The House-Senate conference on deficit reduction broke out of a week-long stall yesterday as it edged toward agreement on poverty-related programs and attempted to come to grips with the key issues of defense and Social Security.

A break-the-ice compromise proposed late Wednesday by Senate Republicans was rejected by House Democrats, but the Democrats then agreed to make a counter-proposal of their own.

House Budget Committee Chairman William H. Gray III (D-Pa.) dismissed the Senate proposals on defense and Social Security as little more than restatments of the Senate's earlier positions, but welcomed concessions on programs intended for the poor.

In their opening proposal, the senators offered $700 million a year to help poor Social Security recipients cope with elimination of cost-of-living increases and agreed to increase their estimate of defense cuts by $3 billion.

But the senators did not budge from their proposals for a Social Security benefits freeze and an increase in defense spending authority to cover costs of inflation, which the House has rejected in favor of the reverse: a defense spending freeze and inflation increases for Social Security.

They also agreed to add $1.3 billion for 20 low-income programs favored by House Democrats, such as child nutrition and job training, an action that Gray applauded although he criticized the Senate's continued insistence on cutbacks in Medicaid and service-connected compensation for veterans.

During discussion of the Senate proposal, Rep. Thomas J. Downey (D-N.Y.) described it as a "nice try . . . but grossly inadequate." As for the extra money for Social Security, he said, the elderly could "break open a bottle of hot water and be grateful they weren't falling below the poverty line."

"The fact of the matter is that you don't want an across-the-board freeze and make it apply to everyone," responded Senate Budget Committee Chairman Pete V. Domenici (R-N.M.).

Gray answered that the Senate and House proposals have so many exceptions that neither qualifies as a spending freeze.

As a possible compromise for defense and Social Security, Rep. W.G. Hefner (D-N.C.) suggested a 2 percent increase for both, roughly half the anticipated cost-of-living increase over the next few years. Domenici invited the House conferees to incorporate it in an offer "so we could look at it."