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Reagan budget cuts $50 billion. Cuts in social programs, user fees, and loan sales said to bring deficit in line with Gramm-Rudman

The White House and Congress are on a collision course over next year's budget. This week they began moving closer to impact when the Office of Management and Budget (OMB) told the various government agencies how much money they would lose under the Reagan budget. Under the new Reagan plan for fiscal year 1988, spending will be cut by $50 billion, resulting in a budget deficit of close to $108 billion, the level mandated by the Gramm-Rudman deficit reduction act.

At least half of the cuts will come from social programs, ensuring a fight from the new Democratically controlled Congress that will get a partial look at the budget proposals on Jan. 5. Hearings will begin Jan. 6, according to an aide to Senator Lawton Chiles (D) of Florida, who will become chairman of the Senate Budget Committee.

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Although the White House would not list the specific progams it proposes eliminating, budget observers said the list included the Appalachian Regional Commission, the Economic Development Administration, and the Legal Services Corporation. Still other social programs would not receive any new money to account for inflation. The only real growth in spending will come in the Department of Defense, international affairs such as foreign aid, and the Department of Health and Human Services.

Under law the agencies can appeal the OMB cuts; White House chief of staff Donald Regan sits on the appeals board. It is understood that OMB director James Miller III received President Reagan's approval for budget plans on Tuesday at a cabinet meeting.

Senate Democrats, now in the majority, vowed to fight the White House. ``This budget puts them out of the game,'' said an aide to Senator Chiles. ``The President is stating he is not willing to come to grips with the problems and work within the realm of what the country wants. No one was elected this fall on the basis of massive elimination of domestic programs.''

In fact, some outside observers are convinced the Reagan budget is doomed even before it gets off the ground. Gary D. Bass, executive director of OMB Watch, a public interest organization, says OMB's budget proposal is ``dead before arrival.'' Mr. Bass notes that this budget plan does not differ much from previous plans. ``They are pulling the same rabbit out of the same hat,'' he quips. ``It's just that this year there is no magic to the numbers.''

Robert Greenstein, director of the Center on Budget and Policy Priorities, called the Reagan budget ``a political document,'' because it allows the White House to blame the budget deficit on the Democrats. Mr. Greenstein, a former Carter administration official, notes that much of the savings is in asset or loan sales. Once assets are sold, he argues, ``the government loses that income in the future, resulting in higher deficits.''

An aide to Congressman William Gray, (D) of Pennsylvania, chairman of the House Budget Committee, warned that Congress would look closely at such sales. ``We want to see real deficit reduction instead of the pretense of reduction,'' he said.

Mr. Miller on Tuesday began the long process of lobbying for the White House proposals. In a speech at the National Press Club, Mr. Miller noted that Congress had made ``precious few cuts in domestic programs'' when it put together this year's budget. Miller noted Congress had actually increased the deficit in later years by including asset and loan sales in this year's budget.

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According to one budget source, OMB is devising a way to come to grips with the loan-sale problem, particularly with ways to account for the loss to the government when a loan is sold at below cost. Bass says the OMB staff has been asked to come up with schedules that will require the selling agencies to come up with the difference between the market value of the loan when it is sold by the government and the original cost to the government. ``I think politically this will be shot right out of the water,'' says Bass.

There have also been reports that the Reagan administration was going to ask for a capital budget that would be different from an operating budget. However, on Tuesday, Miller, who wishes for such a plan, said he would not push for such a budget to circumvent the Gramm-Rudman targets.

Miller is also going to battle for some basic budget reforms. As in the past, he will ask Congress for a balanced budget constitutional amendment, line-item veto, and a two-year budget process that would avoid the yearly sessions where Congress continues to fund government operations with continuing budget resolutions.

Miller directly challenged Congress to address these issues. ``The President is fed up with the current budget process,'' he said, ``and will not hesitate to make his specific recommendations clear.''

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