BUDGET - Congress and the White House Play A Waiting game on the 1983 Budget

March 20, 1982, 7 a.m.

Some ma­jor un­cer­tain­ties re­main, but six weeks after Pres­id­ent Re­agan un­veiled his pro­posed fisc­al 1983 budget, gen­er­al agree­ment has emerged in Con­gress of what lies ahead:

* Re­agan’s budget has been dead al­most since the day it was re­leased.

* An in­flu­en­tial group of cent­rist Re­pub­lic­ans and Demo­crats wants to pass a bi­par­tis­an al­tern­at­ive, the broad out­lines of which are already clear: high­er taxes than Re­agan pro­posed, in­clud­ing likely changes in the 10 per cent in­di­vidu­al rate cut sched­uled to take ef­fect on Ju­ly 1, 1983; a smal­ler de­fense in­crease; few if any cuts in do­mest­ic dis­cre­tion­ary spend­ing pro­grams; and a lim­it on the autem­at­ic an­nu­al ad­just­ments in en­ti­tle­ment pro­grams, in­clud­ing so­cial se­cur­ity.

* Neither this op­tion nor any oth­er can pass in the face of Re­agan’s op­pos­i­tion; at the least, his ac­qui­es­cence is prob­ably es­sen­tial. * Mod­er­ate and lib­er­al Demo­crats hold some trump cards of their own, es­pe­cially in the House, where they con­trol schedul­ing. But they are ex­tremely wary of play­ing them lest they be as­signed the blame for an elec­tion-year re­ces­sion.

* If the stale­mate is not broken by the end of May, the budget crisis will prob­ably not be re­solved un­til after the Novem­ber elec­tions, and the 1983 fed­er­al de­fi­cit could ex­ceed $150 bil­lion, a level likely to com­plic­ate ef­forts to re­duce the in­terest rates that are stifling eco­nom­ic re­cov­ery.

A year ago, with the en­thu­si­ast­ic sup­port of a Re­pub­lic­an Sen­ate and a work­ing ma­jor­ity in the House, Re­agan was able to call the shots in le­gis­lat­ive show­downs. But this year, his ideas seem out­side the polit­ic­al main­stream. Mem­bers of Con­gress in both parties are try­ing to de­term­ine how far they can ven­ture in dif­fer­ent dir­ec­tions and still bring him along.

Re­agan’s re­cent at­tacks on op­pon­ents of his budget have poisoned the at­mo­sphere for a bi­par­tis­an agree­ment. “I want to help him,” said House Ma­jor­ity Lead­er Jim Wright, D-Texas. “But if he slaps our party across the face with the olive branch, our guys feel re­buffed. That’s not pro­duct­ive.”

Al­though a few Re­pub­lic­ans have pub­licly cri­ti­cized Re­agan’s hand­ling of the budget and many have re­spon­ded with un­easy si­lence, GOP con­gres­sion­al lead­ers have tried to keep open the lines of com­mu­nic­a­tion between Re­agan and Con­gress. They be­lieve the Pres­id­ent will ul­ti­mately ac­cept sig­ni­fic­ant budget changes.

So far, only a small num­ber of play­ers have par­ti­cip­ated in the at­tempt to shape a budget al­tern­at­ive, chiefly the party lead­ers and the chair­men and oth­er in­ter­ested mem­bers of the Sen­ate and House Budget Com­mit­tees. Lurk­ing in the back­ground are mem­bers of the House Ways and Means and Sen­ate Fin­ance Com­mit­tees who would draft the tax in­creases and cut­backs in en­ti­tle­ment pro­grams that would be ma­jor com­pon­ents of any at­tempt to re­duce the fed­er­al de­fi­cit.

Per­haps the two most im­port­ant fig­ures are Sen. Pete V. Domen­ici, R-N.M., and Rep. James R. Jones, D-Okla., who be­came Budget Com­mit­tee chair­men in Janu­ary 1981. While sternly em­phas­iz­ing the need to re­duce the fed­er­al de­fi­cit, each has faced con­flict­ing pres­sures with­in his own party.

Domen­ici has con­sist­ently—and gen­er­ally un­suc­cess­fully—tried since last fall to force Re­agan to ac­cept tax in­creases and a slow­down in spend­ing in­creases for de­fense, so­cial se­cur­ity and oth­er en­ti­tle­ment pro­grams. Jones’s prob­lem, as it was last year, is to get Demo­crats, with their form­al con­trol of the House, to rally be­hind com­pre­hens­ive budget al­tern­at­ives and find some com­mon ground with the GOP.

