Rep. William H. Gray III (D-Pa.), newly elected chairman of the House Budget Committee, told the U.S. Conference of Mayors yesterday that he would seek $40 billion to $50 billion in deficit reductions next year.
Gray is the first House Democratic leader to provide a specific target for budget reductions in fiscal 1986.
Gray spoke as the Office of Management and Budget increased both its deficit projection for the next fiscal year and its estimate of deficit reductions that would result from the administration's proposed spending cuts for the year.
OMB Director David A. Stockman told House Republicans that he has recomputed his proposed budget cuts and concluded that they now will add up to $50 billion. That is about $8 billion more than OMB calculated earlier this month and just enough to meet the "minimum threshold" target set earlier this week by Federal Reserve Board Chairman Paul A. Volcker to bring on a reduction in interest rates.
OMB officials also said the fiscal 1986 deficit is now estimated at $230 billion unless spending cuts are made. Thus, with the administration's proposed cuts, the deficit would be $180 billion.
Gray said he had discussed his goal with some members of the Democratic leadership -- who generally have said that the White House and Senate Republicans should be the primary architects of deficit-reduction packages. But Gray emphasized that he was speaking primarily "personally, myself as chairman."
"I would suspect probably that there will be an attempt to shoot for a goal of combined cuts of $40 billion," Gray told the mayors. "I think everyone wants to see the recovery continued and sustained, because I know that many of you here today represent cities that haven't seen Mr. or Mrs. Recovery come walking through yet."
He said he hoped that another $50 billion to $60 billion could be cut in the 1987 fiscal year for a two-year savings of $100 billion. The Senate is aiming for three-year reductions totaling about $260 billion, including $94 billion in fiscal 1987.
In a telephone interview later, Gray said, "a goal of at least $40 billion in 1986 cuts would be moving strongly in the right direction" to encourage lower interest rates. "That would be better yet if I could get $50 billion."
The House budget chairman told the mayors that the major difference between the House's likely approach to reducing the deficit and that of the White House would be the amount of money cut from defense spending.
Secretary of Defense Caspar W. Weinberger has proposed $8.7 billion in Pentagon savings, most of which would come through reducing the rate of growth of currently projected spending.
Gray called those measures "so-called cuts" and added, "Our position is that the reductions must not be made simply on the domestic side of spending. Pentagon spending is spending. I think that all of the spending items are on the table at this time."
When pressed by the mayors, however, Gray declined repeatedly to say what portion of his targeted reductions would come from defense items and what would come from cuts in domestic programs.
But he said it was his "perception" that Democrats and Republicans in the House would be "reluctant" to cut Social Security in any way, or to increase taxes unless President Reagan took the lead to "build a consensus" for approval of a tax hike.
"I could potentially support a freeze if it was fair and equitable," Gray said. But he said it was too early to directly compare his intentions with those of the Senate Republicans, who are considering a one-year freeze on spending authority for nearly all programs.
Also yesterday, former president Gerald R. Ford proposed a one-year tax increase followed next year by some version of the Treasury Department's tax-simplification plan as a way to cut the federal budget deficit.
There were indications yesterday that Senate Republicans will probably fail to meet their Feb. 1 target for a plan of specific deficit reductions to meet targets that the administration has set but has been unable to achieve in its budget.
According to one source familiar with efforts to nail down specific cuts, the job is proceeding slowly and with difficulty in many cases. The absense of senators during the current recess and the severity of some of the proposed cuts were cited as reasons for the likely delay.
Sen. Bill Bradley (D-N.J.), a member of the Finance Committee and cosponsor with Rep. Richard A. Gephardt (D-Mo.) of a Democratic tax-simplification package, expressed doubt yesterday that the Republicans will be able to meet their goal of about $260 billion in spending cuts over the next three years.
He said some of the cuts may be unnecessary because economic growth could be stronger than the administration anticipates. Increased revenues from economic growth and tax revision, coupled with "selected pruning" of spending, might be a better plan than the freeze-plus-cuts approach of the Republicans, he said.