised through a handful of user fees, mostly for loan guarantees but also affecting those who receive non-emergency help from the Coast Guard.

Meanwhile, high-level federal employees--including elected lawmakers, judges and appointed officials--are scheduled to receive a 50% increase in pay this year if Congress does not block the pay boost. Other federal employees are supposed to receive increases to adjust for higher inflation.

House Speaker Jim Wright, in the Democratic reply to Reagan’s speech Saturday, called on Bush to work with Congress this year on both foreign and domestic policies to “usher in a new era of cooperation and good feelings between the legislative and executive branches of government.” While Bush has similarly vowed to cooperate with Democrats in Congress, the odds of conflict are much higher than the chances of calm.

In Saturday’s speech, Reagan went to bat for the pay increase again, arguing that it is necessary to “attract and keep America’s best in government.”

Wright, mindful of White House and public complaints over past congressional delays, vowed to complete action in the House on all regular spending bills before lawmakers leave Washington on their August vacation--in advance of the start of the next fiscal year.