Senate budget negotiators, defying initial objections from President Reagan and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.), proposed yesterday to increase taxes and delay Social Security increases as part of a sweeping plan to break Congress' budget impasse.
House bargainers withheld formal response to the proposal, which would reduce deficits by $338 billion over three years. But they agreed to another summit-style meeting with Reagan and O'Neill as long as the president is willing to spell out his position on taxes and Social Security.
Senate sources said last night that a White House meeting is possible as early as today, although White House sources discounted that speculation. Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) characterized the president as "genuinely interested" and willing to meet. "The speaker has accepted every invitation to the White House and will continue to do so," an O'Neill aide said.
Key provisions of the Senate offer included a $5-a-barrel oil-import fee and biennial inflation adjustments for income taxes and most major benefit programs, such as Social Security. The adjustments, which now are made annually, would be paid in even-numbered years, which also happen to be election years.
Together with major cutbacks in the military buildup and a compromise between Senate and House proposals for domestic spending retrenchment, the plan would theoretically cut annual budget deficits from more than $200 billion to $89 billion by fiscal 1988.
Next year's deficit would be cut by $65 billion to $162.5 billion, well exceeding the earlier White House and congressional target of a $50 billion deficit reduction for fiscal 1986.
In unveiling the proposal with a call for compromise by Reagan and O'Neill, Domenici said the offer -- considerably more ambitious than the original House and Senate budget plans -- would fail without their acquiescence.
"Stubbornness is not going to solve the problem," Domenici said in apparent reference to both Reagan's adamant opposition to tax increases and O'Neill's equally fervent opposition to Social Security cutbacks.
The proposal was formally submitted to House budget negotiators late yesterday in the first session since angry senators broke off talks a week ago in the most serious breakdown of the deficit-reduction effort since it began six months ago.
While the official House reaction was noncommittal, individual House negotiators expressed doubt that it would form the catalyst for agreement.
House Budget Committee Chairman William H. Gray III (D-Pa.) characterized it as a "serious [offer] because it moves substantially away from what the president has said." But Rep. Butler Derrick (D-S.C.) said it was a "hoot," and Rep. Mike Lowry (D-Wash.) said it appeared to contain "nothing to build from." House Majority Leader James C. Wright Jr. (D-Tex.) said tax increases would "suit me fine," but contended that "we're kidding ourselves if we think we can pass new taxes over the president's veto."
Several senators had characterized the proposal as a last-ditch opportunity to prevent total collapse of the deficit-reduction effort. Moreover, without the controversial tax and inflation adjustment provisions, the negotiations would be "back close to zero," said Domenici.
The new plan, drafted in consultation with Senate Majority Leader Robert J. Dole (R-Kan.) and embraced by Republicans and most Democrats on the Senate's negotiating team, marked a milestone in the GOP-led Senate's independence from the White House.
Both Dole and Domenici had previously held off pressure for tax increases, largely in deference to Reagan's position. But Senate Republicans' patience was strained in the wake of Reagan's decision to go along with House Democrats in abandoning a key Senate proposal to freeze Social Security benefits, spawning a search for what Dole called "new approaches."
However, revenue increases would still be a small part of the deficit-reduction effort, adding up to $40 billion, or 12 percent of the total Senate proposal. No tax increases had been proposed in either of the two chambers' original budget plans.
Over three years the oil import fee would raise $25 billion; biennial instead of annual adjustment of income tax rates for inflation would raise $7 billion. In addition, $8 billion would be raised from expanded taxation of state and local government workers for Social Security and Medicare coverage. On the spending side, biennial payment of cost-of-living adjustments for benefit programs, including government workers' pensions as well as Social Security, would save about $12 billion.
Although initial reaction from both Reagan and O'Neill was negative, both the White House and House Democratic leaders held their fire on the plan as a whole as Senate leaders rushed about in an attempt to put out any blazes before they got out of control.
Reagan, in his first trip to the Oval Office since cancer surgery nearly two weeks ago, was asked if he supported a tax on oil imports. "I'm not for any taxes," he responded. But he also stressed his desire for a budget compromise, saying, "The American people deserve to have a budget and the federal government has no excuse for not giving them one."
Soon thereafter, White House chief of staff Donald T. Regan came to Dole's office in the Hart building on Capitol Hill to discuss the plan and, plunging through a hedge and over a wall to get to his car, deftly dodged reporters' questions, claiming he didn't know enough about the plan to comment on it.
O'Neill told reporters he was "stubbornly opposed" to any reduction in Social Security benefits or "other gimmickry" on the issue. Asked about the oil-import fee, he said, "All of us in the Northeast oppose this," a reference to the region's reliance on imported oil.
Rep. Jack Kemp (R-N.Y.), a budget conferee, staunch opponent of tax increases and possible rival of Dole's for the Republican presidential nomination in 1988, attacked the oil-import fee as "regressive . . . a consumption tax . . . protectionist." But, in the Senate, pressure for an oil-import fee was already moving on a separate track. Sen. David L. Boren (D-Okla.) said he will introduce legislation today to impose a per-barrel fee of $5 on crude oil and $10 on refined products. And, in the House, the Ways and Means Committee approved Wednesday an extension of the 16-cents-a-pack cigarette tax, which would raise $4.9 billion over three years.