US budget drama: investors, consumers hold their breath

A drama that is fraught with the highest stakes for millions of American families is unfolding not in the Falklands, not in the Middle East, but here in Washington in a secret huddle over the shape of the 1983 budget.

Based on the outcome of these ''discussions,'' as President Reagan calls them , investors will decide where to put their own and their clients' money, interest rates will rise or fall, and millions of consumers will shape their personal spending plans.

Spurring on White House and congressional negotiators is the prospect of a budget deficit so huge that it threatens to crush out recovery hopes and keep both unemployment and interest rates high.

The White House now concedes that the deficit for fiscal 1983 may total $101. 9 billion. But Sen. Pete V. Domenici (R) of New Mexico, chairman of the Senate Budget Committee, says the shortfall could soar to $180 billion and keep climbing in later years.

The agonizing task before White House chief of staff James A. Baker III and congressional budget leaders is to find a way to trim that deficit below $100 billion, with smaller shortfalls in succeeding years.

Under congressional budget procedure, Congress is required to have a budget in place by May 15. Budget totals can be revised up to Sept. 15, two weeks before the start of fiscal 1983 on Oct. 1.

Senate majority leader Howard H. Baker Jr. (R) of Tennessee, endorsing Senator Domenici's $180 billion deficit estimate, says ''We are talking about an in 1983.

Senator Baker, appearing Sunday on CBS television's ''Face the Nation,'' says there is ''a possibility'' of achieving that goal, at best ''a 50-50 chance.''

Making the job more difficult is uncertainty whether President Reagan and Speaker of the House Thomas P. O'Neill Jr. (D) of Massachusetts will accept whatever compromise is worked out.

So far Mr. Reagan and Mr. O'Neill, like contending heavyweights flexing their muscles in their dressing rooms, are staying aloof from the battle, while their aides struggle toward agreement.

To be meaningful, experts agree, any compromise will have to cut the growth rate of benefit payments for social security, medicare, medicaid, food stamps, and other programs that now transfer income to more than 35 million Americans.

Taxes will have to be raised to boost US Treasury revenues. Defense spending, while still allowed to grow, must be shaved back somewhat to gain Democratic backing for the package.

''The tentative agreement we have on the table,'' said a congressional budget expert, ''calls for very major concessions'' from Mr. Reagan.

That agreement, among other things, reportedly includes:

* A 4 percent tax surcharge on taxable income above a specified level, perhaps $35,000 or more.

Such a surcharge on upper-income taxpayers would conflict with Reagan's supply-side economics, which holds that savings and investment are most effectively generated by giving tax benefits to the well-to-do.

Advocates of the surcharge are expected to argue to the President that this approach at least would leave intact his three-year income tax cut program already enacted into law.

* A tax on all oil, both domestic and imported. This would swell US Treasury coffers, but also would raise the retail price of gasoline and heating oil and add slightly to the consumer price index.

To be fair to all Americans, some experts contend, a similar tax should be applied to natural gas, which is more widely used than oil to heat homes.

* Income tax deductions for interest on consumer loans, apart from mortgages and automobiles, would be repealed under the tentative agreement now being hammered out.

* A cap, or limit, would be placed on annual cost-of-living increases for benefit payments under social security and other entitlement programs. These increases now rise in tandem with the consumer price index.

This issue is extremely sensitive politically. It would be hard for Speaker O'Neill and Democrats generally to accept such cuts, especially if they were not accompanied by tax concessions on the President's part.

* Democrats also would press for a smaller increase in defense outlays than Mr. Reagan wants.

All this, Reagan says, is not being ''negotiated,'' but ''discussed,'' with White House chief of staff Baker authorized to ''listen'' to ideas voiced on Capitol Hill.

By April 20, under the present schedule, the conferees hope to present to their principals a workable program, designed to reduce the 1983 budget shortfall below $100 billion.

The White House fired the first salvo in the whole process by sending to Congress a proposed budget calling for $55.9 billion in ''deficit reductions'' -- mostly in the form of additional spending cuts.

This budget, according to the Reagan budget team, would produce a deficit of

Congressional sources, both Democratic and Republican, claim that the economic assumptions on which the White House based its budget are overly optimistic.

More likely, according to congressional budget experts, is a 1983 deficit of complete list of trims.

The shortfall will be higher if the lawmakers, as expected, refuse to cut nondefense programs as deeply as the White House wants.

Congressional Budget Office specialists have estimated the extra savings needed might be in the $30 billion to $40 billion range.

Savings of the magnitude now being discussed, experts concur, can only be achieved by changing programs considered inviolate, or at least cherished, by either Speaker O'Neill or President Reagan.