The budget battle: politics may be eclipsing economics

Budget negotiations totter on the brink of a breakdown.

''All the political dynamics now are in the direction away from compromise,'' a high-up administration official told the Monitor.

He explained that until about a week ago economic concerns appeared to be pushing the negotiations toward resolution, but that now this has changed. ''The political dynamics are now in control.''

Larry Speakes, White House deputy press secretary, said the White House-congressional negotiators had ''narrowed their differences,'' leaving taxes as the main sticking point.

But congressional sources were saying the differences were still broad and that the talks were on the verge of caving in.

The administration official, privy to the status of the negotiations as well as to the President's position on a compromise, said:

''The Democrats are thinking about the election year. They feel any cuts in entitlements or social programs, which we feel are necessary, would hurt their prospects next fall.

''Also, some of the Democrats actually feel that by moving to a compromise they will be helping the President - helping to pull his bacon out of the fire.''

From the congressional side came another viewpoint: That despite the President's talk of being willing to go ''the extra mile'' to achieve a compromise he is, instead, holding fast to his original position.

They see little ''give'' in the President's stance on cutbacks in defense spending. And they have been unable to budge Mr. Reagan away from his insistence that the tax cuts be preserved intact, including the July 1, 1983, increment.

Veteran adviser of presidents and presidential-liaison with Congress Bryce Harlow expressed some hope that a compromise would nonetheless come, at least at some point along the way.

''Now we may not get a good deal,'' he told the Monitor in an interview. ''But it will be a workable scheme that Americans can work with.''

Mr. Harlow said that ''these negotiators are people who are trained in the art of accommodation. If there is any way to find a deal between white and black , they will find it.''

Harlow added, however, that he had been told ''by an informed source'' that ''the negotiators may be agreeing they can't agree.''

Another White House official, who asked that his comments not be attributed, indicated that there would have to be some sort of a compromise struck along the line. ''My sense is,'' he said, ''that forces within this country will come down so hard on both the President and Congress that it will bring about a compromise.'' He continued:

''I think that industries across the country - the savings and loans, the commercial banks, housing, those really hurting - will bring unheralded pressure on the President and Congress to come up with a compromise.

''The bottom-line problem these businesses have relates to high interest rates. To get those rates down the budget deficit must be reduced. And to get that we must have a compromise.''

Meanwhile, the President, through aides, was letting it be known that the negotiations had reached an extremely critical point. To save them he was meeting with House Speaker Thomas P. O'Neill Jr. on Wednesday afternoon. A White House aide told the Monitor that Reagan was not at all optimistic about the outcome, that he expects the bargaining there would be ''very tough.''

Some observers here believe that the economic dynamics which would still provide a compromise might once again become dominant. Former President Gerald Ford, underscoring the importance of Congress and the President coming together on a budget, said that if they don't, the voters, will show their displeasure at the polls.

There is also talk now of confrontation, that the President, if talks break down, will go on national television to charge the Democrats with failing to cooperate in compromise-making.

But would the public ''buy'' such an allegation - or would they more likely accept the view that both the President and Congress must take full responsibility for such a failure?