House and Senate budget conferees agreed yesterday to cut nearly $2 billion from food stamps by 1985 but stalled over a proposal to save more than $4 billion by imposing a three-year freeze on pensions of 1.1 million federal civilian and military retirees under age 62.
The conferees will return Monday to consider cuts in dairy price supports and the highly controversial pension issue, which appeared to be settled but then unraveled when the administration and some senators objected to the disproportionate impact of the freeze on military pensioners, who constitute most of the government's earlier retirees.
Negotiators came up with the freeze idea after House Democrats balked at the Senate's proposal for a 4 percent "cap" on cost-of-living increases for all government pensions. They called it the opening wedge for a similar squeeze on Social Security inflation adjustments next year.
The idea behind the freeze for younger retirees was that most of them, unlike older retirees, are still likely to be working and, in many cases, receiving inflation adjustments in their pay.
Sen. Ted Stevens (R-Alaska), who proposed the plan, said the conferees are still considering a variation on its theme, such as giving half the cost-of-living adjustment to younger retirees and making up the rest of the required savings by a one- or two-month delay in payment of the inflation adjustment next year.
The negotiations on food stamps, dairy price supports and federal pensions are the last key elements in a collection of budget-savings measures aimed at cutting about $30 billion from domestic spending programs over the next three years. The spending reductions are considered a necessary down payment for passage of the pending tax increase of nearly $100 billion for the same period.
The program cuts, which are expected to be followed by other savings from military and domestic appropriations for fiscal 1983, were required in the budget that Congress passed earlier this year under pressure from President Reagan for continued retrenchment in federal spending.
The agriculture conferees delayed action on the dairy portion of their bill until Monday, but agreed on food stamps by splitting their money differences down the middle.
The House version called for three-year savings of $1.3 billion; the Senate, $2.5 billion. The tentative agreement calls for cuts of $1.98 billion, which would translate to about $3 per month for a four-person household with no other income.
Major changes also were agreed to for wheat, corn, feed grain and rice supports through 1985. Farmers would get bigger loans and payments for not planting up to one-fourth of their land, moves aimed at improving sagging farm prices and cutting overproduction.
The conferees agreed that these steps, although controversial, would result in savings to the government. Federal wheat costs would be down $273 million over the three years; corn and feed grains, down $69 million, and rice, $19 million.
The wheat diversion directs voluntary reduction of 15 percent and paid reduction, at a rate of $3 a bushel, for an additional 10 percent. The corn, feed grain and rice formulas are similar, with payments of $1.50 a bushel for corn and $3 per hundredweight for rice. Partial advance payments are authorized to improve farmers' cash flow.
The largest portion of the food stamp savings, about $510 million over the three years, would come through reductions in benefit increases due as the food-inflation index rises.
Chairman Frederick W. Richmond (D-N.Y.) of the House nutrition subcommittee objected bitterly to the cut. He said the program already provides "a diet no one can live on . . . . I wish some of you senators would try to live on the thrifty food plan. You'd lose a lot of weight."
Richmond indicated he would attempt to reopen the issue after the dairy matter is settled. Substantial budget cuts are expected in that area.
Although his House colleagues abandoned him on the benefits-calculation provision, they won on several key points that food stamp supporters considered vital.
One involved a Senate provision, backed by the administration, to allow states to pay recipients cash instead of issuing them food stamps. Critics feared this would undermine nutritional aspects of the program.
Sen. Patrick J. Leahy (D-Vt.) wondered if recipients could buy liquor or "go to dirty movies" rather than buy food with the money. Agriculture Department official John Bode conceded "it could be done . . . . They could spend it any way they wished."
The House refused to budge from its opposition and after Richmond promised to hold hearings on the issue the Senate conferees backed away from their state-option cash-payment scheme.
On a related issue, the senators altered their position on nutrition aid to Puerto Rico, which for the first time this year is paying recipients cash for their food assistance.
Puerto Rican aid will continue in the form of a block grant, but House language was adopted directing the island commonwealth to distribute the aid in a form other than cash after Oct. 1, 1983.
The senators also retrenched on an amendment by Sen. S.I. Hayakawa (R-Calif.), who wanted pilot projects to require able-bodied food stamp recipients to work at least 20 hours a week. He wanted at least seven pilot projects; he settled for four.
The Stevens proposal to eliminate cost-of-living increases for federal retirees under age 62 would have affected about 150,000 on the civilian side and 980,000 from the military, or roughly two-thirds of all military retirees, according to conference staff members.
The only exceptions would have been disabled retirees and survivors of retirees, who would have continued receiving inflation adjustments.
The proposal would have given full cost-of-living increases, as determined by the Consumer Price Index, to retirees aged 62 and over, but withheld them for those under 62 until 1985, except when the CPI rose higher than the inflation level set in the annual congressional budget. The younger retirees would have been eligible only for the difference between the budget projection for inflation and the actual CPI.
Coupled with other relatively small pension savings already approved by the conferees, this would have saved about $4.5 billion over three years, about $1 billion short of the budget target but considerably more than the token savings that the House had approved.
"I'm ready to throw in the towel. It's about as good as we can get," said the chairman of the House Post Office and Civil Service Committee, Rep. William D. Ford (D-Mich.), who had held out against any limit on general pensions. But when Stevens checked with Senate Government Affairs Committee Chairman William V. Roth (R-Del.), who held the proxies for other Senate conferees, the deal fell apart.
Stevens told reporters that Office of Management and Budget Director David A. Stockman "raised an equity question" about the extent to which military retirees would bear the burden of the pension cut, but added that the main stumbling block was objections from senators on the same grounds. "A very quick reading was 'no,' " he said.