Rep. Bill Fren­zel of Min­nesota, a mod­er­ate Re­pub­lic­an who sits on both the Budget and Ways and Means Com­mit­tees and could play an im­port­ant role in craft­ing an al­tern­at­ive, said that Jones, Domen­ici and oth­er ad­voc­ates of a bi­par­tis­an pack­age will need a “longer leash” from party lead­ers. “The Pres­id­ent and the Speak­er $(Thomas P. O’Neill Jr., D-Mass.$) may not be act­ively in­volved in the ne­go­ti­ations,” Fren­zel said, “but I’d be sur­prised if they’re not on board in sup­port of the ef­forts.”

Some con­gres­sion­al lib­er­als and some staunch Re­agan sup­port­ers have no in­terest in a bi­par­tis­an budget. But re­cent in­ter­views with more than 20 House and Sen­ate Mem­bers from both parties showed that most be­lieve such a product is de­sir­able—both eco­nom­ic­ally and polit­ic­ally—al­though suc­cess is by no means cer­tain.

“Every­one will play their own game and try to wait out every­one else,” said House Rules Com­mit­tee chair­man Richard Bolling, D-Mo. “The prob­lems can be re­solved, but the de­tails won’t be settled un­til the $(House-Sen­ate$) con­fer­ence com­mit­tee be­cause Demo­crats are ab­nor­mally sus­pi­cious of the White House and the abil­ity of Re­pub­lic­an lead­ers to de­liv­er on their of­fers.”

The first ma­jor test is sched­uled for the Sen­ate Budget Com­mit­tee, which plans to be­gin work on March 23 on a res­ol­u­tion set­ting over-all spend­ing and rev­en­ue tar­gets. Sen­ate and House Mem­bers will be watch­ing closely, and many be­lieve that if the com­mit­tee fails to pro­duce a pack­age with sig­ni­fic­ant Demo­crat­ic sup­port, sub­stan­tial steps to cut the de­fi­cit this year would be un­likely. Com­mit­tee mem­bers are split on the pro­spects, al­though there is gen­er­al agree­ment that the 22-mem­ber com­mit­tee will start its work with no ma­jor­ity for any­thing.

“Un­less the Pres­id­ent de­cides to co­oper­ate, noth­ing will hap­pen,” said Sen. Ern­est F. Hollings, D-S.C., who offered the first ma­jor al­tern­at­ive to Re­agan’s budget. “In an elec­tion year, Mem­bers won’t des­troy their vot­ing re­cords to sup­port something go­ing nowhere.”

Nancy Landon Kasse­baum of Kan­sas, the only Budget Com­mit­tee Re­pub­lic­an to en­dorse Hollings’s pro­pos­al, said she was ini­tially op­tim­ist­ic about a bi­par­tis­an budget but re­cently has be­come dis­cour­aged. “My worry is that par­tis­an po­s­i­tions will harden and things will be­come more frac­tious,” she said.

Slade Gor­ton of Wash­ing­ton, a com­mit­tee Re­pub­lic­an closely al­lied with Domen­ici, said the situ­ation is so un­cer­tain that no ac­tion, even in­clud­ing pas­sage of a budget, can be taken for gran­ted. But he ad­ded that he re­mains op­tim­ist­ic, if only be­cause “the prob­lem is out there and won’t go away.”

In the House, some bi­par­tis­an talks have be­gun be­hind the scenes. Though most par­ti­cipants were un­will­ing to dis­cuss them, two Budget Com­mit­tee mem­bers re­por­ted a will­ing­ness to reach a com­prom­ise but little tan­gible pro­gress.

“Every­one is circ­ling,” said Ral­ph S. Reg­ula, R-Ohio.

“A game of budget chick­en is go­ing on with Re­pub­lic­ans and Demo­crats watch­ing each oth­er and the Pres­id­ent not provid­ing any cov­er,” said Le­on E. Pan­etta, D-Cal­if. “So far, no one is will­ing to move.” THE PRE­LUDE

The dra­mat­ic Re­agan vic­tor­ies of 1981 ex­plain the sus­pi­cion with which Demo­crats and some Re­pub­lic­ans view the forth­com­ing battles. “There’s a lot of para­noia from the scars of last year,” said Pan­etta, who helped shep­herd the 1981 spend­ing-cut pack­age through Con­gress even though he was un­happy with many pro­vi­sions of the fi­nal bill.

