The AFL-CIO's 35-member ruling executive council said today that increases in U.S. defense spending should be held to 5 to 7 percent a year after inflation, but it fuzzed the wording to mollify some members who wanted increases kept at 5 percent or less.

The proposal was based on the labor federation's first independent study of defense needs.

The defense report completed an AFL-CIO budget package that also calls for a $46 billion appropriation in fiscal 1984 to create jobs, stimulate the economy and "ease human suffering and hardship."

The proposals will serve as a standard for comparison of presidential candidates seeking the federation's endorsement, scheduled tentatively for next December.

President Reagan's fiscal 1984 budget proposal would increase defense spending by 9 to 10 percent a year.

AFL-CIO President Lane Kirkland and other council members argued in the closed-door meeting that, while Reagan is asking too much, anything below 7 percent could harm national security.

Among those union presidents who called for holding increases at 5 percent or lower, according to sources, were Vincent R. Sombrotto of the National Association of Letter Carriers, William H. Wynn of the United Food and Commercial Workers Union, Gerald McEntee of the American Federation of State, County and Municipal Employes, Douglas A. Fraser of the United Auto Workers and William W. Winpisinger of the Machinists Union.

The labor council based its proposals on the recommendations of a special defense committee set up in reaction to what labor leaders perceived to be the skewed priorities of the Reagan administration. The committee has met 16 times, heard 25 defense experts, observed military exercises at Fort Bragg and sent a delegation to tour NATO facilities in Britain, the report said.

The labor package "would bring some balance to defense expenditures, maintain essential domestic programs and provide 900,000 jobs for the unemployed in 1983 and 1.8 million in 1984," Kirkland said. "Those jobs would provide a new stimulus to the economy that would put us back on the road to full employment."

The labor federation proposes to pay for the programs by closing various tax loopholes "that benefit only the richest individuals and corporations." It would also ask for a $700 cap on the fiscal 1983 income tax cut and repeal of future indexing of tax rates, along with changes in the foreign tax and investment tax credits.

The committee proposed that starting in July, 1984, "a special surtax to cover the real increases in defense spending should be levied on the corporate and individual tax plus the income of the wealthy currently sheltered from taxation."

The surtax should amount to about 3 percent the first year and raise $11 billion to $15 billion, the report said.

Kirkland said in answer to a reporter's question that he does not believe it is necessary to make a choice between continued growth in defense spending and the rises in social spending that he proposes.

"I do not support the proposition that the source of domestic spending ought to be defense spending," Kirkland said. "The Constitution imposes upon the people of this country and their legislators the obligation to provide for the common defense and for the general welfare, not or for the general welfare."

He blamed the current deficit problem on the "irresponsible, ruinous tax giveaway of 1981 that stripped the public coffers of hundreds of billions of dollars," and on the administration's "tight money and restrictive credit policies."

The AFL-CIO package, Kirkland said, would increase the deficit slightly in the current year and begin to cut into the deficit in the later years of the budget cycle.

"They would over the next four or five years make very, very substantial reductions in the deficit without even taking into account the secondary effects of the program," which he predicted would cut unemployment and therefore increase revenues and reduce outlays.

In addition to setting targets for increased spending, the defense report found that "pay freezes, whether military or civilian, are not the way to achieve defense savings."

The defense report was the highlight of the first day of the executive council's winter meeting here.

The schedule also included meetings of the council's political arm, the Committee on Political Education. Charles T. Manatt, chairman of the Democratic National Committee, and Frank Fahrenkopf, chairman of the Republican National Committee, addressed the gathering.

Fahrenkopf expressed regrets that communications between labor and the Republican Party are not good and said he wanted to reach out to labor, according to those who were present. He mentioned specific steps that have been taken toward that end such as the establishment of a permanent Republican Party labor advisory committee. He said he wants to establish similar advisory committees in every state.

Manatt reportedly remarked following Fahrenkopf's comments that from now on perhaps Republicans would hold their conventions in union hotels. He was referring to the Republicans' announcement that their next convention will be held in Dallas, which labor considers an anti-union city.