House Democrats Propose Sharp Cutbacks in Defense : Budget: Leaders call for reducing spending by 25% over 5 years. Plan would allocate $251 billion to deficit reduction and new domestic programs.

House Democratic leaders unveiled a proposed 1991 budget Wednesday that would cut defense spending by 25% over the next five years and allocate the resulting $251 billion “peace dividend” to deficit reduction and a series of new domestic programs.

Starting with a cut of $8 billion from President Bush’s proposed Pentagon outlays for the fiscal year that begins Oct. 1, the Democratic plan calls for ever larger reductions in future years that would require eliminating such weapons systems as the MX or the Midgetman missile.

Rep. Leon E. Panetta (D-Carmel Valley), chairman of the House Budget Committee and author of the Democratic budget proposal, said the measure would be submitted for the panel’s approval today and could come up for debate on the House floor next week.

At the same time, however, he acknowledged that a House-passed budget resolution could be only the first step in a long series of negotiations with the Senate and the White House to resolve differences over defense spending cuts and tax increases.

Senate Democrats are more divided over the budget than their House counterparts. While Senate Budget Committee Chairman Jim Sasser (D-Tenn.) has recommended far bigger cuts in military spending, he apparently has little support, and some observers believe the Senate panel will be deadlocked on that and other issues.

The House Democratic plan calls for raising $13.9 billion in new revenues in the coming fiscal year--the same amount proposed by Bush--but leaves it to the House Ways and Means Committee to figure out how to achieve the goal. Key lawmakers have said it will be impossible to pass tax increases of that magnitude without the President’s active support.

Committee Chairman Dan Rostenkowski (D-Ill.) will have to negotiate with the White House on the revenue package, Panetta said.

The proposal also calls for $9.1 billion in “other savings and adjustments.” Panetta said that amount includes $4.2 billion in new user fees, $3 billion from Internal Revenue Service management reforms and $1.6 billion in asset sales proposed by Bush in his budget.

When the President put those items in his spending blueprint, Democrats denounced them as budgetary “smoke and mirrors” that reflected wishful thinking rather than realistic savings projections.

Overall, the Democratic plan calls for a sharp reduction in defense outlays and a moderate rise in domestic spending for programs dealing with children, health, housing, nutrition, science, research, job retraining and aid to emerging Eastern European democracies.

In the key defense area, which is expected to be the primary focus of this year’s budget debate, the House proposal follows a middle course between deeper cuts favored by House liberals and the small increase advocated by Bush and most Republicans.

Panetta’s plan calls for $295.5 billion in military outlays in fiscal 1991.