Those scars in­clude Demo­crats’ memor­ies of con­ces­sions they made on budget and tax is­sues, only to find Re­agan un­will­ing to com­prom­ise and re­peatedly go­ing to the na­tion to at­tack them for in­flex­ib­il­ity. “I ne­go­ti­ated in good faith to­ward a bi­par­tis­an con­sensus, but at the last minute the Ad­min­is­tra­tion pulled the rug out from un­der us,” Jones said. “Hav­ing learned from that, it’s not up to me to re­play that ex­er­cise.”

For Re­pub­lic­ans and con­ser­vat­ive Demo­crats, past eager­ness to cast their lot with the Pres­id­ent’s policies has faded with the un­ex­pec­tedly long and severe re­ces­sion and un­cer­tain pro­spects for re­cov­ery. “A lot of people got blood­ied last year, and they don’t want to get their hand in the wringer with something con­tro­ver­sial where the Pres­id­ent takes a ‘for me or agin me’ ap­proach,” said Rep. W. G. (Bill) Hefn­er of North Car­o­lina, a Budget Com­mit­tee Demo­crat who did not join south­ern “boll weevils” in sup­port­ing Re­agan in 1981.

Re­pub­lic­an con­cern be­came dra­mat­ic­ally evid­ent last fall when Domen­ici, with en­cour­age­ment from Ma­jor­ity Lead­er Howard H. Baker Jr. of Ten­ness­ee, labored with oth­er Sen­ate Budget Com­mit­tee Re­pub­lic­ans on a huge de­fi­cit-cut­ting pack­age that ul­ti­mately was re­jec­ted by Re­agan even though it was en­dorsed by 10 of the pan­el’s 12 Re­pub­lic­ans. That plan, which en­vi­sioned bal­an­cing the budget in fisc­al 1984 with roughly $80 bil­lion in tax in­creases and $100 bil­lion in spend­ing cuts over three years, will provide Mem­bers with some ideas for this year even though a bal­anced budget is now out of the pic­ture for 1984.

Domen­ici also hoped that the strong Re­pub­lic­an sup­port for tough­er steps would in­flu­ence Re­agan’s own 1983 budget pro­pos­als. But as Budget Com­mit­tee staff dir­ect­or Steph­en E. Bell con­ceded: “Domen­ici’s voice was com­pletely ig­nored by the Pres­id­ent on all is­sues-de­fense and en­ti­tle­ment cuts, a freeze on dis­cre­tion­ary spend­ing and rev­en­ue in­creases. If we had any in­flu­ence, it was not ob­vi­ous.”

Bell noted the dra­mat­ic con­trast to the pre­vi­ous year, when Domen­ici and his aides worked daily with Re­agan aides, es­pe­cially Of­fice of Man­age­ment and Budget dir­ect­or Dave Stock­man, in pre­par­ing a budget and work­ing for its en­act­ment.

Oth­er Re­pub­lic­ans, in­clud­ing the House and Sen­ate party lead­ers and seni­or mem­bers of the Ap­pro­pri­ations Com­mit­tee, re­portedly were sur­prised and up­set by Re­agan’s de­cision last Novem­ber to veto a stop gap spend­ing bill after they thought they had Stock­man’s pledge that Re­agan would sign the meas­ure. So it was not sur­pris­ing that Re­agan’s fisc­al 1983 budget, of­fi­cially sent to Con­gress on Feb. 8, eli­cited, at best, a luke­warm re­sponse even from his own party.

Three days later, House and Sen­ate GOP lead­ers went to the White House to tell Re­agan that changes would be needed. They were es­pe­cially up­set with the pro­posed de­fi­cits—$91.5 bil­lion in 1983, shrink­ing only to $71.9 bil­lion by 1985. (For a re­port on Re­agan’s budget, see NJ, 2/13/82, p. 268.)

