White House offers budget compromises

The White House is waving an olive branch over parts of its fiscal 1988 budget. ``There are a whole range of issues'' where compromise can be reached on the budget, says James C. Miller III, the director of the Office of Management and Budget.

``This budget is surely a starting point for negotiations except for the major parameters the President has given me,'' Mr. Miller said in an interview.

The White House will stoutly argue with Congress over some proposals, Miller says, but he adds the administration is willing to compromise on a number of domestic programs, including medicare and medicaid, which Congress wants to protect from budget cuts.

``As a realist I know there are those on Capitol Hill who will want to approach the medicare and medicaid issue in a slightly different way and some of the nondiscretionary spending in a slightly different way. We are open for discussion along those lines,'' Miller says.

The Reagan proposal on medicare would increase the amount of contribution by recipients and reduce by about $1 billion a year the amount the federal government spends on medicaid, which is a jointly funded state and federal program. In nondiscretionary spending, the Reagan administration has proposed about $10 billion in cuts in such programs as veterans medical care, farm price supports, food stamps, federal retirement, child nutrition, and Aid to Families with Dependent Children.

But he stresses that President Reagan would not compromise on taxes or defense spending, key areas of disagreement with Congress.

In a wide-ranging interview, Miller said:

The US has received several unsolicited bids from Wall Street for loan portfolios it wants to sell to meet the budget targets. In the latest budget, the White House has proposed selling $4.2 billion in loans in such agencies as the Small Business Administration. Miller refused to say who had made the bids or how much they would pay the US on the dollar.

OMB does not believe the current rise in the price of oil will cause an inflation spiral in the US. ``I think inflation will rise, but not as much as some forecasters have it,'' Miller says.

The administration, which wants to pare student borrowing by $1.8 billion, will make a proposal to help students afford college by borrowing against their future income, which is not allowed now.

``Students cannot use their own human capital as collateral,'' says Miller. ``We are increasing dramatically the income contingent loan program,'' he adds, ``where the payback scheme for the students depends on the income they make after they graduate. If you don't make a large income, you don't have to pay back nearly as great a rate.''

The administration also will eliminate the cap on how much an individual can borrow for college.

At the same time, Miller says, the White House will ``do a better job'' of collecting loans students have defaulted on. The default rate is about 9 percent of the ordinary guaranteed student loan program.

Miller continues to defend the administration's defense spending plans, disputing contentions the White House has not critically reviewed the Pentagon's budget. But he concedes that the average cost of new systems is rising because of plans to stretch them out.

Although the White House budget proposal ostensibly meets the Gramm-Rudman deficit reduction targets for fiscal 1988, Miller concedes the administration was having trouble finding ways to lower the gap in later years. This is in large part because of the sale of assets and other revenue producing parts of the government. ``We are not hitting the target in the outyears,'' he admits, ``but I think it is eminently doable.''

Miller also denies that the White House is too busy with the Iran-contra affair to pay attention to the budget process. All the departments met the deadlines, he comments.

Miller stuck to his belief the economy will grow faster than private forecasters predicted. The Congressional Budget Office, in its own forecast, sees slower growth that Miller says represents a $10 billion difference in the budget.

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