Reagan's budget for '87. White House spending plan stakes out tough bargaining position with Congress on deficit

The Reagan Revolution rolls on -- but in the face of increasing resistance on Capitol Hill. True to his conservative philosophy and the goal that has dominated his five years in office, President Reagan yesterday submitted a $994 billion budget to Congress aimed at further slowing the growth of government.

It is a classic Reagan budget: a hefty hike in defense spending, deep cuts in domestic programs, no tampering with social security, and no tax increase. The chief difference this year is that the President had to meet the deficit target mandated by the new Gramm-Rudman Act. His budget proposal for fiscal 1987 shows a deficit of just under the target figure of $144 billion.

The gauntlet to Congress has now been thrown down. With his proposed budget -- and his insistence in the State of the Union speech Tuesday night that he will not support any tax increase to cut the deficit -- the President has set the stage for what is expected to be a year of pushing and hauling between the legislature and the White House. The lawmakers must also meet the Gramm-Rudman deficit target, but their spending priorities differ. Many are already calling the Reagan budget ``dead on arrival.''

Specifically, the President proposes a $33 billion or 8 percent real increase in defense spending authority as well as a 75 percent rise in outlays for his ``star wars'' program and a small boost for the space program. But dozens of domestic programs would be frozen, cut back, or eliminated altogether, for spending cuts of about $32 billion.

Among the programs that would be ended are Amtrak subsidies, urban development grants, the Small Business Administration, the Legal Services Corporation, and new housing for the elderly and handicapped. Also targeted for abolition is the Interstate Commerce Commission, the nation's oldest regulatory agency.

Cuts would be made in the student loan program, medicare, medicaid, and the Job Corps. The President also proposes selling off a number of federal assets, including the Bonneville Power Administration and federal petroleum reserves.

The budget is based on the optimistic assumption that the economy will grow at a 4 percent annual rate after inflation over the coming two years.

Though many lawmakers are pronouncing the budget a nonstarter, political observers see this as fully serving the President's bargaining strategy. Mr. Reagan knows that Congress will not use his budget as the basic document. It is his customary tack to lay down a maximal position, stick by it until it is no longer politically viable, and then, at the last possible moment, compromise.

So while Senate Republicans are urging the President to negotiate an early compromise on the budget -- and hinting that tax-reform could be stalled if a stalemate develops -- Reagan is expected to hang tough.

``Reagan has learned that there's no point in giving in too soon with an early agreement, because things have to play themselves out,'' says Charles Jones, a congressional expert at the University of Virginia. ``In the meantime, he must be persistent in the face of political and budgetary uncertainty on the Hill. When they get their act together and there is something more certain, then is the time to do something.''

Frustrated by the President's unwillingness in recent years to deal with the budget deficit seriously, Senate Republicans will be looking for ways to force his hand. There are many things the President wants -- from tax reform to a resumption of military aid for the rebels in Nicaragua -- and GOP lawmakers may well use these to wrest concessions from the President on the budget, political analysts say.

A central question in the budget debate is who will blink first -- the Congress or the President -- on the sensitive issue of a tax increase. The President vows not to accept a tax rise, except as a ``last resort.'' Democratic lawmakers vow there will be no talk of taxes unless Reagan proposes them first. Yet, amid the political posturing on all sides, there is a growing view that the government will not be able to meet the Gramm-Rudman deficit target without some form of new revenue.

Perhaps foreshadowing an eventual shift in his position, the President signaled this week that he might accept an oil import fee to offset revenue losses from tax reform -- if the extra money is not used to reduce the deficit.

In his State of the Union address, the President also called for an overhaul of the welfare system. He said he was ordering his Domestic Policy Council to conduct a year-long study of federal welfare programs with a view to reducing dependency on welfare.

The White House considers the time ripe for consideration of the issue. Public awareness has been heightened by the recent TV program by Bill Moyers on the break-up of black families. There is also growing interest among the states in workfare programs that combine job requirements with welfare benefits.

``There has been a dramatic shift in the intellectual climate in thinking on this subject,'' says a key White House aide. ``The President is lauching this issue at a time when the defenders of the old system are beginning to reexamine it.''

To get congressional movement on a welfare reform in the second Reagan term will be difficult, however. Given the huge agenda of foreign policy concerns, the 1987 elections, the Gramm-Rudman exercise, and the looming 1988 presidential contest, it is not thought likely Congress will want to tackle still another controversial issue.

Many lawmakers, moreover, are concerned less about reforming welfare than making sure that the President's budget ax does not cut so deeply into domestic programs that states and localities are unable to cope. Some members of Congress -- Republicans as well as Democrats -- want to retain federal revenue-sharing (which the President's budget eliminates) but to target such federal aid on the states in greatest need.