Reagan may revive impoundment

The crisis over the Reagan budget has reached a point where the relationship between President and Congress is being reexamined. To help get his proposed cuts approved, the President is considering asking Congress to restore the right of impoundment, taken away from Richard Nixon in the collapse of his authority in 1974.

Under impoundment the President could decline to spend money appropriated by Congress, thereby taking on the responsibility which politically conscious congressmen won't accept. The device is like an item veto but one that Congress can't override.

Impoundment also would change the power relationship between the White House and Congress. A series of recent one-term presidents has tried to balance the budget and failed. (Of the last seven presidents only Dwight D. Eisenhower served two terms.) If Mr. Reagan, who based his campaign on a platform of ending the red ink in the budget, can't fulfill this pledge, it is likely to raise questions over the whole political process in Washington.

A lack of confidence on Wall Street about Mr. Reagan's ability to balance the budget, halt inflation, and reduce interest rates, has pushed bond prices to record lows and caused one of the sharpest declines in the Dow Jones industrial averages in recent years.

The economic community has also challenged a key feature of the Reagan program -- to increase the defense budget by 7 percent a year above inflatiion.

Tacitly conceding that this is a crisis that may determine the success or failure of the his administration, the President is holding a series of meetings with top financial, legislative, and military advisers.

From these meetings some drastic proposals have already emerged:

* To hold the line on a projected $42.5 billion deficit next year. (The administration proposes to cut $10 billion to $15 billion more from domestic expenditures).

* To slow down an ambitious arms expansion program.

There is a special issue for Mr. Reagan. He has been committed to the supply-side economic theory which says that a program of tax cutting would bring more money into the Treasury by stimulating savings and investment. Some orthodox Republican economists have questioned the theory. And now, because of doubts in the investment community, this view seems to be facing a critical review by the administration.

Congressmen agree that current White House decisions may determine the 1982 midterm election and perhaps even the presidential election. Rep. Morris K. Udall (D) of Arizona, keynote speaker at the 1980 Democratic National Convention , told a breakfast group of reporters here that Democrats will gain "15 House seats" next year. He wasn't certain whether Congress would restore presidential impoundment power.

White House strategy includes talks with the following:*

* Congress -- Senate majority leader Howard H. Baker (R) of Tennessee and House minority leader Robert H. Michael (R) of Illinois.

* Defense advisers -- Secretary of State Alexander M. Haig Jr., Defense Secretary Caspar W. Weinberger, White House national security adviser Richard V. Allen, and Budget Director David A. Stockman.

* Economic advisers -- headed by Murray Weindenbaum, chairman of the Council of Economic advisers.

At the same time, Alice Rivlin, director of the Congressional Budget Office, presented an updated budget forecast. Most outside observers agree that the White House forecast of $42.5 billion deficit next year is underestimated by as much as $25 billion. Like a fire alarm bell the new estimate has put administration advisers in commotion.

Representative Michel, on a TV show Sept. 8, first disclosed the impoundment proposal, to revive the mechanism if congressional appropriations exceed a certain figure.The news created a stir in the capital. Mr. Michel elaborated Sept. 9, declaring Congress will try to revive the authority. Senator Baker corroboated this:

"I think there's a fair possibility we [Congress] can adopt some temporary impoundment or deferral authority for one year's duration," he said.

Impoundment was infrequent before Mr. Nixon. He stretched it to unprecedented limits, amounting to $18 billion in his term. He used it to set policy and reorder priorities.He stopped funds for water pollution control, urban aid, emergency farm loans, and other programs.