With the world financial community looking on, White House and congressional leaders will sit down today and try to break a 10-month stalemate on the federal budget. The stakes are high. Wall Street's dizzy plunge is said to have been triggered, in part, by accumulating concerns that the nation's political leaders are unable to deal with burgeoning federal budget and US trade deficits.
``In the most clear and stark terms, Wall Street is telling Washington that it wants a new economic policy and it wants it fast,'' said Senate majority leader Robert Byrd (D) of West Virginia in the Democratic response to President Reagan's weekly radio address.
Lawmakers and Reagan administration officials, driven to the bargaining table in search of the deficit-slashing compromise that has eluded them all year, expect anxious investors to be calmed if they reach agreement.
``Investors want to see that we have control over our own destiny,'' says Rep. Tony Coelho (D) of California, the House majority whip. ``They think Congress will just let things happen.''
Failure could pack at least as powerful a message. ``If we meet and do nothing, then we're really in the soup,'' says Senate minority leader Robert Dole (R) of Kansas.
Actually, if Congress and the White House are unable to settle on a budget plan that reduces the deficit by some $23 billion, the automatic budget-cutting mechanism established by the Gramm-Rudman balanced-budget act will probably do it for them.
But that kind of irresolution might not bode well for the deficit-reduction efforts of the next few years. If the deficit is to be eliminated in the foreseeable future, political judgment will probably supplant the strictures of Gramm-Rudman.
Next year, during the heat of the presidential campaign, Gramm-Rudman requires an only modest amount of deficit reduction. In the years following, however, the law mandates relatively steep reductions toward a balanced budget in 1993. The reductions are so steep, in fact, that few lawmakers believe they can possibly be met.
Indeed, a number of lawmakers argue that an agreement should result in more than $23 billion of deficit reduction. With the annual deficit hovering around $150 billion and projected to float upward next year, a number of Republicans and Democrats say more drastic steps need to be taken. Rep. William Gray III (D) of Pennsylvania, chairman of the House Budget Committee, says ``$23 billion ought to be the floor, not the ceiling.''
It would seem that an agreement is within reach. Democrats and Republicans alike agree that the turmoil on financial markets worldwide has created a political climate in Washington conducive to agreement. ``It's added just the right touch of crisis to things,'' says one senior Democratic Senate budget committee aide. ``The markets have given everyone an excuse to compromise.''
In addition, the two sides are not far apart on some important issues. Both the Democrat-controlled Congress and the White House have suggested new taxes: The President's budget in January called for $6.1 billion worth, while the tax-writing panels of the House and Senate have crafted legislation raising an added $12 billion.
Both sides agree that, in looking for new sources of revenue, they will avoid politically controversial increases in corporate and personal income taxes or excise taxes on liquor, cigarettes, and gasoline.
Democrats, meanwhile, indicate that they will discuss further cuts in domestic spending with White House negotiators. At the same time, the President and the Congress have agreed to consider all budget options, except those affecting the politically sensitive social security program.
The mistrust between Democrats and White House officials is considerable and could complicate efforts to reach a settlement. Both have called for a truce in their long-running rhetorical war over budget issues. Both have ignored their own calls.
In a speech Thursday, President Reagan charged Congress with being ``unable to get control of deficit spending.'' The next day, House Speaker Jim Wright (D) of Texas released a statement, inquiring whether it was ``clear to the President'' that deficits were, in fact, his fault.
Still, there seems to be sufficient impetus for agreement to overcome the effects of such sparring.
Sen. John Danforth (R) of Missouri speaks optimistically of the talks as an opportunity for ``d'etente'' between the White House and the Congress. ``I think it could be an opportunity for cooperation across a whole range of issues - not just budget, but trade as well.''
Trade policy could, in fact, worm its way into the budget negotiations. Congress is in the midst of crafting a huge trade bill that significantly tightens trading laws in an attempt to reduce the US trade deficit.
Administration officials have objected vociferously to a number of provisions in the bill, arguing that they could lead to a resurgence of global protectionism. Meanwhile, Reagan charges that it is the fear of resurgent protectionism, sparked by the emerging trade bill, that helped send the financial markets into a slide.
Some Democrats privately concede that events of the last week are forcing them to reevaluate their stance on trade. At the same time, an administration lobbyist said the White House will be looking for congressional leaders to drop parts of the emerging trade bill that Reagan finds most objectionable in return for concessions on taxes.