With Re­agan’s eco­nom­ic pro­jec­tions cast in doubt by in­creas­ingly gloomy re­ports of un­em­ploy­ment and bank­ruptcies and ser­i­ous talk of a pos­sible de­pres­sion, mem­bers of both parties have pushed for a ma­jor change in budget policy. Sen. Dan Quayle of In­di­ana, one of the two Budget Com­mit­tee Re­pub­lic­ans who op­posed Domen­ici’s plan last fall, said: “I thought it was in­ap­pro­pri­ate then to make changes when $(Re­agan’s$) pro­gram had not even got­ten off the ground. Now that the Pres­id­ent has had some breath­ing room and the eco­nomy is worse, my chal­lenge is to work to get the Pres­id­ent to change his mind.” AL­TERN­AT­IVES

As Re­pub­lic­ans and Demo­crats dis­cuss budget al­tern­at­ives, they may reach tent­at­ive un­der­stand­ings that may not be form­al­ized for many weeks. “A lot of the talk is smoke sig­nals,” said Sen. Wil­li­am L. Arm­strong of Col­or­ado, an in­flu­en­tial con­ser­vat­ive Re­pub­lic­an on the Budget and Fin­ance Com­mit­tees. “What’s im­port­ant now is not what I say be­hind closed doors but, for ex­ample, things I tell re­port­ers—prais­ing the Hollings plan or say­ing the Ad­min­is­tra­tion plan is not real­ist­ic.”

Mem­bers will con­tin­ue to hold their cards close to their vests un­til, as Jones said, there is “a sense of trust” between Con­gress and the Pres­id­ent. “We’ve made some pro­gress, but there is a long way to go,” Jones said.

The ini­tial pub­lic de­bate was shaped primar­ily by Hollings and Domen­ici, the only two ma­jor fig­ures who pub­licly offered al­tern­at­ives to the Re­agan plan. Hollings chaired the Budget Com­mit­tee for most of 1980 after the resig­na­tion of Ed­mund S. Muskie, D-Maine, and he and Domen­ici have worked closely on the com­mit­tee, primar­ily in sup­port of a sig­ni­fic­ant in­crease in de­fense spend­ing pro­posed by Pres­id­ent Carter.

Hollings’s plan for fisc­al 1983—no in­crease in de­fense spend­ing, no cost-ofliv­ing ad­just­ments for en­ti­tle­ment pro­grams, a freeze on fed­er­al pay and elim­in­a­tion of the 10 per cent tax cut sched­uled in Ju­ly 1982—re­flec­ted his view that rad­ic­al steps are needed to avoid huge de­fi­cits. Al­though he did not an­nounce his plan un­til Feb. 10, aides said he de­cided on most of the de­tails after at­tend­ing a meet­ing in Decem­ber of the eco­nom­ic ad­vis­ory group of the Con­gres­sion­al Budget Of­fice, which pro­jec­ted pos­sible de­fi­cits of $200 bil­lion a year in the next few years.

Hollings re­ceived plaudits from Domen­ici and from Baker, who called his pro­pos­als “both in­ter­est­ing and worth­while.” Hollings also moved to so­li­cit sup­port from Budget Com­mit­tee Demo­crats and in­flu­en­tial House Demo­crats; for ex­ample, Rep. But­ler Der­rick, D-S.C., ar­ranged a meet­ing for Hollings with key Budget Com­mit­tee Demo­crats, and Rep. G. V. (Sonny) Mont­gomery, D-Miss., or­gan­ized a meet­ing with ap­prox­im­ately two dozen boll weevil Demo­crats.

“The Hollings plan was the only vi­able al­tern­at­ive offered by Demo­crats,” said Der­rick. “It was a good place to start work­ing.”

Domen­ici’s plan an­nounced on Feb. 23 is sim­il­ar in dir­ec­tion though not so severe as the meas­ures ad­voc­ated by Hollings.

Al­though Domen­ici did not spe­cific­ally ad­dress the 10 per cent tax rate cuts sched­uled for 1982 and 1983, his call for rais­ing an ad­di­tion­al $122 bil­lion in rev­en­ues by 1985 might re­quire post­pone­ment of part of the cuts. He also said spend­ing should be cut $223 bil­lion by 1985. As in­ter­est­ing as the de­tails were his de­scrip­tion of a “fright­en­ing” eco­nom­ic situ­ation and his cri­ti­cism of polit­ic­al lead­ers who “do all a dis­ser­vice by pre­tend­ing that we can swal­low $100-plus bil­lion de­fi­cits as though they were as­pir­in tab­lets.”

