House-Senate budget conferees agreed last night on a budget of nearly $860 billion for next year that the White House already has labeled unacceptable in all its major features.
The budget, which conference leaders cautiously predicted would pass both houses, calls for higher taxes and more domestic spending, along with less for defense, than President Reagan wants.
It anticipates a deficit of $170 billion to $179 billion for fiscal 1984, depending on how much of an $8.5 billion "reserve" fund of recession relief is authorized by Congress. According to Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), Reagan's budget would have provided a deficit of about $171 billion under economic assumptions used in the congressional budget, although Reagan proposed billions of dollars worth of domestic spending cuts that both houses have rejected.
The agreement allows room for a pay raise of 4 percent for both military and civilian employes of the government, delayed by three months from October to January. It also envisions a six-month delay in cost-of-living increases for federal pensions, similar to the delay in inflation adjustments approved earlier for Social Security.
While the budget is only a tax and spending blueprint for Congress that does not go to the president for signature, Reagan can veto legislation that is passed to enforce it, and he reiterated yesterday that he will veto any tax or spending bills that he regards as excessive.
Returning on Air Force One from Jackson, Miss., with Reagan last night, White House spokesman Larry Speakes criticized the compromise plan. "At first blush, it doesn't look much better than what they had earlier. It doesn't show a lot of prospect," he said.
Speakes said the proposed defense spending increase of 5 percent after inflation is "way too low to defend the country." Asked about the proposed new taxes, Speakes said, "The president wants what he proposed. He won't go for new taxes."
Agreement on the budget by Senate Republicans and Democrats from both houses, with House Republicans conspicuous by their absence, came after a weekend of behind-the-scenes talks among the principal negotiators that whittled the remaining issues to a half dozen or so, including Medicare, food stamps and terms of the reserve fund for recession relief.
Its major provisions include:
Tax increases of $73 billion over the next three years, including $12 billion in 1984, $15 billion in 1985 and $46 billion in 1986, all of which would be enacted in legislation this year. This is considerably more than the nominal increases sought by Reagan for the next two years but in line with the $50 billion in standby tax increases that he wants for 1986.
A defense spending increase next year of roughly 5 percent after inflation, or half what Reagan wanted, although the proposed spending authority level of $268.6 billion provides more than a simple split-the-difference between Senate and House figures. Reagan's defense spending request for next year would be cut by roughly $12 billion, leaving an increase of $23 billion over anticipated defense spending for this year.
About $15 billion more domestic spending than Reagan wants and $8.5 billion as a "reserve," or contingency fund, to be allocated for recession relief programs only if the programs are authorized, which is considered doubtful in many cases.
The reserve would include funds for a new industrial development bank, health insurance for the unemployed, public works and public service jobs, protections against home and farm foreclosures and an extension of jobless benefits for the long-term unemployed.
In order to placate both liberals who want to spend the reserve funds and conservatives who don't, the conferees agreed to state the total budget figure and its projected deficit both with and without the reserve amount.
Differences over the Senate's proposed Medicare savings were resolved by splitting the difference, although House conferees said the savings were not to be achieved by increasing costs to patients. Proposed restoration of food stamp spending that had been cut over the last two years was included in the reserve fund, subject to passage of authorizing legislation.
The budget is scheduled to be taken up Thursday in the House, where, according to Budget Committee Chairman James R. Jones (D-Okla.), the Democratic leadership has said it will wage a strong fight for passage over what is expected to be heavy Republican opposition.
In the Republican-controlled Senate, which passed its version of the budget by only a one-vote margin, Domenici said, "I think there's a reasonably good chance we can pass it," although it emphasized that "it won't be a cake-walk."
As they resumed work yesterday morning, the conferees approved a revised set of assumptions about the economy's likely performance next year that had the effect of slightly reducing the projected deficit for next year. In general, the new assumptions anticipate greater economic growth and less unemployment than had been predicted earlier by the Congressional Budget Office and incorporated in the Senate and House versions of the budget.
The expected growth rate for next year, after adjustment for inflation, was changed from 4.7 percent to 5.1 percent. The anticipated unemployment rate, projected at 9.8 percent last January, was reduced to 9.3 percent. The inflation forecast remained unchanged at 5 percent.
Rep. Jack Kemp (R-N.Y.), a House conferee, complained that the new projections weren't optimistic enough. "This is the year we were supposed to have a balanced budget, if you recall," responded Jones sarcastically, referring to Reagan's prediction that the budget would be balanced by 1984 because of economic growth stimulated by his tax-cut program.
Kemp argued that tax increases proposed in the new budget would impede growth, but Democrats contended that the tax hikes would contribute to recovery by decreasing the federal deficit and thereby taking pressure off interest rates.
Among the spending issues resolved yesterday was foreign aid, for which the budget compromise would allow $12.9 billion, about $250 million more than Reagan proposed. According to Rep. Stephen J. Solarz (D-N.Y.), the compromise would allow enough room for anticipated aid to Israel and Egypt without forcing cuts in aid programs to other countries. The conferees were rushing to finish work because their authority for the conference expired yesterday, and some feared that foes of the compromise might try to block a reauthorization of the conference by either of the two houses.