Bush Expected to Cut Defense Budget by 2%

President Bush has decided to ask Congress to cut defense spending by 2% after inflation next year, Administration sources said Wednesday, marking the first time that the White House has sought less for the armed forces since President Ronald Reagan began boosting military budgets early in the decade.

Bush settled on a Pentagon budget request of roughly $298 billion, a compromise between a higher level sought by Defense Secretary Dick Cheney and more severe cutbacks advocated by Richard G. Darman, director of the White House Office of Management and Budget, the sources said.

That level, which scales back the Pentagon’s earlier budget proposal of $311 billion for the fiscal year that begins next Oct. 1, would lead to significant cutbacks by the military services, including troop reductions, cancellation of weapons programs and training curtailments.

“It’ll be sporty,” said a senior Pentagon official of the coming cuts in Pentagon spending. The military services will now have to prepare budgets that conform with the new departmental budget total.

Congress, which four years ago began forcing the Pentagon to halt the massive buildup begun early in the Reagan Administration, is expected to seek an even larger defense cut after the proposal is submitted by the White House in January.

“The defense budget is in political free fall,” said Rep. Les Aspin (D-Wis.), chairman of the House Armed Services Committee. “Because of all the talk about $180 billion in cuts, the public expectation is that the defense budget would be a lot lower than that. People are already spending the ‘peace dividend,’ people are already talking about the economic impact of big cuts in defense.”

The $298-billion Pentagon spending plan approved by Bush for fiscal 1991 would mark a modest gain over the $291.3 billion that Congress finally agreed to give the Defense Department for this year. But the increase would fall short of the level needed to keep up with inflation by about 2%.

Much of the new spending authority sought by Bush for 1991, particularly for long-term weapons procurement, would result in actual spending only in subsequent years. Actual spending in 1991 would total about $293 billion, officials said, a figure that also represents about a 2% decline after inflation from this year’s spending level.

Negotiations between the Defense Department and the White House budget office centered on this figure, because this is the one that affects the federal deficit. Officials said that the $298 billion in new spending authority could shift slightly before Bush presents his budget Jan. 22, while the $293 billion in actual spending is more firm.

Bush’s decision comes as the Pentagon girds for further reductions to its projected 1992-1994 budget blueprint. In mid-November, Cheney directed the services to identify ways to trim $180 billion from the final three years of the Pentagon’s $1.5-trillion spending plan spanning 1990 through 1994.

In a recent interview, Cheney said that he had ordered the contingency plans drawn up so that the Pentagon could adjust to budget declines likely to be demanded by Congress. After congressional action, the defense budget since 1985 has declined by an average of 2% yearly after accounting for inflation, which is expected to average 4.2% in 1991.

Cheney’s order demanding that the services consider large future cuts from projected levels of spending would keep the Pentagon budget on its current downward slope of 2% a year.

“We’ve always projected real growth in every single one of these years coming down,” Cheney told The Times. “We never got it.”

Bush decided on the figure after a day of meetings Tuesday with Cheney, Darman and Gen. Colin L. Powell, chairman of the Joint Chiefs of Staff. A defense official described Cheney’s defense of a higher spending figure as “spirited.”

In making his decision, Bush appeared to split the difference between his budget director and his Pentagon chief. Darman has argued in negotiations with Cheney that the Defense Department should not postpone reductions until fiscal 1992.

Cheney originally had hoped to allow next year’s real defense spending to rise enough at least to keep pace with inflation.

Darman has been looking for large Pentagon spending cuts to help the White House in its effort to meet the $64-billion deficit target called for by the Gramm-Rudman budget law.

The budget package outlined by Cheney contains about $4.5 billion in savings described as management reforms.

At the same time, Defense Department planning documents show that the Pentagon expects to seek pay hikes of 3.5% for both military and civilian employees in 1991.

Cheney, speaking to Washington’s North Atlantic Treaty allies on the eve of Bush’s summit with Soviet leader Mikhail S. Gorbachev, said that none of the troop reductions envisioned for next year would come from among those soldiers stationed in Western Europe.

Staff writer John M. Broder contributed to this story.