Sub­sequently, Domen­ici began lengthy meet­ings with Baker; Fin­ance Com­mit­tee chair­man Robert Dole, R-Kan.; Ap­pro­pri­ations Com­mit­tee chair­man Mark O. Hat­field, R-Ore.; and long­time Re­agan con­fid­ant Paul Lax­alt, R-Nev., to plan strategy for win­ning sup­port for budget changes from the Sen­ate and from Re­agan. GOP Sen­at­ors fa­mil­i­ar with those ses­sions said they were de­signed to fo­cus at­ten­tion on the dif­fi­cult op­tions and to build sup­port for Domen­ici, al­though the party lead­ers will prob­ably pro­pose some changes in his earli­er plan be­fore the Budget Com­mit­tee be­gins work.

“My coun­sel to the lead­ers has been to fine-tune the Domen­ici plan be­cause that is the only game in town,” said Quayle. Sen­ate Re­pub­lic­an lead­ers are also keep­ing in close touch with Hollings and oth­er Budget Com­mit­tee Demo­crats, whose sup­port they con­sider es­sen­tial.

In the House, the most sig­ni­fic­ant ef­fort to pro­duce a budget al­tern­at­ive has come from a group of Budget Com­mit­tee Demo­crats known be­cause of their past co­oper­a­tion as the “Gang of Four”-Richard A. Geph­ardt of Mis­souri, Pan­etta and Nor­man Y. Mineta of Cali­for­nia and Timothy E. Wirth of Col­or­ado—plus Les Aspin of Wis­con­sin, a new Budget Com­mit­tee mem­ber with ex­pert­ise on de­fense is­sues.

“We have gone through this ex­er­cise not to come up with a sep­ar­ate doc­u­ment but to feed in­to the com­mit­tee pro­cess,” said Mineta. “We’ve put to­geth­er op­tions for Jim Jones after talk­ing to oth­er Mem­bers on and off the com­mit­tee.”

Pan­etta, who said the re­com­mend­a­tions were sent to Jones on March 9, called the de­tails in­com­plete. The most im­port­ant step for Demo­crats, he said, is to “get out some themes to the pub­lic,” adding that he is try­ing to get O’Neill and oth­er party lead­ers to fo­cus on the prob­lem. In ad­di­tion to spe­cif­ic tax in­creases and spend­ing cuts, in­clud­ing so­cial se­cur­ity, Pan­etta said the group is push­ing for le­gis­la­tion “em­phas­iz­ing job train­ing and restor­ing some money for edu­ca­tion, en­ergy and re­search and de­vel­op­ment” and fo­cus­ing at­ten­tion on the de­teri­or­at­ing do­mest­ic “in­fra­struc­ture” with pro­pos­als for a series of user fees. (For de­tails of the al­tern­at­ive budgets, see box, p. 492.)

The out­lines of the Gang of Five’s plan were gen­er­ally re­flec­ted in what Jones out­lined as a “con­sensus” budget based on his own thoughts and those of the dozens of Mem­bers with whom he has met.

Cuts from Re­agan’s de­fense plans are “do-able,” said Jones, and sup­port is form­ing for a 5 per cent in­crease in real growth that would not af­fect mil­it­ary read­i­ness but could can­cel or stretch out some pro­cure­ment pro­jects. He es­tim­ated a three-year sav­ings of $40 bil­lion to $45 bil­lion in budget out­lays, twice as high as Domen­ici’s plan but roughly half the Hollings total.

On en­ti­tle­ments pro­grams, in­clud­ing so­cial se­cur­ity, Jones said a “private con­sensus” is grow­ing that they should be con­trolled through either re­duc­tions in the an­nu­al cost-of-liv­ing ad­just­ments or an over-all lim­it on spend­ing growth. “But,” he said, “the Ad­min­is­tra­tion has to come for­ward be­fore we can move be­cause of the fear the Ad­min­is­tra­tion will use this as a polit­ic­al weapon this fall. ”

On dis­cre­tion­ary do­mest­ic spend­ing, he said that House and Sen­ate Mem­bers agree that Re­agan’s pro­posed ad­di­tion­al cuts go too far. But it is too early, he said, to say what Con­gress will re­com­mend.

