Republican-controlled Senate committees indicated yesterday that they are likely to bust President Reagan's budget for so-called "discretionary" domestic programs by about $10 billion, and Majority Leader Howard H. Baker Jr. (R-Tenn.) appealed urgently to the chairmen to look for further cuts.
Criticism of Reagan's budget up to now has focused on the size of the fiscal 1983 deficit, calculated at $91.5 billion by the president and $120.6 billion by the Congressional Budget Office. But the committees, by also refusing to endorse most of Reagan's proposed cuts in domestic appropriations, were suggesting that the deficit may well end up at least $10 billion higher.
The committee rebellion surfaced as Federal Reserve Chairman Paul A. Volcker warned the Senate Budget Committee that economic recovery could be aborted if Congress fails to make deficit reductions at least as deep as Reagan has proposed.
"I would urge upon you the desirability of going even further to reduce demonstrably the pattern of deficits as the economy recovers," said Volcker, adding that most of the deficit reductions should come from spending cuts rather than tax increases.
In a similar warning to the chairmen of Senate committees, Baker said Congress faces "the certain prospect of deficits of more than $100 billion in 1983 and the years beyond" unless spending cuts are at least as large as Reagan has proposed.
"The economic consequences of such prolonged and large deficits could very well be further high interest rates and an aborted recovery that could jeopardize our party's economic platform," said Baker in urging the chairmen to restrain the spending zeal of their committees.
What prompted Baker's appeal to the chairmen was an informal poll of authorizing committees showing that they think they will exceed Reagan's proposals by $29 billion in budget authority, which a congressional budget aide said translates into about $10 billion more than Reagan wants in actual spending for fiscal 1983.
In his budget request, Reagan had proposed $14 billion in domestic appropriations savings as part of $56 billion in overall deficit reductions. A $10 billion spending overrun would mean savings of only $4 billion in domestic appropriations.
Even that is doubtful, according to Senate Appropriations Committee Chairman Mark O. Hatfield (R-Ore.), who said in an interview yesterday that Congress will "do well" just to hold the line on spending, meaning no cuts below fiscal 1982 spending levels.
Describing the preliminary indications from the authorizing committees as "staggering," Hatfield added: "This is only further indication that holding the line is the most optimistic we can do."
Hatfield said he expects that appropriations subcommittees will differ little from the authorizing committees when they report their anticipated spending levels next week.
Actual spending levels will not be set until later in the year, but the committees are required to submit projections by next Monday to the Budget Committee to aid in preparation of budget targets for fiscal 1983. It was in connection with these projections that the informal poll was taken so reductions might be considered before Monday's deadline.
The Senate Finance Committee, voting formally yesterday on its proposal to the Budget Committee, came within Reagan's target figures but indicated it would do so by raising taxes more than the administration wants and cutting spending by less than it wants.
Because the Finance Committee has jurisdiction over basic benefit or entitlement programs as well as taxes, this means that entitlements--like appropriations--will probably be cut less than Reagan has proposed.
The committee met Reagan's targets by simply forwarding his recommendations, but it included language reserving the right to change the mix of tax and spending proposals. "We are not locking ourselves into anything," said Chairman Robert J. Dole (R-Kan.).
In the House, however, there was an outright rebellion in the Agriculture Committee as Democrats, joined by Republicans, rejected Reagan's spending cuts for commodity price supports and conservation programs. This effectively wiped out the 20 percent reduction that Reagan recommended for agriculture. Still awaiting action are other big farm-related programs like food stamps.
In his Senate testimony, Volcker suggested that some of the budget alternatives circulating in Congress would have "a very strong reaction" on financial markets, leading to lower interest rates. But he declined to say how much of an interest rate decline might be expected from alternatives such as those proposed by Budget Committee Chairman Pete V. Domenici (R-N.M.).
While he favored spending cuts over tax increases, Volcker said Congress should not "shrink from closing the budget gap on the revenue side" if this is necessary, which he said seems "likely."