President Reagan yesterday gave qualified approval to a proposed Senate Republican budget compromise for next year that would scuttle most of his domestic spending cuts and put a modest dent in his military buildup but avoid the major tax increase he is resisting.

After Reagan signaled he could live with the proposal despite objections to some of its parts, Majority Leader Howard H. Baker Jr. (R-Tenn.) predicted that enough Republicans will support it to assure Senate passage.

But some Republicans were still holding out for changes, including half a dozen moderates who want tax increases and still more domestic spending, and ranking Budget Committee Democrat Lawton Chiles (Fla.) said a Democratic-led bipartisan coalition is "within striking distance" of being able to pass a budget of its own.

It was just such a coalition that came together on the Budget Committee to report out a plan that resembled in many respects the one already adopted by the Democratic-controlled House, sending Senate Republican leaders scurrying to come up with an alternative that would give the GOP some leverage in a conference on the budget.

After meeting yesterday morning with Reagan, Baker described the president as "favorably disposed toward the concept" of the proposed compromise and added:

"He clearly was pleased by the tax numbers and defense numbers for the first year fiscal 1984 and felt that the domestic spending . . . should be lower. But my guess is his generally favorable disposition toward it will be enough to put the package together and pass it in the Senate."

Other sources said Reagan's approval was conditioned on an agreement by the senators to make no further concessions when they go to conference with the House on the budget.

A Baker aide said the majority leader told Reagan he would "go into conference and try to maintain the Senate position." Said Banking Committee Chairman Jake Garn (R-Utah): "We said we had to take one battle at a time." Budget resolutions, both Baker and Garn noted, are congressional documents that do not have to be signed by the president.

In its current form, as drafted by Budget Committee Chairman Pete V. Domenici (R-N.M.), the compromise would give Reagan about $11 billion more than he wants for domestic programs next year, thereby slowing although not necessarily reversing his drive for retrenchment in social programs.

It would split the difference on defense by providing for a 7.5 percent increase after accounting for inflation next year, which is halfway between the 10 percent that Reagan proposed and the 5 percent that the Budget Committee recommended. The compromise figure is also nearly double the 4 percent defense spending increase approved by the House.

The compromise would provide for 5 percent after-inflation increases for the Pentagon in future years, although Baker noted that only the fiscal 1984 figure, which many expect to be whittled down to 5 or 6 percent in conference, will be binding on Congress in passing appropriations bills.

It is in the area of taxes that the proposed compromise tilts the most toward Reagan and toward conservatives within the GOP.

It would abandon the committee's proposal for more than $130 billion in tax increases over the next three years--which could mean repeal of the remainder of Reagan's tax cut program--and lock in only the roughly $8 billion in new taxes that Reagan wants for the next two years.

It would urge but not require enough new revenue to cover the "standby" tax increases that Reagan proposed to reduce likely deficits in fiscal 1986 through 1988.

Although there were still some objections by conservatives to any tax increases, most of the complaints yesterday came from moderate Republicans and Democrats, who objected that the tax increases were insufficient to make a dent in soaring deficits.

According to Senate Reagan Agrees to Live With Budget Compromise Some GOP Moderates Still Seek Changes By Helen Dewar Washington Post Staff Writer

President Reagan yesterday gave qualified approval to a proposed Senate Republican budget compromise for next year that would scuttle most of his domestic spending cuts and put a modest dent in his military buildup but avoid the major tax increase he is resisting.

After Reagan signaled he could live with the proposal despite objections to some of its parts, Majority Leader Howard H. Baker Jr. (R-Tenn.) predicted that enough Republicans will support it to assure Senate passage.

But some Republicans were still holding out for changes, including half a dozen moderates who want tax increases and still more domestic spending, and ranking Budget Committee Democrat Lawton Chiles (Fla.) said a Democratic-led bipartisan coalition is "within striking distance" of being able to pass a budget of its own.

It was just such a coalition that came together on the Budget Committee to report out a plan that resembled in many respects the one already adopted by the Democratic-controlled House, sending Senate Republican leaders scurrying to come up with an alternative that would give the GOP some leverage in a conference on the budget.

After meeting yesterday morning with Reagan, Baker described the president as "favorably disposed toward the concept" of the proposed compromise and added:

"He clearly was pleased by the tax numbers and defense numbers for the first year fiscal 1984 and felt that the domestic spending . . . should be lower. But my guess is his generally favorable disposition toward it will be enough to put the package together and pass it in the Senate."

Other sources said Reagan's approval was conditioned on an agreement by the senators to make no further concessions when they go to conference with the House on the budget.

