Bush Formally Warns of Budget Cuts on Oct. 1 : Deficit: Notification of Gramm-Rudman slashes puts pressure on negotiators. Analysts see the move as symbolic.

The Bush Administration formally served notice that it will have to impose mandatory budget cuts in many key federal programs starting Oct. 1 unless White House and congressional negotiators reach agreement on a budget accord.

The Office of Management and Budget warned that, in order to avoid such cuts, the budget deficit must be reduced by between $85.4 billion and $105.7 billion--a figure that is $35 billion to $55 billion more than negotiators have publicly said is politically feasible.

Bush is expected to sign a cutback order Saturday that will direct federal agencies to begin preparing for the mandated reductions. The action would not affect Social Security and other basic entitlement programs.

Analysts say that, at this point, the move is mainly symbolic. In reality, both the budget negotiators and Congress have plenty of room to maneuver if they decide to cut spending further, raise taxes or simply abandon the targets set by the Gramm-Rudman budget law.

But the action intensifies pressure on the negotiators, who already are being faced with soaring costs stemming from the Middle East crisis.

The White House warnings were bolstered by a companion report compiled by the Congressional Budget Office showing that a cut of $101.2 billion is required to meet the Gramm-Rudman target, which calls for reducing the deficit to $64 billion.

Monday’s report by OMB provided a detailed analysis of how spending will be reduced in each government department; it calls for cuts of 32.4% in non-defense programs and 35.3% in military spending, excluding personnel costs.

President Bush earlier exempted personnel costs from the Gramm-Rudman automatic cuts in order to avoid putting spending pressures on the Pentagon’s deployment of troops to the Middle East.

If the automatic cuts reached the maximum $105.7-billion level, about $52.8 billion would be slashed from non-exempted defense programs, and $52.8 billion would be cut from the scant 28% of domestic programs that are not exempt from the required reductions.

The $85.4-billion figure represents the cutbacks that would be needed from appropriations already passed by Congress. The higher figure of $105.7 billion reflects what the total would be if the lawmakers provided full funding for all the programs they have authorized.

Under the law, 72% of total government spending, including Social Security benefits, would be exempted from mandatory cuts. Medicare benefits could be reduced by up to 2%.

Budget Director Richard G. Darman said the Administration hopes to avoid imposition of automatic cuts, but he again criticized Congress for failing to work with the White House to reach an agreement.

“Absent responsible congressional action, sequester (the automatic cuts) will go into effect--as required by law,” Darman said in a statement.

But other Administration officials and congressional staff members said that the budget-cutting threat was mostly symbolic, because the increased cost of coping with the Middle East crisis has forced both the White House and Congress to rethink their budget projections.

White House and congressional negotiators have agreed that the deficit should only be reduced by $50 billion in 1991, effectively diluting the official Gramm-Rudman targets.

At the same time, analysts say the combination of the U.S. military deployment in Saudi Arabia and the impact of higher oil prices stemming from Iraq’s invasion of Kuwait now will make even that lower deficit-reduction figure more difficult to attain.

Congressional staff members said the crisis may force Congress to find a way to circumvent the Gramm-Rudman process in September, perhaps by altering the budget targets, in order to give the government breathing room during the confrontation with Iraq.

If Congress were to change--or temporarily suspend--the Gramm-Rudman targets, the automatic cutbacks would not be required.

Sen. Phil Gramm (R-Tex.), one of the authors of the Gramm-Rudman legislation, conceded Monday in an interview that the lawmakers most likely would take some action to rescind the cuts once they went into effect.

“No one contemplates keeping these kinds of (mandated) cuts in place for a year,” he said.

Gramm conceded that the whole budget-cutting debate will be thrown out if “shooting starts” in the Middle East. “Then the (automatic budget cuts) stop being a credible threat to Congress, and people who oppose them will use that to find a way around them,” he said.

Yet, even if Congress takes no action before Oct. 1, the effect of Saturday’s presidential budget-cutting order would still be limited if a new budget agreement can be hammered out by Oct. 15, the final deadline under the current Gramm-Rudman process.

If an accord were reached by then, federal agencies would be able to avoid layoffs and other cost-cutting measures by using funds allocated for the rest of the year, thus making up for any loss of funds in early October, budget experts said.