Mayor Marion Barry and D.C. Council Chairman David A. Clarke escalated their 1987 supplemental budget battle yesterday as Clarke recommended cutting $26.3 million in Barry's midyear budget request to avoid a $17.9 million tax increase.

Clarke said that the council can reduce personnel spending in dozens of agencies by $4.4 million and save the rest of the money by slashing the program budgets of agencies that are likely to underspend their allocations by millions of dollars.

The largest single reductions would come in the city's Tenant Assistance Program, where $10 million in unspent tenant aid would be returned to the general fund. In 1986, the Department of Housing and Community Development spent none of the $5 million set aside for the program that year.

Barry, in a letter sent to the council yesterday, harshly criticized Clarke's spending reduction suggestions, saying that his recommendations were based on "rough, and incorrect, estimates."

Barry, while acknowledging that there have been problems involved in implementing and spending the money set aside for the Tenant Assistance Program, insisted that the $10 million be retained.

"Because I am hopeful that {the program will succeed} I have been unwilling to use currently unobligated TAP funds to support other agencies' spending needs," Barry wrote.

Any excess Tenant Assistance Program money, the mayor said, should be carried over for future use.

Clarke also suggested that the budget be reduced by cutting $6.5 million from the Medicaid budget, $2.6 million from energy spending, $1.9 million from employment services, $576,000 from the Department of Public Works and $111,000 from the Board of Parole.

Earlier in the day yesterday, the council's Committee of the Whole agreed to reductions in personnel spending that would cut the Office of Planning budget by $54,000 and the council's own personnel spending by $217,000.

"We need to set the tone of sacrifice," said council member Carol Schwartz (R-At Large).

In passing his recommendations on to Barry, Clarke asked the mayor to submit a revised spending plan that reflects the $26.3 million in cuts, an amount that includes funds to reduce the city's accumulated deficit.

Barry rebutted Clarke's recommendations point by point in yesterday's letter, saying that the $26.3 million targeted by the council's budget staff "seriously understates expected spending levels."

"No agency manager can complete the fiscal year exactly at budget . . . . If we cut too close to the bone, we can expect deficits at year-end instead of the underspending you observed in {fiscal} 1986," Barry wrote.

Barry's total $82.3 million supplemental budget request, which includes the proposed tax increase, would drive the city's total 1987 operating budget up to $2.5 billion.