Reagan team at odds over prospects for deficit package
Top Reagan administration officials are divided as to the prospects of negotiating a successful three-year, $100 billion deficit reduction ''down payment'' with Congress.
''There is a good chance of the President being successful,'' said Martin S. Feldstein, chairman of the Council of Economic Advisers, in a Monitor interview. ''I don't see how the Democrats can walk away by saying $100 billion, $100 billion-plus, isn't enough. We say, well, if $100 billion isn't enough and you can come up with acceptable items, we are happy to go above $100 billion. We recognize that more needs to be done.''
Treasury Secretary Donald T. Regan was more cautious.
''We have to see whether or not they want to live up to cries . . . in the House asking for a 'summit,' '' he said in another Monitor interview, referring to the possibility of a final bargaining session between President Reagan and the congressional leadership.
He accused the Democrats of ''not even participating in the prelude (to the summit) with any degree of speed.''
Another leading White House official, who asked that his name not be used, doubted whether a summit would produce a comprehensive package of spending cuts and revenue-boosting measures. But he thought it possible ''ad hoc legislative actions'' later this year might reduce the deficit somewhat from the $180 billion now forecast by the administration for fiscal 1985.
The stickiest issue in the negotiations is the amount of defense spending. The 1985 budget asks for $305 billion in spending authority, up $47 billion from the year before, or 13 percent after allowing for inflation.
That increase, admitted this highly placed official, ''is not going to fly'' on Capitol Hill.
Lawrence Kudlow, chief economist at the Office of Management and Budget until last year, says the defense budget request contains much ''fluff,'' and one administration official admits as much.
The White House official speculated that Congress might be willing to give an extra $20 billion to $25 billion for defense. But whether that would satisfy Mr. Reagan remains an unknown.
''I don't know how far the President is willing to go,'' noted the highly placed official.
The President, he held, tends to ignore the defense budget numbers, concentrating on the provisions for actual weapons programs. His attitude, it was said, is: ''Those defense numbers are flaky . . . so why get confused by them?''
Defense Secretary Caspar W. Weinberger, however, is described as ''a true believer'' in the numbers prepared by his aides. He will at first describe any cuts in the defense budget ''as the end of Western civilization,'' and nine months later talk of the nation making ''further strides'' in building its defenses, the White House official held.
So far Congress has not eliminated any major defense system sought by Reagan. But Congress has ''pared off the fluff.''
In any case, one White House official feels the defense budget proposal is the administration's ''weakest point,'' considering the views of both Congress and the public that defense spending is probably higher than necessary. Another top official calls defense cuts proposed by some congressional leaders ''preposterous.''
Obviously, in tough negotiations like this, no side wants to give away its hand in advance. Indeed, there may be considerable posturing as to who is at fault and what the chances for success of the talks are, with pessimism part of the bargaining process.
Whatever, negotiations over the ''down payment,'' according to a White House source, may resume today. The first session was held Feb. 9, with a bipartisan group of administration and congressional leaders agreeing only that the social security system should be immune to any budget cuts.
The White House participants in the prelude to the summit are White House chief of staff James A. Baker III, Treasury Secretary Regan, presidential assistant Richard G. Darman, and the director of the Office of Management and Budget, David A. Stockman.
According to insiders, congressional leaders are divided in their view of the negotiations. Sen. Robert C. Byrd (D) of West Virginia was described as ''totally uncooperative,'' a ''saboteur,'' trying ''to jettison the discussions.'' The office of House Speaker Thomas P. O'Neil Jr. (D) of Massachusetts was said by an administration official to be divided over whether to take the down-payment negotiations seriously. Some Democrats would prefer to avoid giving the President any credit for reducing the huge deficits in this political year.
But a column in the Washington Post last week by Rep. Dan Rostenkowski (D) of Illinois, chairman of the House Ways and Means Committee, describing how $100 billion could be knocked off the budget, was described by a White House official as ''improving the atmospherics.''
Administration officials presented what they termed an ''illustrative'' list of budget cuts to the congressional negotiators at their first meeting. To the annoyance of the officials, it quickly was leaked to the press. Thus they proclaim a reluctance to submit a written list of specific defense cuts for fear of further leaks.
One source guessed that the summit will fail with much press ado, but that Congress will then go on to cut defense, add some revenue through closing of tax loopholes and deferring a series of tax reductions scheduled to take place between now and 1987, and then make some modest budget cuts. If that happens, both the Rostenkowski proposals and the administration suggestions are considered prime candidates for action.
''The kind of things we have in mind ought to be acceptable to them,'' said Dr. Feldstein, after noting earlier deficit-reduction proposals by the House Ways and Means Committee, the Democratic Study Group, and leading Democrats. He noted the overlap with some of the administration suggestions.
One thing the administration is ''adamant'' about, as Secretary Regan put it, is that it will not accept any general tax increase. It could, however, approve measures that close loopholes and have the ''unintended benefit'' of boosting revenues.
Mr. Kudlow, now an economic consultant in Washington, was a close observer, but not a participant, in the negotiations that in the summer of 1982 resulted in passage of the Tax Equity and Fiscal Responsibility Act. This act trimmed the deficit by revoking some tax breaks for business that Congress had enacted the year before. He figures something will come of the current discussions.
''Both the Democratic and Republican leadership in Congress and the White House will want to take some credit for cutting the deficit in an election year, '' he said. ''The $64,000 question is, How much will they cut it?''
If the negotiators come up with ''a constructive package'' of perhaps $20 billion in deficit reductions the first year, $35 billion the next, and $45 billion in fiscal 1987, it should improve the economic outlook, he says. If it is only $10 billion a year, it will be ''a great disappointment.''
Much depends, he says, on whether President Reagan will put some ''elbow grease'' into the negotiations by going up to the Hill and seriously bargaining.