House-Senate conferees agreed yesterday to a compromise $695.4 billion budget for next fiscal year that ignores President Reagan's proposed new cuts in Social Security but still shaves the size of his projected deficit.
Faced with strong House resistance, Senate conferees agreed to drop any reference to Social Security cuts, either those proposed by Reagan this week or the $6 billion the Senate had voted earlier to take from cost-of-living increases for Social Security and other federal retirement programs.
Even most Democrats went along with the conference result, despite protests from many of them that it was based on rosy, artificial and politically inspired economic assumptions, including a projected decline in interest rates to levels well below what most economists forsee.
Conferees from both parties agreed the budget will win approval of the House and Senate next week, marking an end of the target-setting phase of the budget process and the start of the more painful business of cutting programs to meet these targets.
The budget not only sets spending targets for the fiscal year starting Oct. 1, it also orders committees of both houses to make actual program cuts of more than $36 million. But the actual cuts still have to be made, and binding spending limits will not be set until the fall. [Some committees have begun this work, however. Details on Page A2.]
The compromise gives Reagan just about everything he wanted -- and then some in the area of the deficit -- in his campaign to shift the focus of federal spending from social programs to defense. It makes deep cuts in a multitude of government enterprises, some dating back to the New Deal.
Reagan's bonus from the conferees is a $37.6 billion that Reagan proposed only two months ago when Congress, abandoning its usual deliberate pace in dealing with budgets, embraced Reagan's goals and put his budget on a fast track toward approval.
Outside of Social Security, there was little difference between the $688.8 billion budget adopted by the Democratic-controlled House, with its $31 billion deficit, and the $700.8 billion budget approved by the Republican-run Senate, with its deficit of $50.5 billion.
The difference was largely one of assumptions about inflation, interest rates, unemployment, productivity and other aspects of the economy. The conferees tilted toward optimism, splitting the difference between the two houses' assumptions on interest rates and adopting the House's more optimistic expectations about revenues.
House Budget Committee Chairman James R. Jones (D-Okla.), who failed to persuade the heavily pro-Reagan although nominally Democratic House to opt for more cautious projections contained in an alternative Democratic budget, warned that the compromise will produce a deficit that is "billion of dollars' higher than it appears on paper.
"We're playing games with the American people," grumbled Sen. Howard M. Metzenbaum (D-Ohio).
But Rep. Delbert L. Latta (R-Ohio), ranking Republican on the House committee, said the bullish predictions will prove true becuase Reagan's economic program will work.
In the end, both sets of conferees accepted the budget compromise: senators by a 9 to 2 vote with Metzenbaum and Sen. James Exon (D-Neb.) dissenting, and House memebers by a voice vote.
In one of the many ironies of the budget deliberations, it was the Republican Senate -- and one of its most conservative members -- that ended up pleading at the last minute for a few hundred million dollars more for social programs that Reagan wants to cut.
At the request of Senate Labor and Human Resources Committee Chairman Orrin G. Hatch (R-Utah), the confesses added $500 million in spending authority for education and labor programs to the split-the-difference sum that was provided in the compromise for most other areas of spending.
"I chair a committee that I don't think ever made a cut in history," noted Hatch. Citing the close ideological division on the committee, he said agreement on spending cuts -- as well as action on the president's proposal to combine many social programs into block grants to be administered by the states -- would be impossible to achieve unless the committee has more flexibility in spending.
Mischievously labeled by House Democrats as a "born-again liberal," Hatch said more money for programs for handicapped and economically disadvantaged children is "absolutely crucial," adding that they help prevent welfare costs in the future.
"You have thrown a life preserver to a drowning man," said Rep. Stephen J. Solarz (D-N.Y.), a liberal defender of social programs.
Although there is nothing to prevent Congress from voting less money than its budget provides, the conferees wound up calling for significantly less of a cut in all the income supplements than Reagan would make in Social Security alone.
In addition to $2.4 billion worth of miscellaneous Social Security cuts that both House previously incorporated into their budgets, Reagan earlier this week proposed $6.5 billion in new cuts in Social Security benefits for fiscal 1982.
Senate and House conferees disagreed about how much in the way of new cuts are anticipated in their compromise, but they agreed it was less than Reagan wants. Senate conferees said the compromise anticipates $4.5 billion in new cuts for income-security programs, while a spokesman for the House conferees said it anticipates no more than $2.3 billion.
The conferees rejected a proposal to foreclose even these cuts, but their coolness to the idea of Social Security cutbacks appear to be a further in dication of trouble for the president's effort to curb the rising costs of this popular, far-reaching program.