The Republican-controlled Senate Budget Committee yesterday ran out of patience and began rewriting President Reagan's budget by rejecting as too optimistic the economic assumptions that he used to keep his projected deficit for next fiscal year under $100 billion.
Voting 16 to 1, the committee adopted a less optimistic economic forecast prepared by the Congressional Budget Office, under which Reagan's budget would produce a deficit of $121 billion, instead of $91.5 billion, even if Congress agreed to all the spending cuts and tax increases he has proposed.
Congress, however, has signaled repeatedly that it will not agree to all these proposals, and the CBO projects a deficit of $157.7 billion for next year if no budget savings are approved.
Negotiations are currently under way between White House officials and congressional leaders on compromise spending cuts and tax increases, but Reagan has held firm on the key items: the individual tax cuts scheduled this year and next, his defense spending buildup and no cuts in Social Security.
"We're sending a signal that we've got to go . . . we've got to move," said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) before the meeting started.
Sen. Howard M. Metzenbaum (D-Ohio) was even more explicit after the vote rejecting Reagan's economic assumptions, saying publicly what some Republicans were saying privately: "That vote was a telegram to the White House. 'Mr. President, everyone is off the reservation, and you better shape up or we'll ship out on our own.' "
The committee took its first step toward an open break with Reagan on the budget as the Senate refought last year's fight over special tax breaks for members of Congress, during which Majority Whip Ted Stevens (R-Alaska) delivered an extraordinary attack on the city of Washington.
Defending the tax break of up to $75 a day that Congress approved for its members, Stevens portrayed Washington as a hardship post in which life is made miserable by high crime rates, poor schools and dirty air.
"God forbid that someone should tell me that the city of Washington is my home," said Stevens, adding: "I can't think of a worse city to have as capital and I don't care who knows it."
The tax break issue had still not been finally resolved when the Senate quit late last night after more than six hours of tumultuous debate. But earlier in the evening, by 77 to 20, the Senate indicated it wanted to repeal the politically controversial tax break and return, as proposed by Sen. William L. Armstrong (R-Colo.), to the former limit of $3,000 a year that can be deducted for Washington living expenses. If it does so, however, the House is considered unlikely to go along.
Such action by the Senate would jeopardize chances of final approval of the bill to which the provision repealing the tax break was attached as a rider: stopgap funding for seven government departments for which interim funding expires at midnight Wednesday.
Unless the two houses can agree on a bill by midnight, the Treasury, Health and Human Services, Education, Labor, State, Justice and Commerce departments face shutdown on Thursday in the latest of many congressional attempts to hold government agencies hostage for approval of riders to appropriations bills.
The first Senate vote on the so-called continuing resolution came in the face of a strong appeal from Majority Leader Howard H. Baker Jr. (R-Tenn.) to avoid the temptation of dressing up the bill with politically attractive riders.
"We play Russian roulette with the government every time we get a chance," complained Baker. "It used to be we did it by accident; now we do it by design . . . . It's going to shut down the poor old FTC Federal Trade Commission one more time."
But Stevens angrily threatened to bring up amendment after amendment to keep from losing the congressional tax break, including one that would force senators to vote on whether to take a 10 percent pay cut, which is an issue that some senators would rather avoid.
Stevens' pay cut proposal was pending when the Senate recessed, shortly after Sen. Joseph R. Biden Jr. (D-Del.) characterized the debate as an "absolute travesty" and Baker asserted that the Senate had "reached the end of our rope." "Once a year we run off a cliff just for the exercise of it," complained Biden. Said Sen. Robert J. Dole (R-Kan.): "If ever a case was made for no televising of the Senate, it was made today."
Before quitting, the Senate voted 55 to 43 to require members of Congress to disclose their tax returns, but the proposal by Sen. Paul E. Tsongas (D-Mass.) was contingent on eventual passage of Armstrong's amendment. Defeated earlier was a proposal by Stevens to couple tax return disclosure with a $5,000 limit on tax reductions for Washington living expenses.
The Budget Committee's decision to start rewriting Reagan's budget reflected mounting congressional frustration over Reagan's failure to make budget concessions that could lead to lower deficits, especially in future years. "I think it's absolutely urgent we move and move with dispatch," said Domenici, explaining that "reliable" economic assumptions were the necessary starting point for considering deficit reductions.
"This isn't a game of budget chicken," added Sen. Ernest F. Hollings (S.C.), ranking Democrat on the committee, who has been working closely with Domenici on a possible bipartisan compromise. "This is serious business." Said Sen. J. Bennett Johnston (D-La.): "The problem is the 'great communicator' . . . he's got to get on board and soon."
The CBO's projections are predicated on the view that Reagan underestimated the cost of some government programs and overestimated the likely performance of the economy over the next few years. For 1983, CBO predicts slower economic growth, stemming largely from higher interest rates than Reagan predicted and a correspondingly slow economic recovery. For future years, CBO also predicts higher inflation, unemployment and interest rates than the administration does.
On the spending side, CBO contends that the administration underestimated the cost of farm price supports, defense procurement, receipts from Outer Continental Shelf oil leasing and interest on debt. Even though CBO foresees much higher deficits than Reagan does, especially in the future, Domenici said he thought CBO was probably also too optimistic. "If anything, they the deficits will be higher," he said.
Democrat after Democrat on the committee complained that Congress needs a signal from Reagan before it can act. "Do we want to make these political kamikaze raids and get vetoed?" asked Johnston, who said the committee could come up with a bipartisan budget "by morning" if Reagan would only send a signal of willingness to compromise.
But Armstrong, a member of the committee, responded that Reagan has "already sent a signal" that he wants his budget as is. "Some of us just don't think it's a very desirable signal," added Armstrong.
The only dissenting vote came from Sen. Robert W. Kasten Jr. (R-Wis.), who said the committee was making "a mistake to start off by rejecting the administration's economics."