Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) declared yesterday that unemployment has "reached a point where it is politically unacceptable to the American people" and said the budget should now aim more at stimulating growth than containing inflation.
While on the one hand still urging curtailment of defense as well as domestic spending to reduce soaring deficits, Domenici indicated in a session with reporters that his first concern has shifted from inflation-fighting budget cuts to a fiscal policy aimed at fostering economic growth and job development.
"We can't cut the budget of the United States fast enough under any circumstances that I can see to make up for the loss of revenue occurring because of deflation and recession," he said, adding that, even with spending cuts, "some very large deficits" can be expected over the next few years.
Domenici's comments reflect a growing sense among Republicans that policy must shift in light of rising unemployment and the Nov. 2 midterm election results.
They came as the Reagan administration confirmed that it is considering several proposals to help reduce unemployment and the House Appropriations subcommittee on defense began work on its chairman's proposal to cut $33.3 billion from President Reagan's costly military buildup program.
The job initiatives under study by the administration include tax credits for companies that hire young people and wage subsidies for companies that hire jobless workers who have exhausted their regular 26 weeks of unemployment benefits.
Under the wage subsidy plan, a person could either remain unemployed and receive 13 weeks of extended unemployment benefits or receive a government voucher worth the same amount, which would go to an employer as a subsidy for hiring the worker. The government would get back some of the cost from income taxes the worker would pay.
Under another proposal being studied by the administration, workers would be allowed to receive at least some unemployment benefits if they took part-time jobs. In most states, workers lose all their benefits when they work part-time.
Administration officials said Reagan's Council of Economic Advisers and the Labor Department are reviewing these and other proposals in connection with the fiscal 1984 budget that Reagan will submit to Congress in January. But they cautioned that no decisions have been made and that the proposals may turn out to be too costly in relation to the number of jobs they create.
However, "there is a general consensus in the White House that we have to give employment policy a hard look to see what we can come up with," said an administration official.
But some administration officials said yesterday that Reagan had given budget director David A. Stockman guidelines calling for "fairly sizable" cuts in spending for discretionary programs and entitlements in fiscal 1984. Reagan made the decisions Friday, they said, and reviewed them yesterday. The officials would not disclose the size of spending cuts, and they added that Reagan has not yet made budget decisions on the Pentagon and Social Security.
As House defense appropriators began considering Reagan's $249.5 billion military spending request for fiscal 1983, subcommittee chairman Joseph P. Addabbo (D-N.Y.) said "a couple of big-ticket weapons systems" would have to be terminated to meet budget demands for at least a $12 billion reduction in spending authority. He did not identify them, but he previously targeted the MX and Pershing II missiles, B1 bomber and two new nuclear-powered aircraft carriers as unnecessary or too costly.
It is not yet clear whether Addabbo has the votes to do what he wants. But his proposals for cuts are in line with a House Democratic leadership plan to finance an emergency jobs and housing subsidy program in part from military savings.
Domenici also called for defense savings, perhaps as much as $10 billion a year in actual outlays over the next few years, as part of a deficit containment program that would also include a continued freeze on domestic appropriations and further cuts in benefit entitlement programs.
To increase revenues, he said Congress should explore an increase in the gasoline tax, an oil import fee and repeal of so-called tax indexing, under which tax brackets would be modified to account for inflation after 1984. Both the administration and House Democrats are considering a 5-cent-a-gallon increase in the gasoline tax -- now 4 cents a gallon -- for road and bridge projects.
But in general both Congress and the Federal Reserve should "let inflation take a back seat" to economic growth for the time being, he said, indicating approval for recent Fed actions to encourage lower interest rates.
He said he was not calling for a "super-acceleration of domestic spending" but was not as worried now as in the past about the impact of spending on inflation. While there is room for entitlement cuts, he added, proposals for further big savings in discretionary spending for education, health and transportation "simply won't fly."
With the recession choking off tax revenues, he said, "I just don't know of any way that I can honestly tell you we can get a balanced budget in a couple of years."