Fi­nally, Jones said, there is agree­ment that rev­en­ues must be in­creased but no con­sensus on how. The easi­est steps, he said, would be to “stretch out” the 1983 tax cut—pos­sibly 5 per cent in 1983 and the oth­er 5 per cent in 1984—and elim­in­ate in­dex­ing of tax brack­ets to com­pensate for in­fla­tion, which is sched­uled to be­gin in 1985. OBSTACLES

The two toughest is­sues to re­solve be­fore agree­ment can be reached on a bi­par­tis­an pack­age are prob­ably the fate of the 1983 tax cut and the cost-of-liv­ing ad­just­ment for so­cial se­cur­ity. Re­agan has firmly stated he would not sac­ri­fice the tax re­duc­tion; O’Neill and many oth­er Demo­crats have been equally adam­ant about pro­tect­ing so­cial se­cur­ity, and Re­agan has said he would not sup­port a cut­back.

The Con­gres­sion­al Budget Of­fice (CBO) es­tim­ates that killing the 1983 tax cut would in­crease rev­en­ues $86 bil­lion by 1985 and that im­pos­ing a freeze in 1983 on en­ti­tle­ment spend­ing would save $60 bil­lion by 1985.

Mod­er­ates in both parties agree that a sig­ni­fic­ant cut in pro­jec­ted de­fi­cits may not be pos­sible without ad­dress­ing both areas and that, in any case, no op­tion should be ruled off lim­its. “Everything has to be ne­go­ti­able,” said Geph­ardt.

“The Pres­id­ent may not be happy with all the parts, such as a change of the tax cut, but I be­lieve he’ll re­spond to a re­spons­ible pack­age if it re­duces the size of the fed­er­al gov­ern­ment and the de­fi­cit,” said Reg­ula, the second-rank­ing Re­pub­lic­an on the House Budget Com­mit­tee.

Per­haps the most in­triguing polit­ic­al ques­tion is wheth­er Con­gress can af­ford in an elec­tion year to cut back the cost-ofliv­ing in­creases that so­cial se­cur­ity re­cip­i­ents have come to ex­pect. Mem­bers re­call the cri­ti­cism Re­agan re­ceived a year ago when he pro­posed be­ne­fit re­forms. When Con­gress re­jec­ted those meas­ures, Re­agan es­tab­lished a bi­par­tis­an task force sched­uled to make its re­com­mend­a­tions fol­low­ing the Novem­ber elec­tions.

Rep. James G. Mar­tin, R-N.C., a mem­ber of both the Budget and Ways and Means Com­mit­tees, said Re­pub­lic­ans and Demo­crats on both those pan­els dis­cussed changes in the an­nu­al so­cial se­cur­ity ad­just­ment last year. “If we rely on one party or an­oth­er to bring out the pro­pos­al, we won’t get far,” said Mar­tin. “We need bi­par­tis­an sup­port as a nuc­le­us, and then we can grow from there.”

Pan­etta agreed that so­cial se­cur­ity is “touchy polit­ic­ally” but that a re­duc­tion of 1 or 2 per­cent­age points in the 1983 ad­just­ment, with cer­tain poor people ex­emp­ted, may be the “most work­able.”

The polit­ic­al prob­lem of tak­ing re­spons­ib­il­ity for so­cial se­cur­ity cuts and tax in­creases is prob­ably far more dif­fi­cult than de­cid­ing on spe­cif­ic ad­just­ments, most Mem­bers agree. Demo­crats want to avoid be­ing at­tacked by Re­agan for un­do­ing his pro­gram, and Re­pub­lic­ans fear that Demo­crat­ic lead­ers will place the blame for so­cial se­cur­ity cuts on the de­fi­cits in the Re­agan budget.

As a res­ult, some mem­bers of each party say it is the oth­er party’s re­spons­ib­il­ity to make the next move. “One thing that would help would be for the Demo­crats to show us an al­tern­at­ive,” said Rep. Lynn Mar­tin, R-Ill., a Budget Com­mit­tee mem­ber. “It’s ap­pro­pri­ate for the loy­al op­pos­i­tion to say what it can live with. I don’t be­lieve they would be ir­re­spons­ible enough to think they can simply watch the Re­pub­lic­ans self-de­struct, even though we’re not go­ing to do that.”

But Geph­ardt said Demo­crats can­not ne­go­ti­ate with a party whose lead­er has pub­licly ruled out changes in his tax and de­fense pro­grams. “All Demo­crat­ic lead­ers will be will­ing to ne­go­ti­ate so long as there is a be­lief the Pres­id­ent is com­mit­ted in good faith to the ef­forts,” Geph­ardt said. “The prin­cipals have to be will­ing to sit down privately and bar­gain on the ma­jor is­sues. Un­til then, no one will put any­thing on the table. Most of the de­cisions are tough polit­ic­ally, and I don’t see Con­gress will­ing to do much without con­sensus and pres­id­en­tial lead­er­ship.”