A Baker aide said the majority leader told Reagan he would "go into conference and try to maintain the Senate position." Said Banking Committee Chairman Jake Garn (R-Utah): "We said we had to take one battle at a time." Budget resolutions, both Baker and Garn noted, are congressional documents that do not have to be signed by the president.

In its current form, as drafted by Budget Committee Chairman Pete V. Domenici (R-N.M.), the compromise would give Reagan about $11 billion more than he wants for domestic programs next year, thereby slowing although not necessarily reversing his drive for retrenchment in social programs.

It would split the difference on defense by providing for a 7.5 percent increase after accounting for inflation next year, which is halfway between the 10 percent that Reagan proposed and the 5 percent that the Budget Committee recommended. The compromise figure is also nearly double the 4 percent defense spending increase approved by the House.

The compromise would provide for 5 percent after-inflation increases for the Pentagon in future years, although Baker noted that only the fiscal 1984 figure, which many expect to be whittled down to 5 or 6 percent in conference, will be binding on Congress in passing appropriations bills.

It is in the area of taxes that the proposed compromise tilts the most toward Reagan and toward conservatives within the GOP.

It would abandon the committee's proposal for more than $130 billion in tax increases over the next three years--which could mean repeal of the remainder of Reagan's tax cut program--and lock in only the roughly $8 billion in new taxes that Reagan wants for the next two years.

It would urge but not require enough new revenue to cover the "standby" tax increases that Reagan proposed to reduce likely deficits in fiscal 1986 through 1988.

Although there were still some objections by conservatives to any tax increases, most of the complaints yesterday came from moderate Republicans and Democrats, who objected that the tax increases were insufficient to make a dent in soaring deficits.

According to Senate Budget Committee sources, deficits under the proposed compromise would be $192.4 billion in 1984 and $186.3 billion in 1985, which is higher than either the Senate committee or the House projected in their plans.

Chiles called the compromise tax proposal a "rinky-dink" scheme that would jeopardize economic recovery by keeping deficits high and said it was even a retreat from Reagan's budget because it would not nail down contingency taxes for the future.

In proposing these contingency taxes, Reagan had imposed several conditions, including congressional acceptance of his domestic spending cuts. His tacit approval yesterday of $11 billion in add-backs left that condition in doubt. White House aides said Reagan's position on the issue would depend on final decisions in the House-Senate budget conference.

As Republicans continued their behind-the-scenes efforts to agree among themselves, the Senate continued a second day of desultory debate on the budget as Sen. Orrin G. Hatch (R-Utah) introduced what amounts to a modified three-year budget freeze, which is not expected to pass.

The GOP compromise will not be introduced for a day or so, according to leadership aides, and final action by the Senate is not anticipated before the middle of next week.

With Democrats and left-of-center Republicans complaining about deficits and conservatives putting tax cuts ahead of deficit reductions, Baker observed ruefully as he left the White House yesterday that "it's sort of Alice-in-Wonderland time in the Senate."

"Those are role reversals. They both sides are both right as a matter of fact, but it's strange to see. It's made it difficult to pull together a package," he added.

Staff writers David Hoffman and Juan Williams contributed to this report. Budget Committee sources, deficits under the proposed compromise would be $192.4 billion in 1984 and $186.3 billion in 1985, which is higher than either the Senate committee or the House projected in their plans.

Chiles called the compromise tax proposal a "rinky-dink" scheme that would jeopardize economic recovery by keeping deficits high and said it was even a retreat from Reagan's budget because it would not nail down contingency taxes for the future.

In proposing these contingency taxes, Reagan had imposed several conditions, including congressional acceptance of his domestic spending cuts. His tacit approval yesterday of $11 billion in add-backs left that condition in doubt. White House aides said Reagan's position on the issue would depend on final decisions in the House-Senate budget conference.

As Republicans continued their behind-the-scenes efforts to agree among themselves, the Senate continued a second day of desultory debate on the budget as Sen. Orrin G. Hatch (R-Utah) introduced what amounts to a modified three-year budget freeze, which is not expected to pass.

The GOP compromise will not be introduced for a day or so, according to leadership aides, and final action by the Senate is not anticipated before the middle of next week.

With Democrats and left-of-center Republicans complaining about deficits and conservatives putting tax cuts ahead of deficit reductions, Baker observed ruefully as he left the White House yesterday that "it's sort of Alice-in-Wonderland time in the Senate."

"Those are role reversals. They both sides are both right as a matter of fact, but it's strange to see. It's made it difficult to pull together a package," he added.