Congressional budget negotiators agreed with President Reagan yesterday to try to produce a deficit-reduction plan that would allow defense spending to rise with inflation, provide full Social Security cost-of-living increases and rule out a tax increase.
While it appeared to have broken the budget impasse, the accord on a budget "framework" stopped short of resolving major differences over domestic spending, which must be ironed out before a fiscal 1986 budget and deficit-control package can be approved.
By ruling out tax increases and Social Security cutbacks and fudging the defense spending issue, the agreement appeared to have met key demands of both the White House and House Democrats, while leaving Senate Republicans with little to cheer about.
During the 75-minute meeting with Reagan, Senate Majority Leader Robert J. Dole (R-Kan.) protested that the Senate "didn't sweat blood for four months to back off now," and senators of both parties echoed his dismay.
"There's great skepticism on our side whether it will yield a budget we can support," said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), adding that he considered the loss of savings from Social Security and other pension programs to be a "tremendous blow" to the cause of deficit reduction.
The ranking Democrat on the committee, Sen. Lawton Chiles (Fla.) said the agreement would probably produce "real" deficit reductions of no more than $40 billion next year, compared with the $56 billion in savings claimed in separate budget drafts passed earlier by the House and the Senate.
By contrast, the president was described by an aide as "hopeful," and House Budget Committee Chairman William H. Gray III (D-Pa.) called the framework a "very positive sign," claiming that deficit reductions of more than $50 billion can be acheived.
Under the agreement, Reagan got his way on taxes, while the House won out over the Senate in blocking its proposal to freeze Social Security and other government pension programs.
On defense, spending authority would be allowed to grow with inflation, as Reagan demanded as a bottom line in negotiations with the Senate, although projections for actual expenditures would be reduced, in line with House demands. For defense, the spending authority figure is more important because it more accurately reflects policy decisions.
The Senate's loss was political as well as budgetary. "We walked the plank for real deficit reductions, but the president and the House Democrats came out the winners," one aide said. This was a reference to the lead role taken by Senate Republicans in drafting an initial deficit-reduction plan and the pressure put on reluctant senators, especially the 22 Republicans up for reelection next year, to support Social Security cutbacks as part of a budget agreement.
As of late yesterday, no date had been set for a resumption of the House-Senate budget conference, even though the White House and congressional negotiators agree that, with Congress due to recess for the rest of the summer at the end of July, there is only about a week and a half left to nail down a deficit-reduction plan.
The critical issue facing the conference is the demand by the Senate and the White House for much deeper cuts in domestic spending than the House wants.
Dole and Domenici, with White House backing, are demanding domestic savings to offset $28 billion in deficit reductions that would be lost over three years from payment of full cost-of-living increases for Social Security and other inflation-adjusted benefit programs.
House Democrats said yesterday they are willing to consider further cutbacks but insisted that there was no commitment to make up the $28 billion.
However, the House by voice vote approved a proposal from Republicans to instruct House budget negotiators to go along with additional domestic savings to offset the loss resulting from retention of the inflation adjustments.
The resolution was nonbinding, but Senate sources described it as the "one bright spot in an otherwise grim day" that might point to an eventual budget settlement.
While not openly critical of Reagan for backing off his earlier support for the Senate's proposal to freeze Social Security benefits, Senate Republicans were clearly disappointed.
"It made it far more difficult than it might have been," Domenici said. Sen. Slade Gorton (R-Wash.), a Senate conferee, said Reagan had made it clear that, among his budget priorities, deficit reduction ranks fourth, behind no tax increases, more spending for defense and curtailment of domestic programs.
By contrast, House Democrats, despite their sharp differences with Reagan on budget issues in the past, applauded the decision and urged a cession of partisan hostilities. Gray said the accord was a major victory for the House.