President Reagan Monday will propose a $757.6 billion budget for next fiscal year with deep new spending cuts, a small tax increase and still a $91.5 billion deficit, congressional sources said yesterday.
According to budget details given congressional leaders by Office of Management and Budget Director David A. Stockman, the government would grow by 4.5 percent, less than the anticipated rate of inflation.
Federal workers would receive a pay raise of 5 percent. Cost-of-living increases for federal retirees would be limited in the future to the percentage increase in federal pay or the increase in consumer prices, whichever was less.
The budget anticipates domestic spending cuts of $43 billion below what programs would cost without change, including a $14.2 billion reduction in the miscellany of programs funded by annual apppropriations and an $11.7 billion retrenchment in the larger basic benefit or entitlement programs, principally Medicare, Medicaid, food stamps, Aid to Families with Dependent Children and federal retirement benefits.
These new retrenchments would come on top of about $40 billion in spending cuts approved last year.
A total of $7.2 billion in new revenues would be raised mainly by curtailing existing tax breaks, including $2.3 billion from imposing a minimum tax on corporations.
In addition, $2.5 billion would be raised from user fees to be paid by the aviation, maritime and nuclear industries, with the nuclear fees to be used to provide a fund for waste disposal.
More than $15 billion more is proposed to be saved by what are being called "management initiatives," of which the largest would be an $8.4 billion increase in sales of oil and gas drilling rights on the Outer Continental Shelf.
Also included in this category are other government property sales, improved debt collection and reduced waste, fraud and abuse.
While domestic programs would be cut sharply for the second year in a row, Pentagon spending would rise by $33.1 billion to $215.9 billion, to account for 29 percent of the budget as compared with 24 percent in 1980. The Pentagon's share would rise to 37 per cent in 1986.
Included is $6.8 billion for two new nuclear carriers, $4.5 billion for the MX missile, $4.1 billion for the B1 bomber, $3.7 billion for the Trident submarine and about $1 billion for the cruise missile. An additional $5 billion is provided for other defense-related activities.
Among domestic programs, food stamps would be cut by $2.4 billion by increasing from 30 to 35 percent the amount that benefits are reduced as recipients' incomes rise. The special milk and summer feeding programs would be eliminated.
No new subsidized housing starts would be provided, and the government would take preliminary steps toward a new housing voucher system for the poor.
Money for vocational education and education for the handicapped would be cut. Pell grants for college students would be targeted more toward the very poor, and guaranteed student loans would also be restricted.
Funding for the Comprehensive Employment and Training Act programs, already reduced by eliminating public service jobs, would be further cut and combined into a block grant to the states.
Mass transit subsidies would be cut 38 percent and highway funding by 21 percent. Amtrak would lose $185 million. The president again would propose that the Legal Services Corp. for the poor be abolished.
Energy conservation programs would be ended, along with research and development funding for energy, as the administration moved to dismantle the Energy Department. The Education Department would also go, the president has said. The Export-Import Bank would be cut by 18 percent.
For benefit entitlement programs, the proposed cuts amount to $2.5 billion from Medicare, $2 billion from Medicaid, $1.2 billion from AFDC (basic welfare), the $2.4 billion from food stamps, $300 million from child nutrition, $300 million from Supplemental Security Income (welfare for the aged, blind and disabled), $2.7 billion from federal retirement (by capping cost-of-living increases) and $800 million from guaranteed student loans.
For discretionary programs funded through annual appropriations, the cuts would total $1.2 billion from education, $2.2 billion from training and employment, $3.4 billion from income security and social services, $1.6 billion from energy and natural resources, $1.6 billion from transportation and $4.2 billion from other programs.
Anticipating strongly adverse reaction from Congress to a deficit that could exceed $100 billion if all the spending cuts and tax increases are not approved, as many are predicting, the administration put out figures showing how high the deficit would soar without Reagan's budget initiatives: $147 billion for 1983, $167 billion for 1984 and $171 billion for 1985.
But they also reported that the likely deficit for the current fiscal year is now $98.6 billion, and that in fiscal 1984 and 1985 the deficit will fall only slowly, to about $83 billion the first year and $72 billion the second.
After an hour-long briefing by Stockman for both Democratic and Republican leaders, they said misgivings were voiced about the deficit projections as well as the lack of defense spending cutbacks and cuts in such sensitive programs as feeding for mothers and infants.
"Well, I don't like it," said House Minority Leader Robert H. Michel (R-Ill.), speaking of the deficit.
But, he added, "we're going to have to swallow hard and take it" if there is no other alternative.
There was less alarm about the deficit projection because "we've all been conditioned to it" by reports of possibly even high red-ink figures, said Michel.
The budget is predicated on an assumption of 5.2 percent in economic growth in 1983, together with an inflation rate of 5.5 percent, average unemployment of 7.9 percent and Treasury bill interest rates of 10.5 percent.
For 1982 growth would be 3 percent, inflation 7.2 percent and average unemployment 8.9 percent, congressional sources said the budget assumes.