Trying to sell deep budget cuts

IN BILLIONS OF DOLLARS Budget summary 1986 1987 1988 Deficits if no action taken $206 $225$217 Deficit targets $170 $138 $99 Cuts needed $42 $85 $110 Cuts proposed $34 $60 $75 Additional cuts needed $8 $25 $35

Source: Office of Management and Budget

The Reagan administration now faces the tough job of selling Congress, governors, and mayors on a budget reduction plan that would chop spending for some popular domestic programs and eliminate others.

''It isn't going to fly,'' predicted Rep. Bill Green (R) of New York after Republican congressional leaders were briefed by David A. Stockman, director of the Office of Management and Budget (OMB).

The plan, which the President outlined to his Cabinet Wednesday, would eliminate the Small Business Administration, the Legal Services Corporation, and the Job Corps.

Automatic inflation adjustments in most federal benefit programs - like veterans pensions, federal civilian worker retirement, and railroad workers' retirement programs - would be frozen for one year. Social security retirement benefits would not be affected by this freeze.

Other federal progams would come in for sharp cuts. Federal civilian workers would face a 5 percent pay cut, and farm price supports and child-nutrition programs would be reduced.

Governors and mayors would quite keenly feel the effects of several of the budget-cut proposals. For example, the administration would let the 12-year-old federal revenue sharing program expire. Most aid for urban mass transit would be eliminated, as would urban development action grants, which are designed to spur economic development in economically depressed areas.

On Thursday, White House spokesman Larry Speakes quoted the President as saying: ''I am willing to lead the charge - to go to the people'' to fight for the budget reduction plan. Mr. Speakes added the President was willing to take a 10 percent pay cut, along with other top federal officials, to set an an example of restraint.

The goal of the President's budget plan is to trim the federal deficit to $99 billion by fiscal 1988. Defined in terms of the nation's economic activity, this would reduce the deficit to 2 percent of the gross national product. Without action, the deficit would be $217 billion that year, or 4.4 percent of GNP.

To meet its goal, the administration says it would have to cut spending by $ 42 billion in 1986, $85 billion in '87, and $110 billion in '88. The deficit reductions the administration has already identified fall short of those goals. The remaining gaps between savings targets and the cuts outlined are $8 billion in fiscal 1986, $25 billion in '87, and $35 billion in '88.

Administration aides explain that subtracting their deficit targets from the deficits that otherwise might occur will not yield the administration's savings targets, because of the effects of off-budget items and changes in interest payments on the national debt.

Although the plan does not spell out cuts in the growth of military spending, such reductions are implied because of what an OMB document circulating on Capitol Hill calls ''savings shortfall to date'' - the gap between the budget savings identified and the savings targets. These closely match the amount of defense spending cuts the President's budget working group has been advocating.

The President has postponed a decision on the defense budget until Defense Secretary Caspar W. Weinberger returns from overseas. Mr. Weinberger said Wednesday his budget was ''the only budget in the United States government that has to be determined by the threats outside the United States.''

Military spending authority would continue to grow, even if the defense budget is cut by the amount Reagan's economic advisers suggest.

Weinberger seeks $334 billion in defense budget authority for 1986, a 14 percent increase before adjustment for inflation. The fiscal '85 budget authorizes him to spend $293 billion.

So if the President opts to cut Weinberger's budget request by $8 billion in '86, this would represent a 2.4 percent reduction in overall spending authority he has requested.

Senate Budget Committee chairman Pete V. Domenici (R) of New Mexico told reporters at breakfast earlier this week that defense would need to be cut some to win congressional support for a budget-reduction package. He said a $12 billion to $14 billion cut in the Pentagon's request would be needed.

Copies of the administration's budget plan, which are circulating on Capitol Hill, make it clear that most of the budget savings will come not from freezing various programs but from cutting or eliminating programs.

For example, freezing cost-of-living payments to veterans and retired government workers saves about $6 billion in 1986, the administration documents show.

What the administration calls ''freeze-equivalent savings,'' save another $4 billion in fiscal 1986.

These items include restraining the annual increase in medicare reimbursements to hospitals, forcing states to pick up a bigger share of medicaid costs, and boosting the premiums the elderly are charged to cover supplemental medicare insurance, which covers physicians' fees.

But the bulk of the $24 billion in already identified savings for fiscal 1986 come from program reforms, cuts, and terminations.

These cuts include offering no new subsidized loans from the Export-Import Bank, eliminating Amtrak subsidies, and terminating grants to libraries.