The Senate Republicans -- especially Majority Leader Bob Dole and Budget Committee Chairman Pete Domenici -- deserve enormous credit for the fiscal plan they produced early Friday morning. The plan is not perfect; it still needs work. But they moved their president a major distance on the difficult issue of defense. They deftly marshaled their colleagues, picking up needed votes at minimal cost in budget outlays. And now they have sent some $56 billion in proposed deficit reductions to the House. The alternative was a budget stalemate that would have sent all the wrong signals to the financial markets and the Federal Reserve. Stalemate could drive up interest rates and threaten the economy; this vote is a source of hope.
The budget retains President Reagan's powerful imprint, much as he has distanced himself from the process: the deficit cutting is done without resort to taxes, and defense is still favored over domestic spending. A large swath is cut through domestic programs, and Social Security recipients, one-seventh of the population, would not get next year's cost-of-living increase. The Pentagon would get such an increase, but a notable thing has happened. For the first time in the Reagan presidency, defense appropriations would rise only as fast as inflation. Actual spending would continue to rise faster, in large part because of unspent ap- propriations from the past. But this increase would be only about half as much as Mr. Reagan sought. In political terms, the Republican Senate decid- ed last week to rein in the Reagan defense buildup. On domestic issues the senators mostly split differences. The cost-of-living formulas that help drive Social Security and other federal benefit costs have become a major point of dispute in the budget. The Senate chose not to recalibrate them. Its budget instead would simply dispense with cost-of- living increases in all the major benefit programs for one year. That in itself was a difficult step politically. Fortunately, the president, who had earlier said he would not accept any diminution of Social Security benefits, now says he will.
Such other major programs as Medicare and aid for college students were cut but not restructured as the administration had asked. There was also a list of lesser federal agencies and programs the administration wanted to drop entirely. The Senate agreed to expunge a few of these -- the Economic Development Administration, urban development action grants, direct loans by the Export-Import Bank. Others -- the Job Corps, the rural electrification program, the Amtrak subsidy -- it voted only to curtail.
The bill now goes to the House, where the Democrats are sure to move even farther from the president's priorities. Less for defense, no cut in Social Security, fewer cuts in other domestic programs, some form of tax increase: all these are likely. So there will have to be further compromises. But the House needs to be careful to press for its changes -- some of which we think are essential -- in a way that doesn't undo the progress the Senate has already made, but rather takes advantage of it.