Reagan administration officials said yesterday that Democratic gains in the House of Representatives essentially rule out any prospect of bringing federal budget deficits under control through additional cuts in domestic spending programs.
Current estimates place the 1984 budget deficit in the neighborhood of $185 billion. While not confirming that figure, the officials said that, if Congress will not pass more domestic cuts, the administration will be forced at some point to turn to a combination of defense cuts and tax increases if it intends to close the budget gap any time between now and 1988.
The officials stressed that President Reagan nevertheless could seek such domestic cuts in the budget he will propose in January, leaving it up to Congress to chose alternative ways to lower the deficit.
But such an approach, similar to that followed by Reagan this year, would raise major questions about the credibility of the budget and could have repercussions in financial markets and damage the prospects for economic recovery, they said.
Budget Committee Chairman Sen. Pete Domenici (R-N.M.) has explictly warned administration officials that they should submit a "constructive budget" that does not call for wholly unrealistic domestic cuts, congressional sources said. "If they go ahead anyway, there will be a blood bath up here," the sources said. "The Republican senators know we have got to do something to get the economy moving again. They know what the election results mean."
Reagan met Tuesday and again yesterday with Office of Management and Budget Director David Stockman,, Council of Economic Advisers Chairman Martin Feldstein and other advisers for his first substantial discussion of the 1984 budget and a briefing on the economic outlook.
The first of a series of so-called director's reviews, at which the economic assumptions for budget planning are updated, will take place Friday. A detailed economic forecast will not be made until late December.
Even before the election, some administration officials had all but given up on the prospect of dealing with the budget problem through added cuts in nondefense programs, however much they might like to see them made.
The cuts made last year and this already had left nondefense programs very close to the "political bone," said one.
While the focus in the wake of the election was on the changes in the House, the administration may have equal trouble in the Senate, and not just with Domenici.
Sen. Robert Dole (R-Kans.), chairman of the Senate Finance Committee and of the Agriculture subcommittee that has jurisdiction over food stamps, has told the administration not to seek more cuts in that program.
Similarly, Sen. Mark Hatfield (R-Ore.) has publicly urged the administration to submit no more cuts in the so-called discretionary nondefense programs -- domestic programs other than entitlement programs such as food stamps.
The president is in a severe budget bind not just because of demands for reduced deficits to leave more money available to the private sector for investment but also because of his strong public commitment to the balanced-budget constitutional amendment. "To preserve the integrity of that commitment, we have got to show a balanced budget some time between now and 1988," the official said.
Some Reagan advisers hope to persuade the president that he can reduce the large planned increases in defense spending without damage to the military buildup. They argue that, because of the drop in inflation, defense dollars will go further.
On the revenue side, they also hope they can convince the president of the need to increase some taxes, including advancing future Social Security payroll tax increases to January 1984. The increases, scheduled for 1985 to 1990, would boost the total tax rate in three stages from the current 13.4 percent to 15.3 percent. This would yield about an additional $30 billion in revenue if they took effect in 1984. The tax is paid equally by employers and employes.