A seni­or House Re­pub­lic­an aide said the Demo­crat­ic “smug­ness” could back­fire. “Al­though some Demo­crats have been will­ing to con­sider the bi­par­tis­an ap­proach, O’Neill and $(Ways and Means chair­man Dan$) Ros­ten­kowski $(D-Ill.$) have taken a polit­ic­al pos­ture,” he said. “They could suf­fer once the pub­lic fo­cus turns to them and they don’t have any­thing to of­fer.” In that event, the aide said, the pres­sure would be on Jones, Geph­ardt, Pan­etta and oth­er mod­er­ates to con­tin­ue co­oper­at­ing with Re­pub­lic­ans at the risk of work­ing for a plan their party lead­ers even­tu­ally may at­tack.

For their part, Re­pub­lic­ans must con­sider how far they can go in work­ing with Demo­crats without arous­ing the an­ger of Re­agan or strong sup­port­ers of his budget, such as Rep. Jack F. Kemp, R-N.Y. Re­cent harsh com­ments about Re­agan and his aides by a few Re­pub­lic­ans have in­creased party fears of dis­ar­ray that could hurt can­did­ates in Novem­ber. (See this is­sue, p. 517.)

As they de­vel­op budget al­tern­at­ives, mem­bers of both parties face a dif­fi­cult prob­lem caused by what are gen­er­ally re­garded as overly op­tim­ist­ic eco­nom­ic as­sump­tions un­der­ly­ing Re­agan’s budget de­fi­cit. The CBO es­tim­ates that the Re­agan plan, which in­cludes many sav­ings that may be hard to achieve polit­ic­ally or eco­nom­ic­ally, would ac­tu­ally leave a de­fi­cit of $120.6 bil­lion, and that means that op­pon­ents us­ing “hon­est” num­bers be­gin with a $30 bil­lion han­di­cap.

“We’re on the horns of a di­lemma,” said Mineta. “It’s re­l­at­ively easy for us to get to a $75 bil­lion de­fi­cit if we use the Pres­id­ent’s un­real eco­nom­ic as­sump­tions, but if we don’t and end up with a de­fi­cit close to his, he’ll show that he has a smal­ler spend­ing pro­gram and that Demo­crats again want to tax, tax, tax.” PRO­SPECTS

Re­agan ap­pears to hold the key to any budget agree­ment. “Un­less and un­til he starts to talk sense with his own crowd, noth­ing really oc­curs,” said Hollings.

“He’s in­dic­ated he’s will­ing to talk, but only if we rule out the tax cut,” ad­ded Wright. “That’s like mak­ing a lem­on pie without lem­ons. There’s no way to get the budget near bal­ance without com­ing to grips with the enorm­ity of the tax cut.”

Many Re­pub­lic­ans voiced con­fid­ence that Re­agan would ac­cept a budget agree­ment with the Demo­crats if one is achieved. “I don’t re­gard what I’m do­ing—or what Bob Michel, Pete Domen­ici or oth­ers are do­ing—as break­ing ranks with the Pres­id­ent,” said Rep. Mar­tin of North Car­o­lina. “The White House will ac­cept any pack­age that does not do vi­ol­ence to its con­cepts… . Dave Stock­man has made clear they’re not adam­ant on all the spe­cif­ics.”

But Demo­crats are wary of mak­ing com­prom­ises and fa­cing a pres­id­en­tial show­down any­way. “We’ve learned to our re­gret that the Pres­id­ent is in­clined to over­rule his sub­or­din­ates, as he did on the spend­ing bill last Novem­ber,” said House Ma­jor­ity Whip Thomas S. Fo­ley, D-Wash.

The le­gis­lat­ive cal­en­dar does not leave Re­agan much time to be­come con­cili­at­ory if he hopes to af­fect cur­rent ef­forts. the 1974 Con­gres­sion­al Budget Act re­quires that the House and Sen­ate act jointly by May 15 to ap­prove spend­ing and rev­en­ue tar­gets, a date that in re­cent years has been missed by as much as a month.

