After a Week Off, Budget Negotiators Return to Face the Music--and Pain : Deficit: Everyone is waiting for the other guy to make the first move on taxes and spending--but time to make a credible deal is running out.

For White House and congressional leaders, trying to cut the mushrooming federal deficit has become like grasping for a mirage in a hot desert: The closer they get to the details, the tougher it looks to achieve a deal.

As budget summiteers returned to work after a week-long recess, they repeated their concern that their task won’t be easy. Despite the boost from President George Bush’s new-found willingness to support “tax revenue increases,” successful completion of the budget negotiations will require a meeting of the minds on issues that have undercut agreement throughout the 1980s.

Even if the President and the legislative titans craft a deal, it is far from certain that they will be able to force the rank and file to swallow the painful potion.

“I have said all along that the most difficult part of the process is getting a majority of each party in the Senate and House” to vote for deficit reduction, Senate Majority Leader George J. Mitchell (D-Me.) said last week. Finding answers on each of the key components--tax increases, domestic-spending cuts and defense--will trigger opposition or criticism from many quarters. Democrats do not intend to “bail out” the President while he and other Republicans attack the medicine, added Mitchell.

The negotiators, led by Office of Management and Budget Director Richard G. Darman and the top Senate and House leaders, have accelerated their pace. They have been meeting daily in a tightly packed room in the Capitol a few feet from the Senate chamber.

By most accounts, the summiteers want to agree on at least the outlines of a deficit-reduction package before the summer recess, set to start Aug. 3, for at least three reasons: Several more weeks will be needed to write and gain approval of the nitty-gritty legislative details; Congress will be hard-pressed to do much work before the November election; and Congress faces the need to make a politically painful increase in the federal debt ceiling before lawmakers can leave town.

The negotiators, for the most part, have not revealed their hand. But comments by some of the participants suggest the magnitude of their task.

“We will need to convince members of the political risk of not doing a deal,” said a senior Democratic aide. “The President will also have to sell the public. This becomes a chicken-and-egg problem.”

Because Bush convened the budget talks in May, Democrats have insisted that he is responsible for taking the initiative. Successful, so far, in playing a waiting game, the Democrats say that they will not walk out and allow Bush to blame them for a failure of the negotiations. But they cannot be idle players, if only because they control a majority in the House and Senate and they want to protect their previous commitments.

Nearly all the negotiators say that a serious deal must trim the deficit--expected to surpass $160 billion in fiscal 1991--by $50 billion. During the next five years, they want about $500-billion cut.

In the long run, nearly half the budget savings may come from the “peace dividend.” But even Democratic doves concede that it will be difficult to cut the $300-billion Pentagon budget by more than $10 billion in the next year.

Nearly all sides see the opportunity to raise at least $20 billion in new taxes in 1991, perhaps $120 billion over five years. But the details are tricky. In part, there are technical disagreements.

Bush proposed federal user fees or asset sales among the roughly $19 billion of new revenues in his original budget. The Administration also assumed that Bush’s avidly sought cut in the capital-gains-tax rate would yield the Treasury $5 billion next year, $2 billion more than calculated by congressional number-crunchers. In later years, most experts outside the Administration say that the capital-gains cut will reduce federal revenues by billions of dollars.

The bigger dispute facing budget negotiators on the revenue side is how they should increase taxes. Democrats, led by Mitchell and House Majority Leader Richard A. Gephardt (D-Mo.), lately have attacked the regressivity of the Reagan-era tax changes for soaking the middle-class and ladling goodies on the wealthy. They want to reverse that trend by, for example, raising the top income-tax rate from 28% to 33%. Anything less would be “completely unacceptable,” Mitchell said.

But 90 of the 176 House Republicans have written Bush, warning him that “a tax increase is unacceptable” and that they will not vote for a budget package that includes one. Instead, they prefer to increase excise taxes on tobacco and alcoholic beverages and, perhaps, a gasoline or other energy tax.

Cutting the domestic-spending side of the federal budget by as much as $10 billion will be no easier. So-called discretionary programs, such as education or job training, were slashed during the Reagan era. Republicans say that they will be happy to avoid an overall increase this year.

Medicare costs exceed $100 billion and are escalating at double-digit annual rates. But objections from the powerful senior-citizens lobby last year led Congress to repeal seemingly sensible changes that would have added Medicare fees to pay for a “catastrophic-illness” program.

The biggest domestic program is Social Security, the original “hot button” issue. Benefit cuts are unlikely, but negotiators might settle on lowering the $25,000 level at which beneficiaries may be taxed. Democrats also might try to trim the 7.65% Social Security payroll tax.

What happens if the budget summit fails to reach agreement this year? The budgeteers probably would have to raise the current 1991 deficit ceiling of $64 billion in order to avoid massive cuts in major programs. Both parties also would have to consider the potentially major political implications of such a failure.

Facing these perils, the negotiators have kept an optimistic public outlook. They may need that positive attitude to retain their own will power.