President Reagan now plans to seek a quick budget compromise with Senate Republicans by the end of next month on a $50 billion cut in the deficit for fiscal 1986, then try to blitz that plan past the divided Democrats who control the House, a senior administration official said yesterday.
He conceded that the compromise with the Senate likely would involve larger cuts in defense than the president would like, but predicted that the Senate would not go so far as to freeze next year's defense budget at this year's levels, as some members have suggested.
On defense "the rhetorical distance" between the president and the Senate Republican leadership "is a lot further apart than the numbers or policy difference," said the official, who spoke to reporters on condition that he not be named.
he official later was identified by United Press International as Office of Management and Budget Director David A. Stockman.
The official also said that "it's not a foregone conclusion" that a Reagan-Senate compromise will include a one-year delay in Social Security cost-of-living adjustments, because some senators now are privately balking at that, too. Several, including the new majority leader, Robert J. Dole (R-Kan.), have suggested such a deferral.
In a separate development, a draft White House memorandum suggests several long-term options for shoring up the financially ailing Medicare program, including doubling federal alcohol taxes, raising tobacco taxes from 16 to 32 cents a pack, cutting basic Social Security benefits and shifting the savings to Medicare or counting some Medicare benefits as income, subjecting them to income tax and plowing the proceeds back into the Medicare trust fund.
The draft memorandum, a copy of which was obtained by The Washington Post, was prepared by a White House "working group" for departing White House counselor Edwin Meese III, the president's attorney general-designate.
The working group was created by an April 1984 directive on "Forward Planning on Health Policy and Economics" from Meese to John A. Svahn, head of the White House Office of Policy. The draft memorandum lists as members of the group assistant Treasury Secretary Manuel H. Johnson Jr.; Council of Economic Advisers member William A. Niskanen Jr.; John Cogan of OMB and others of similar rank.
Additional steps it suggests as possibilities include:
* Raising the Medicare eligibility age from 65 to 67.
* Having a "means test" for Medicare premiums, so the rich pay more.
* Cut benefits for the CHAMPUS program, which provides medical benefits for military families, and for veterans' health and Medicaid.
* Tax workers on all or part of the premiums their employers pay for their health benefits.
* Include a "catastrophic illness" protection feature in Medicare.
On the forthcoming budget, which Reagan will send to Congress Feb. 4, Stockman last week "re-priced" the administration's proposed deficit reductions from $44 billion to $50 billion after Federal Reserve Board Chairman Paul A. Volcker said the higher figure would help bring down interest rates. Reagan's budget still would show a deficit of about $180 billion.
The senior official who spoke yesterday acknowledged major hurdles for a deal on a $50 billion cut, but he said there was a "decent chance" these could be overcome by Feb. 20.
A one-year "freeze" on defense spending authority would shave $20 billion off next year's deficit, the official said. But the administration now is offering cuts of only $8 billion from the amount the Pentagon originally requested.
Top White House aides seem anxious to strike a Senate bargain that would serve as a launching pad for the expected battle with House Democrats. The senior official said a compromise defense figure had not been reached yet.
The senior official said, "The House will be in a very difficult position if we get agreement with the Senate" on a $50 billion deficit-reduction package.
This official said the White House believed that House Democrats were "lying in the weeds until they see what the governing party is going to do," and at the same time "so divided you couldn't negotiate with them if you wanted to." Reagan will put "the heat" on Democrats by saying "if you don't have an alternative," give the president a vote on his package, the official said.
The official, who is familiar with the latest budget estimates, said Reagan would fall short of his goal of reducing the deficit in fiscal 1988 to 2 percent of the gross national product, or about $100 billion. For next year, the deficit will be "a hair above" the target of 4 percent of GNP. But Reagan will meet a second goal of holding spending next year to this year's levels of about $820 billion, excluding interest payments on the national debt. Also, the official said that Reagan might seek to tie the 1985 farm bill to the overall deficit package as part of an effort to contain costs.
The official said that a $50 billion cut would switch the deficit out of the "danger zone" for the economy into a "manageable zone."
The tobacco and alcohol tax increases in the White House options document would raise $14 billion a year by 1990 that could be used for the Medicare trust fund, according to the memorandum. As a preventive health measure, not just a revenue-raiser for Medicare, the document poses the possibility of tripling the alcohol and tobacco taxes.
At present the tax on whiskey is $10.50 per 100-proof gallon, on wine 17 cents a gallon, on beer 29 cents a gallon and on cigarettes 16 cents a pack, although this is scheduled to drop to 8 cents Oct. 1.
Another option was to use temporary surplus funds in the Social Security old-age and disability trust funds to help pay for Medicare until about 2020, but the report noted that if nothing else were done, Medicare would not be able to repay the funds.
It would be more effective, the memorandum said, to reduce the growth of basic Social Security benefits, leave Social Security old-age and disability taxes as they are and use the savings for Medicare.
The memo said that if Social Security wage credits were increased somewhat less than the full growth of wages, Social Security would save $335 billion a year by 2060 that could be used for Medicare.
Other options: to tax workers' employer-paid health insurance premiums, give Medicare the proceeds (a tax on all premiums would raise $173 billion in four years, the memo said) and raise the Medicare eligibility age to 67.
Added Medicare options: setting per-case doctor's fees in advance, tightening fee schedules or giving a doctor a fixed payment per year for caring for a group of patients.
The memo also mentioned raising the premium for the Medicare doctor-insurance program to as high as 50 percent of program costs, but only for "higher-income beneficiaries." This would introduce a means test.