But con­gres­sion­al budget ex­perts are count­ing on a less flex­ible dead­line to force agree­ment on a ma­jor le­gis­lat­ive budget pack­age. That dead­line is late May, when a bill to in­crease the fed­er­al debt ceil­ing will be re­quired to keep the fed­er­al gov­ern­ment cred­it­worthy. (See NJ, 3/6/82, p. 429.)

The or­din­ar­ily simple debt ceil­ing ex­ten­sion could be­come—in re­sponse to in­struc­tions in the budget res­ol­u­tion—a vehicle to en­act a vari­ety of ma­jor tax and spend­ing meas­ures, much like last year’s re­con­cili­ation bill. One likely dif­fer­ence, however, is that this year’s ac­tions would primar­ily in­volve pro­grams in the jur­is­dic­tion of the tax-writ­ing Fin­ance and Ways and Means Com­mit­tees. Dole, for in­stance, has pro­duced a lengthy list of pos­sible tax in­creases aside from any changes in the sched­uled 1983 tax cut.

Al­though this ap­proach could cre­ate pro­ced­ur­al obstacles, ob­serv­ers said both Dole and Ros­ten­kowski would wel­come the ini­ti­at­ive provided by the Budget Com­mit­tees, the ac­tion-for­cing mech­an­ism of the debt ceil­ing bill and the like­li­hood that the Sen­ate pan­el would con­sider the is­sues first. The Con­sti­tu­tion re­quires that the House ini­ti­ate tax le­gis­la­tion.

The Sen­ate Budget Com­mit­tee’s ac­tion on the budget res­ol­u­tion may sug­gest what lies ahead. “Domen­ici is a key,” said Sen. J. J. Exon, D-Neb., who serves on the Budget Com­mit­tee. “If he can put to­geth­er a com­prom­ise, that will flow to the House, where Jim Jones is a real­ist… . I think Tip O’Neill is far too shrewd a lead­er to get him­self in the trap of block­ing a com­prom­ise.”

Jones has been talk­ing with Michel and House Budget Com­mit­tee Re­pub­lic­ans in hopes of reach­ing such an agree­ment. “I have to find out if there is good faith on the oth­er side and need some in­dic­a­tion Bob Michel can ne­go­ti­ate and con­trol his troops,” said Jones. A few days later, Jones told re­port­ers he may force an early vote on Re­agan’s budget un­less the White House gives a clear sig­nal that Re­pub­lic­ans are free to draft an al­tern­at­ive. “Bob Michel can’t ne­go­ti­ate in­de­pend­ently,… so we’re at an im­passe,” Jones said.

Jones fears that even if he reaches a com­prom­ise with Michel, con­ser­vat­ive Re­pub­lic­ans may pro­pose an al­tern­at­ive more to the White House’s lik­ing—a tac­tic that Rep. Newt Gin­grich, R-Ga., said he and oth­ers are con­sid­er­ing.

In any case, the like­li­hood is that the fi­nal pack­age will be pre­pared by House­Sen­ate con­fer­ees work­ing on the budget res­ol­u­tion and debt ceil­ing bill, in close con­sulta­tion with party lead­ers. In fact, some sug­gest that the con­fer­ence com­mit­tees could de­cide what to do with the an­nu­al so­cial se­cur­ity ad­just­ments and the 1983 tax cut.

If so, the pack­age may up­set mem­bers of both parties. “When the deal is fi­nally made, the tax changes will mean there won’t be sol­id Re­pub­lic­an sup­port,” said Gor­ton.

Bolling ad­ded that in the Demo­crat­ic­con­trolled House, so­cial se­cur­ity changes are “pos­sible, but only as a last step.”

Few dis­agree that a com­pre­hens­ive budget pack­age faces a dif­fi­cult road. Arm­strong, an op­tim­ist, said, “There will be a lot of blood, a lot of late ses­sions and a lot of broken bones, but the al­tern­at­ive of do­ing noth­ing is too hor­rible to con­tem­plate.”

The task will be com­plic­ated by shifts in eco­nom­ic news and judg­ments by Mem­bers on what their well-be­ing re­quires. A ma­jor busi­ness bank­ruptcy or pub­lic opin­ion polls show­ing that the voters want ma­jor le­gis­lat­ive changes could force the hand of usu­ally cau­tious law­makers.

Jones, who said he is wait­ing for the right time to make his budget pro­pos­al, may have ad­equately sum­mar­ized the state of the budget: “lf any­thing is cer­tain about 1982, it’s that things are un­cer­tain.”

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