Federal Reserve Board Chairman Paul A. Volcker broke with President Reagan yesterday, saying he has doubts a proposed constitutional amendment making it harder to unbalance the federal budget would work.
Reagan endorsed the amendment in a nationally televised speech last week on his own budget for the next fiscal year, under which experts say the deficit is likely to be $182 billion.
Testifying before a House Judiciary subcommittee, Volcker said that debate on the amendment should "not become a kind of substitute or surrogate for the action needed, here and now, to deal with the pressing current situation."
That seemed a jab at those among the amendment's mostly Republican sponsors who hope that by voting for it this summer they can cloak the votes they may also be called upon to cast in favor of a high deficit for fiscal 1983.
Volcker expressed sympathy for the proposed amendment's underlying rationale, which is to force Congress to discipline itself in taxing and spending and come up with balanced budgets in most years.
The present version is an advance over previous ones, he said, and "is coming close to something that is workable." But he advised caution, warning that there is no clear mechanism for enforcing the balanced-budget requirement. He questioned whether it would work in the current situation "when a sizable deficit for a few years ahead appears inevitable."
The proposal facing Congress this year requires a balanced budget unless a three-fifths majority in both houses specifically votes for a deficit. It has been voted out by the Senate Judiciary Committee, has 55 Senate sponsors, and may come to the floor in that chamber next month.
An identical version has 202 sponsors in the House but is less assured of reaching the floor. The amendment is strongly opposed by Rep. Peter W. Rodino Jr. (D-N.J.), chairman of the House Judiciary Committee, and the House Democratic leadership is hostile.
Supporters in the House, led by Rep. Barber B. Conable Jr. (R-N.Y.), hope to use a discharge petition to extract the amendment from Judiciary and put it before the full House.
Sources said this would be timed to coincide with votes on raising the debt ceiling or passing a regular budget resolution for 1983. That would enable members to claim they voted against future budget deficits while approving a higher debt limit and a large immediate deficit.
Pressure for Congress to act has come from the states. Thirty-one state legislatures have approved petitions for a constitutional convention that would consider a similar amendment, although the movement in other state legislatures has shown little progress lately. Approval by 34 legislatures is needed to call a convention.
Rodino, who is also chairman of the subcommittee before which Volcker testified yesterday, warned that a "legislative stalemate" would result if the amendment were to pass and Congress proved unable to muster a three-fifths majority to unbalance a budget in years when that was regarded as advisable to stimulate the economy.
"I want to move cautiously on any proposal that would enshrine in the Constitution a statement of economic policy that may be only of scant value," Rodino added.
The subcommittee's ranking Republican, Robert McClory (R-Ill.), endorsed the amendment, contending that Congress has lost control and lacks "political accountability" in the budget process. He told Rodino he anticipates a markup on the amendment later this month, but the chairman ignored the remark.
Volcker did not directly put the blame on either President Reagan or Congress for producing the current situation in which large deficits are projected for the next few years, and he studiously objected to a comment by Rep. Don Edwards (D-Calif.) placing the blame on tax cuts passed at Reagan's urging last year.
But Volcker said he shared the feeling of the amendment's supporters that the "political process" has created a bias toward "more spending and less taxation--in other words, toward budgetary deficits--than is healthy for the economy or for governmental efficiency.
"The cost has been obscured, but it is real--a bias toward inflation, too little private investment, and possibly toward a federal sector inefficiently large."