Treasury Secretary Donald T. Regan acknowledged yesterday it is no longer "probable" that President Reagan will be able to live up to his campaign promise of a balanced budget by 1984.
In testimony before the Senate Budget Committee, Regan also acknowledged that the administration, under pressure from some in Congress to fight rising deficit projections by raising revenues, is split internally over whether to support large new tax increases over the next three years.
The president himself has said the nation is in a recession, and Regan yesterday conceded further that 1982 economic growth will be considerably less than the administration has projected--"2 percent or less" instead of 3.4 percent.
This likelihood of no or low growth argues against a tax increase, he said. "Whether we should have massive tax increases in a time of recession is a debatable topic . . . it might be counterproductive," he told the committee, indicating that he is among those who resist going much beyond Reagan's earlier proposal for $22 billion in what the administration euphemistically calls "revenue enhancements" by 1984.
But he also cautioned against what he called the traditional "lunge for the panic button" when the economy slows down, saying Congress should stick by Reagan's economic program, including the spending cuts it approved last summer.
"Any indication on our part that we are willing to compromise on the president's program will only signal to the financial markets that it is business as usual in Washington and more inflation is imminent," he said.
While predicting "several more months of disappointing economic statistics," Regan contended that the recession will be "mild, its end certain and swift," probably by March or April. Interest rates have begun to drop, he added, and the tax cut should precipitate recovery.
Regan's assertion that a balanced budget by 1984 is "possible . . . but not probable" is the latest and strongest in a series of recent statements by administration officials inching away from Reagan's campaign promise to balance the budget by 1984.
Later in his testimony, Regan said he meant that a balanced budget was unlikely unless Congress steps in to help cut deficits. But he said help of the magnitude needed to balance the budget was unlikely. The help, he later told reporters, would have to be "massive."
The important thing, said Regan, is to produce a downward trend in deficits to show that the budget is coming under control--a theme that has also developed in Congress among Republicans who contend that a balanced budget by 1984 is simply out of the question.
Republican congressional leaders are trying to put together a set of spending cuts and tax increases to match Reagan's proposals last month for $115 billion in new savings by 1984, on top of $130 billion in spending reductions that Congress approved last summer. Meanwhile, they are trying to squeeze what they can from appropriations bills for this year, acknowledging it probably won't be much.
The Senate made a little dent in the 1982 deficit yesterday by approving a $21.1 billion agriculture appropriations bill that was cut $1.1 billion from earlier proposals to help meet Reagan's latest goals for the year. It was only $521.7 million more than his most recent target, closer than many of the money bills now going through the Republican-controlled Senate.
But a proposal by Sen. Mack Mattingly (R-Ga.) to cut another 2.6 percent to bring the bill down to Reagan's new levels was rejected, 32 to 51.
In his testimony, Regan said the administration, including the president, has yet to decide whether taxes should be increased beyond the $22 billion that Reagan recommended in September as part of his $115 billion in proposed spending cuts and revenue increases.
Senate Republican leaders have been talking of three-year tax increases of up to $70 billion.
Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) and Senate Finance Chairman Robert J. Dole (R-Kan.) were reported yesterday by an aide involved in the negotiations to be "close" to agreement on a plan that includes "very substantial" tax increases and cuts in basic benefit or entitlement programs, mainly for 1983 and 1984.
But Regan cautioned that any tax increases should be weighed carefully so they don't undercut the economic stimulus that the administration hopes will result from its big tax cut that was approved last summer. "On balance it was a good tax bill and should be given a chance to work," he said.
Asked by Sen. Dan Quayle (R-Ind.) if he was sympathetic to tax increases in the range of $70 billion to $90 billion, Regan said he was not.