Budgetmakers lean on Reagan to accept new taxes

By , Staff writer of The Christian Science Monitor

Efforts to forge next year's deficit-slashing federal budget hinge on the outcome of a contest of wills between Congress and President Reagan. Neither side has budged so far. The White House has maintained a studied distance from the budgetary deliberations of Congress. A House-Senate conference is attempting to reconcile budget resolutions passed in earlier months by both chambers.

Disagreements between congressional budgeteers and the White House are grounded in questions of whether or not to increase taxes, how much to cut domestic programs, and where to hold the line on defense spending.

This week, House budget conferees will decide whether or not to sign on to a plan proposed Friday by Senate negotiators that essentially holds spending increases for defense and other sensitive programs hostage to a tax increase. If House conference members sign onto some version of the plan, Senate budget leaders hope the President will finally be compelled to come to the bargaining table with Congress on the budget.

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The plan would set up a $7.3 billion ``reserve revenue fund'' that would become available if Congress approved and Mr. Reagan signed a bill raising taxes $7.3 billion in fiscal 1987 and $47 billion over three years. Three billion dollars of the reserve would be earmarked for defense programs, $400 million for the space shuttle, and $100 million for embassy security and other favorite programs of the administration. Most of the remainder would be for a raft of programs important to the Democratic majority in the House, including farm credit relief, job training, education, housing, and trade promotion.

Sen. Lawton Chiles (D) of Florida, ranking minority member of the Senate Budget Committee, referred to the plan as a ``leveraged buyout. There's a little leverage on everyone.''

The plan is intended to tempt House Democrats to vote for a tax increase -- something they have so far pledged not to do without the President's support. It is also supposed to tempt House Republicans -- many of whom have vowed opposition to any tax increase whatsoever -- by holding out the prospect of protecting a number of defense programs.

Its authors also hope it could entice the President to abandon his oft-stated opposition to any kind of a tax increase by guaranteeing that some of the increased revenues would go to protect the defense budget from large cuts.

Without the reserve, the Pentagon would face a budget that did no more than split the difference between House and Senate figures. The resulting $293 billion would not be quite enough to keep the defense budget up with inflation.

Some House Democrats have expressed reservations about the plan. They note that while presidential approval is not required on congressional budget resolutions, his signature is needed on the spending and revenue bills that put the overall budget plan into effect.

These Democratic sources say they doubt that Congress could muster the nerve to override a presidential veto on a tax increase, especially in an election year. Thus, they fear, some of the programs for which money is locked in the reserve might not be funded.

Impelling Congress to act is the Gramm-Rudman deficit-reduction act, which -- unless made impotent by a US Supreme Court ruling expected next month -- would effect automatic budget cuts on Oct. 1, the start of the fiscal year 1987, barring agreement between Congress and the White House on a deficit-reduction plan.

A major question is whether the prospect of Gramm-Rudman cuts will be enough to force Reagan to alter his stance on taxes.

On Friday the President reiterated his opposition to tax increases and told a group of editors and publishers that ``defense spending is the first priority . . . of the federal government'' under the Constitution and, thus, should not be cut.

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