Congress set to vote on '88 budget Reagan is certain to dislike. Crucial tests come later, when bills releasing funds reach President

The stage has been set for a season of high-stakes political brinkmanship on the fiscal 1988 federal budget. House and Senate conferees adopted a $1 trillion budget yesterday that puts the Democrat-controlled Congress on a collision course with the Reagan White House.

``We've made a start,'' says Senate Budget Committee chairman Lawton Chiles (D) of Florida. ``It's an honest advance toward deficit reduction.'' It is also the beginning of what seems certain to be a long and steamy summer of partisan confrontation. The conference budget plan for fiscal '88, which begins Oct. 1, would raise $19.3 billion in ``additional revenues'' next year. At the same time, it would hold next year's defense spending to $289 billion - although the plan allows for a $296 billion military budget, just enough to keep pace with inflation, so long as President Reagan is willing to sign off on the new taxes to pay for it.

The White House had asked for a $312 billion defense budget and large cuts in domestic spending.

Reagan has repeatedly insisted that he will veto any bill that raises any kind of tax. At a Capitol Hill meeting Tuesday with Republican senators, he repeated his position, claiming that ``the only thing worse than the deficit is a new tax.''

No one quarreled yesterday with Sen. Pete Domenici (R) of New Mexico when he observed that ``there is not the slightest chance in the world that the President of the United States will be held to this.'' Nevertheless, both houses of Congress are expected to pass the budget bill agreed to by conferees. The question is what happens after that. The President does not sign the budget plan - it serves, instead, as a blueprint by which congressional committees fashion spending and revenue bills that, to become law, require a presidential signature.

As a result, Democrats are eager to get Reagan to sign on to a tax increase. Currently, Democrats are considering increases in cigarette, liquor, and other excise taxes, as well as an increase in the estate tax.

``We never thought the President was going to say when we passed this budget: `Oh, you got me. I guess we'll have to raise taxes,''' says Chiles. ``It's an invitation to sit down and work from there.'' For the Republicans ``working from there'' means adopting a package of budget reforms that, in the final analysis, would increase the President's budgetary discretion at the expense of Congress. Democrats are loathe to grant such concessions, but Republicans say that will be the price of their cooperation in the ongoing budget process.

Democrats, for their part, hope to force Reagan to accept a tax increase by combining tax-raising bills with legislation Reagan wants. For example, Chiles says any tax bills could be wrapped into massive legislation, called a reconciliation bill, that allows spending reductions in entitlement programs such as medicare. Similarly, a bill that would restore some version of the Gramm-Rudman automatic deficit-reduction device struck down last year by the US Supreme Court could be included on a reconciliation package.

To raise the stakes even higher, the reconciliation bill could be attached to critical legislation to increase the amount the federal government is allowed to borrow. Reagan backs the spending cuts and, in the past, has advocated a restoration of the Gramm-Rudman trigger. Nevertheless, Democrats are prepared for the possibility that the President may stick by his guns and veto any bill that includes a tax increase. In that case, says Chiles, the savings would jettisoned along with the taxes and next year's deficit would soar. ``If we can't come to an agreement on deficit reduction,'' he says, ``then we'll have to vote a debt limit that would break the back of Gramm-Rudman.''

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