Reagan at a crossroads over defense, budget, taxes

A now-familiar Washington drama is running again this week: Ronald Reagan at a crossroads, forced to choose between principles and pragmatism. It's a drama that has energized his administration. It has made the President into a pivotal player in the public's eye, yet has kept him detached, as if he were a monarch in some medieval court where competing dukes and other factions make their pleas and argue for the leader's assent.

The fact is, however, that Mr. Reagan's budget, tax, and social spending policies have been steadily edged toward a more moderate, centrist domestic direction that Democrats and most Republicans can live with more readily.

The key internal debate now is how to accommodate that drift.

Democrats claim that on major issues like jobs creation, highway rebuilding, and tax hikes, Reagan's positions have moved their way - even though he has been able to sustain an image of consistency.

The Senate compromise pact this week that delays the withholding of taxes on interest and dividend income showed Reagan again crowded by his Republican contingent in the upper chamber. A week ago it was the Senate Budget Committee's move to cut in half Reagan's defense spending request that had chopped his room for maneuver.

Reagan, who had earlier vowed to veto repeal of the withholding measure - a proposal bitterly opposed by bankers and other generally Republican stalwarts - hedged on his response.

A spokesman said the President would decide later whether to ''endorse, embrace, or veto'' the Senate's proposed four-year postponement of withholding - which would in effect kill it while other efforts to collect interest income were tried.

Actually, White House and Treasury Department officials took part in the withholding compromise negotiations. But as with the current budget impasse and other key issues, the White House finds it convenient to define a ''Reagan decision'' as one made only when a proposal or bill actually reaches his desk. This keeps the President apparently out of concessionmaking, but out front for decisionmaking. It helps control the pace of negotiations between Capitol Hill and the White House. And it mutes the strife among advisers who compete to lead the President in hard-line or compromise directions.

There's no doubt some of Reagan's advisers are again taking a lead - in loose concert with business and GOP leaders on the Hill - in persuading the President to negotiate with Congress on the budget. The warning this week by White House budget chief David A. Stockman that $200 billion deficits would stretch into the future as far as the eye can see, unless the budget impasse is broken, was a clear message to the President.

Sometimes advice is given less directly. Chief economic adviser Martin Feldstein reportedly told a gathering of economists recently that the administration's biggest chore during the next two years will be to get an agreement with Congress for large revenue increases, as the only way to reduce deficits. Reagan is resisting tax increases.

In effect, he's being told to make a deal with Senate GOP leaders, particularly on his defense spending target, or risk having Congress overrun his

Mr. Stockman's plea was partly to keep leverage on the budget process itself, which enabled Reagan to seize the initiative in Washington his first two years.

''If there's no budget resolution, it's totally unpredictable how spending is going to turn out,'' agrees a congressional budget analyst. ''In the House it will lead to old-fashioned Democratic big spending - leaving it to the White House to veto it.

''Stockman has believed all along Reagan would have to compromise on defense. He fought this defense thing (Reagan's request for a 10 percent defense hike) early on, and again near the end, and lost. He knew it was a nonstarter. By now, positions are set on the Hill.''

On taxes, the lines are not yet clearly drawn. Some experts say there are enough votes in both houses to get rid of tax indexing, which Reagan wants. And despite posturing, Democrats are not seen as really wanting to get rid of Reagan's third-year tax cut.

Some in Congress see a logic to the President's resisting budget and tax concessions every step of the way, since the forces on Capitol Hill and in the public are pushing toward compromise.

''You have the conference and appropriations steps and so on,'' a budget expert says. ''You can't let the chipping away start too soon.''

Still, Reagan's impasses with Congress - on defense, the budget, taxes, aid to El Salvador, the nuclear freeze - appear to be mounting. Senate GOP leaders and top White House officials meeting this week have come up with no overall strategy for resolving the conflicts. The President himself seems in no hurry to strike deals.

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