President Reagan and Republican House and Senate leaders tentatively agreed yesterday to make the further budget cuts necessary to meet the administration's 1982 spending goals by giving Reagan the power to impound funds already appropriated by Congress.
Reagan discussed such a strategy with Senate Majority Leader Howard H. Baker Jr. (Tenn.) and House Republican leader Robert H. Michel (Ill.), who proposed it as perhaps the best method of achieving roughly $17.5 billion in further cuts the administration needs to keep its economic program on track.
Michel said the proposed legislation would permit the president to refuse to spend up to 10 percent of funds appropriated for any specific program during fiscal 1982.
Appearing on the Public Broadcasting System's "MacNeil-Lehrer Report" last night, Michel said the impoundment power might be triggered if appropriated funds exceed a specific target figure. A presidential impoundment might also be made subject to veto by one or both houses of Congress, he suggested.
Michel described Reagan as "very enthusiastic" about the proposal.
Under the GOP proposal, money appropriated by Congress for programs such as pensions, Social Security, debt service and other inflexible commitments for the 12 months beginning Oct. 1 could not be impounded.
After President Nixon made wide use of impoundment, Congress rescinded presidential power to impound appropriated funds in 1974.
While advisers briefed Reagan in a 75-minute meeting on the economic situation yesterday, the president made clear that the only way he wants to close budget gaps is by reducing spending. White House communications director David Gergen said Reagan "has no sympathy" for imposing new excise or other taxes, which would be another way of reducing future deficits.
Reagan and his advisers, undaunted by skepticism outside the administration, rededicated themselves yesterday to reaching two of their fundamental goals: a 1982 budget deficit no larger than $42.5 billion and a balanced budget in 1984. It was the first of a series of meetings expected to result in presidential budget decisions early next week.
"Certainly," Gergen replied when asked if the president's budget goals are still within reach despite continued forecasts of weak economic growth and high interest rates.
Gergen added that the $42.5 billion deficit goal would be a subject of further discussion this week, but that it is important to the president's economic program not to back away from the goals that have been set.
"It's well recognized that there are some threats to that figure," Gergen said, after attending the session in which Reagan was briefed on the general economic picture and the need for further reductions in federal spending.
The threats from poor economic performance are so great that most forecasters peg the 1982 deficit at more than $60 billion.
The director of the Congressional Budget Office, Alice Rivlin, who will present an updated forecast and budget projection to the House Budget Committee Thursday, is expected to indicate the deficit may rise $20 billion or more above the $42.5 billion goal.
Alan Greenspan, a former chairman of the Council of Economic Advisers, expects the number to be $67 billion, even after another $15 billion to $20 billion in spending cuts.
Gergen acknowledged that high interest rates could keep the administration from meeting its budget deficit goals, but said the administration still thinks the converse is also true: the president must stick to his targets to encourge the financial markets and thereby bring down interest rates.
The markets, Gergen said, want to see more evidence of the administration's "determination and courage" in confronting the economy.
Michel said he and Baker told Reagan it is imperative to act quickly to bring down interest rates. Failure to do so could trigger congressional pressure for credit controls or other types of regulation that the administration wants to move away from, Michel said, and could cause the GOP "irreparable harm" in next year's congressional elections. Then, he added, Reagan's whole economic program would be "in jeopardy."
Although Gergen said the president's decisions on budget cuts would most likely be made by early next week, he also said that "a lot of the thinking" on further 1982 cuts is still "in the formative stage."
Reagan, in his first week back from a month-long stay in California, also must decide how deeply to cut military spending, an action that runs counter to his desire and promise to bolster American defenses.
Michel said he and Baker warned the president that the Pentagon must take some spending cuts if Congress is to approve more cuts on the domestic side. Michel said they told Reagan that "defense simply could not be sacrosanct."
The future cuts for 1983 and 1984 designed to bring Reagan's promised balanced budget will be shaped by what the president decides to do about military spending.
Gergen said that Reagan will meet with Defense Secretary Caspar W. Weinberger, Secretary of State Alexander M. Haig Jr., White House national security adviser Richard V. Allen and Office of Management and Budget Director David A. Stockman today to discuss reductions in the $1.6 trillion the administration has proposed spending over five years on defense.
After Reagan settles on a magnitude of defense spending for 1983 and 1984, Gergen said, Stockman will know how much he must ask the other departments and agencies to trim from their budgets. The administration has spoken since last spring of needing to cut about $75 billion more from spending for these years in order to balance the budget. That number has grown because of continuing economic weakness and high interest rates.