Predicting that Republicans will lose 30 or more House seats in November if the budget impasse is not broken soon, Sen. Paul Laxalt (R-Nev.), probably President Reagan's closest friend in Congress, called on the president yesterday to signal quickly that he is willing to compromise on both defense spending and Social Security benefits.
Laxalt's warning that "time is running out" on a budget compromise came as senior White House aides indicated some readiness to give ground on spending questions as long as the original Reagan three-year tax cut is preserved.
In a speech to the National Association of Realtors at the Washington Hilton Hotel, Reagan continued to defend his original economic program and said he opposes a "budget-busting bailout" for the troubled housing industry. Details, D8
But Reagan also said he was "open to any and all suggestions to reduce the size of the federal deficit that do not endanger our freedom."
The president offered in the speech to "put aside . . . political differences," and aides pointed to this passage, saying he was seeking to avoid partisanship in the budget debate.
Laxalt told reporters that, "knowing Reagan," he was convinced the president "will play his cards right to the end, but he's not going to take the economy and his party over the cliff."
But the senator, who headed Reagan's presidential campaigns in 1976 and 1980, said that is where the economy and party are headed unless a compromise budget plan is passed by the middle of May.
Laxalt did not specify what kinds of cuts in defense or Social Security might be required to produce a compromise. Deficit-reducing ideas of all kinds are being discussed in Congress and in the administration. They range from such revenue-raisers as an oil import fee or gasoline tax increase to sizable cuts in spending programs that in previous years were regarded as sacred cows--restricting cost-of-living increases in Social Security, for example.
In Congress yesterday, the administration was accused by House Budget Committee Democrats of abusing its authority by "impounding virtually every add-on over the president's budget," as Rep. Norman Y. Mineta (D-Calif.) put it.
Office of Management and Budget Director David A. Stockman declined to appear at a hearing on the alleged abuses, but Democrats used the occasion to list a number of instances in which they said OMB refused to spend appropriated funds.
In a letter, Stockman joined Senate leaders in opposing any amendments to the House-passed "continuing resolution" to keep seven government departments operating after midnight Wednesday, when their current stop-gap funding expires.
Among the amendments under consideration are proposals to force prompt House action on anti-busing legislation, to modify the tax break that Congress approved for itself last year and to initiate government-wide talks to bring down interest rates. Senate leaders fear amendments could lead to a House-Senate impasse and a shutdown of the departments on Thursday.
Laxalt told reporters at a luncheon that he had "never seen a better climate for compromise" within Congress, but said it would disappear by the end of the Memorial Day recess in the partisan pressures of an election year, unless Reagan moved quickly to demonstrate his own flexibility.
White House aides said Reagan is being pushed in that direction by two factors. Polls show the president is suffering from an image of intransigence, of being "locked in concrete," as one aide put it. And economists inside and outside government are telling him that there will be no significant decline in interest rates or sustained recovery until Congress and the White House work out their differences and come up with a credible plan for reducing the deficits.
But Laxalt conceded that in all his conversations with Reagan, the president "remains supremely confident" that his own budget will bring economic recovery and thinks Laxalt is a victim of "Capitol Hill panic."
Arguing the opposite view, the senator said that if Republicans go into the fall campaign with unemployment and interest rates at or near current levels, "we could lose 30 or more seats in the House" and be stalemated in the Senate, increasing the chances of a Democratic takeover in 1984.
Laxalt and White House aides said they believe Reagan is adamant on preserving the scheduled third year of personal income tax cuts in 1983 and would veto any budget that eliminated those promised reductions. But there have been hints from presidential advisers that Reagan would accept at least "symbolic" cuts in Pentagon spending.
Laxalt said he had seen no such flexibility as yet in the president, but believed ultimately Reagan would have to weigh his desire for every dollar of defense spending against the risks of a budget stalemate to "a strong economy and his remaining strong politically."
Agreement on some moderation of the defense buildup is seen by Laxalt and the White House aides as a precondition for Democratic support of reductions in domestic entitlement programs. Even then, they acknowledge, agreement would be tricky, because, as one aide put it, "No one wants to get out front and get shot in the back."
In addition to Laxalt, calls for Reagan to soften his stance came from Senate Finance Committee Chairman Robert J. Dole (R-Kan.) and Senate Minority Leader Robert C. Byrd (D-W.Va.).
Dole told the realtors, according to United Press International, that "we're right on the threshold of a budget breakthrough," but the compromise must come in a matter of "days and weeks, not months any longer."
Senate Republican leaders are scheduled to decide today whether the Senate Budget Committee should begin drafting a budget resolution or await results of talks between House Democrats and White House chief of staff James A. Baker III on possible compromises. Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) said there was a "50-50 chance" that the go-ahead sign will be given.
Even if the committee starts, there is no guarantee it would finish the budget before the Senate starts its Easter recess late this week. A Republican leadership source said some progress is being made in the talks with House Democrats and "there is reluctance to get in the way."