President Reagan would rather see Congress pass no budget at all than one with a tax increase, a presidential spokesman said yesterday as the Republican-controlled Senate, sharply divided over taxes, struggled inconclusively to pass a budget.
"Any tampering with the tax cut . . . any tax increase is just, for him, totally the wrong thing to do," said deputy White House press secretary Larry Speakes.
He apparently was referring to a plan by Republican moderates that would raise taxes by $14 billion next year by imposing a $300 cap on the July income tax cut.
Asked what Reagan would do if the choice were between "no budget resolution and a tax increase," Speakes responded without hesitation, "No budget resolution."
Speakes' comment in response to reporters' questions came amid mounting congressional speculation that the Senate's budget difficulties could result in failure to approve a budget for the first time since passage of the Congressional Budget Act a decade ago.
However, Majority Leader Howard H. Baker Jr. (R-Tenn.) told reporters last night that he remains confident that the Senate will pass a budget, probably today, although he conceded that he had no idea what would be in it.
But, even if the Senate passes a budget, House Republican leaders are considering a strategy of trying to scuttle it if it includes substantial tax increases. That development drew a scathing response yesterday from House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.).
"Acting more like political muggers than legislators, they have failed to come up with a program to deal with the staggering deficits this nation faces . . . . If they succeed, their bankrupt program will bankrupt this nation," said O'Neill.
With time about to run out on the Senate's 50-hour budget debate, Baker described himself as only "mildly optimistic" that the Senate will approve a leadership-sponsored budget that would preserve Reagan's tax cut program at a cost of higher deficits.
Baker's ebullience of earlier days appeared to fade as the Republican moderates held out for a higher-tax, lower-deficit plan of their own and clung to a strategic advantage by withholding action on it until after the Senate disposes of the leadership plan.
Several Republican senators acknowledged that their only hope of winning was to dispose first of the moderates' plan, relying on Democrats to split sufficiently to deny it a majority and then counting on the GOP mavericks to return to the party fold.
So the Senate remained in a kind of Alphonse-Gaston standoff as evening approached, prompting needling from Democrats who, after two years of being trampled by a unified Republican majority, clearly were relishing the disarray in the GOP camp.
Accusing the Republican leaders of flinching from a vote on their own plan, Sen. Daniel Patrick Moynihan (D-N.Y.) commented at one point that the Republicans had turned into the "catatonic majority," and suggested that senators could find better things to do off the Senate floor.
"The West Front of the Capitol is falling down," said Moynihan. "At least we could watch that."
In response to Democratic complaints that Republicans are bailing out on the congressional budget process because they can't get their way, Budget Committee Chairman Pete V. Domenici (R-N.M.) looked grimly at the Democrats and said flatly, "I want a budget resolution, I want you to know that."
Domenici went on to defend the leadership plan, which he drew up, saying that higher tax increases proposed by both the Republican moderates and the Democrats simply won't be approved by Congress. "No one's going to put any big taxes on people before 1986," he said.
The Baker-Domenici leadership plan would preserve Reagan's tax cut and allow only nominal tax increases that Reagan has proposed for the next two years, while cutting back on his proposed defense spending increase and allowing about $11 billion more domestic spending than he wants.
The major difference between the leadership's plan and the moderates' plan is taxes.
The moderates' plan, as proposed by Sens. John H. Chafee (R.I.), Mark O. Hatfield (Ore.), Charles McC. Mathias Jr. (Md.), Robert T. Stafford (Vt.) and Lowell P. Weicker Jr. (Conn.), would provide basically the same domestic spending as the leadership plan, slightly less defense spending and tax increases of $70 billion over the next three years.
The moderates are suggesting that the tax increases could be achieved by a $300 limit on the 10 percent income tax cut scheduled for July, which would restrict the savings to about the first $20,000 of income a year, and repeal of legislation that indexes tax rates to inflation after next year.
Democrats, who also back higher tax increases than the Republican leadership has proposed, have indicated interest in the moderates' plan. But there were doubts on both sides of the aisle yesterday whether enough Democrats would unite with Republicans to pass it, especially if the Baker-Domenici leadership plan was still alive.
Baker met last night with the five moderate leaders in an attempt to resolve the dispute, and moderates are expected to meet again today before deciding their final strategy. Hatfield said they are considering "refinements" to their plan, and other sources said the leadership and moderates are trying to work out a procedural agreement to resolve the question of who goes first.