Budget pressures on President Reagan intensified yesterday as his top aides prepared to give him their unanimous recommendation that he must raise taxes to hold down the 1983 and 1984 federal budget deficits--something Reagan said last week he did not plan to do.
The Congressional Budget Office now estimates that those deficits will be about $175 billion in 1983 and $210 billion in 1984 unless spending is cut or taxes raised from levels set in current law, congressional sources said.
These estimates, provided last week to congressional leaders and the Office of Management and Budget, are about $25 billion and $50 billion higher, respectively, than comparable recent administration estimates.
The new pressures on the tax and deficit sides of the budget triangle came as 27 senators from the Northeast and Midwest, some of them strong conservatives and supporters of Reagan's economic program, warned they would not continue to vote for cuts in federal spending programs vital to their regions while supporting energy and defense outlays that they say favor Southern and Western states.
Reagan, who is trying to wrap up by tomorrow his policy decisions on the 1983 budget, was briefed yesterday on his advisers' latest economic forecast and on a set of possible cuts in politically sensitive entitlement programs, such as Medicare and food stamps, that would save between $40 billion and $50 billion over a three-year period, administration officials said.
Today, Reagan will be given a proposal for tax increases that would raise more than $40 billion in 1983 and 1984. White House sources said this revenue plan is backed by all three of Reagan's senior aides, Edwin Meese III, James A. Baker III and Michael K. Deaver, as well as his Treasury secretary, his budget director and his chief economic adviser. However, Reagan declared at his news conference last week that he has "no plans for increasing taxes in any way," and his approval of anything except perhaps the $22 billion in tax increases over three years that he sought last September was far from certain, the sources said.
Included in the new set of options are increases in excise taxes on alcohol and tobacco products and the closing of a number of "loopholes" in tax laws, several of which were part of Reagan's September proposals. The basic business and individual income tax cuts that Congress voted last summer at Reagan's behest would be unaffected.
The president deliberately left his decision on taxes until after he has completed his review of the spending side of the budget. Seeking to influence some of those spending decisions, the 27 senators wrote OMB Director David A. Stockman to "advise you that we cannot continue to support a budget which exacts such a heavy toll on the Northeast-Midwest region--an area of the country least fiscally capable of coping with reduced federal funding."
The letter was signed by 13 Republicans, including among the more conservative Alfonse M. D'Amato of New York, Robert W. Kasten Jr. of Wisconsin and Dan Quayle and Richard G. Lugar of Indiana. Fourteen Democrats also signed the letter, which said that the group's most immediate concerns were proposals to end community development and urban development programs, make additional cuts in energy assistance and weatherization aid for low-income families, end trade adjustment assistance to workers hurt by imports and make "severe cuts" in federal employment and training programs.
The CBO estimates of huge deficits in 1983 and 1984 are based on an economic forecast that envisions a brisk recovery from the recession but nevertheless sees unemployment, interest rates and inflation remaining higher than the administration assumes they will.
The deficit projections of all economic forecasters have risen sharply in recent weeks as the extent of the recession became more clear. Even with a strong recovery, the level of gross national product and federal revenues in 1983 and 1984 will still be significantly lower than the administration had been expecting without the recession. The 1983 unemployment rate, for instance, could average 8 percent or more, compared to the 6.6 percent initially forecast by the administration.
In the CBO analysis, moreover, the deficits do not necessarily shrink even with healthy economic growth. In the past, revenues normally grew faster than outlays except during recessions so that longer-term projections always showed eventual surpluses if taxes were not cut or new spending programs added.
Now, except during a recovery, the balance between revenues and spending has been so altered that deficits will tend to grow by $30 billion to $60 billion a year. Administration economists confirmed this extraordinary shift in the nation's fiscal outlook.
The major factors in this shift are Reagan's commitment to increases in defense spending at a rate well in excess of the rate of inflation, and the unprecedented multiyear cuts in business and personal income taxes passed last summer at the president's urging.
The sheer size of the projected deficits also contributes to the problem, since a $100 billion deficit by itself adds, in the following year, another uncuttable $10 billion to outlays if the interest rates Treasury pays average, say, 10 percent.
One administration official involved in budget making said the hope is that some additional but small cuts can be made in non-defense programs other than entitlements, while significant reductions are made in entitlements. At the same time, the size of the deficits remaining after such cuts are made likely will make tax increases unavoidable even if Reagan resists them.
The entitlements cuts, a smaller version of which Reagan promised in September but never detailed, will include some reductions that are "plausible but not fully viable" politically, the official said. But the administration is more interested in the overall amount of the cuts than their specifics. If Congress balks, then Reagan can say, change the mix but give me the total.
By all assessments, the president will not reduce his request for large increases in defense spending.