President Reagan and his Cabinet were told yesterday that despite the new spending cuts approved by Congress last week, federal deficits are likely to exceed the $200 billion mark for at least the next two years without further action, administration officials said.
In a closed session at the White House, Reagan and the Cabinet were told by the acting budget director that more recent and pessimistic economic assumptions, as well as likely increases in future spending bills and major legislation still pending -- such as the farm bill -- would drive the deficits over the $200 billion mark.
Just last week, Congress approved a compromise deficit-reduction package after a six-month struggle that in the end pitted Reagan against his fellow Republicans. That package estimated deficits of $172 billion in fiscal 1986, $155 billion in 1987 and $112 billion in 1988.
Moreover, the president told the Cabinet yesterday that he wants to ask Congress next year for many of the deep domestic budget cuts rejected this year, officials said. Reagan urged Cabinet members to incorporate these cuts in budget requests they are now preparing.
Officials also said there was agreement yesterday that the administration should once again seek to trim deficits from about 4 percent of the gross national product to 3 and finally 2 percent over three years. The budget resolution just approved by Congress fell short of this 4-3-2 formula.
A senior official said these agreements marked "a hell of a start" for a budget process that is begining unusually early this year. The targets set yesterday are for the fiscal 1987 budget, which Reagan will submit to Congress early next year.
The new and gloomier deficit projections were outlined by acting Office of Management and Budget Director Joseph R. Wright Jr. They amount to a declaration that the fiscal 1986 congressional budget resolution passed Aug. 1 will not put a major dent in the deficit without further action.
The projections of deficits that Congress used in approving the budget have been widely criticized by private economists as far too low. Last week, Reagan said the budget resolution was "only a beginning, not an end."
A Cabinet member who was at the meeting yesterday said, "The bottom line is, this year didn't work out too well, and it has to work next year, and it will."
Congress voted last week to allow no increase in spending authority above inflation for the Pentagon in fiscal 1986, and 3 percent above inflation in 1987 and 1988. In past years, Defense Secretary Caspar W. Weinberger has said he did not feel bound by such limits on future budgets.
But a senior official said there was general agreement that the administration would keep within the 3 percent limit this time; a second official said the final word had not been heard from Weinberger.
The senior official said that White House chief of staff Donald T. Regan "wants policy to drive the budget," giving Cabinet members some flexibility to choose priorities but insisting they also seek domestic cuts and program eliminations that Reagan wanted but which Congress rejected this year.
In explaining the higher deficit projections, Wright told the president and Cabinet that Congress used old economic assumptions which showed stronger growth than has been experienced in recent months. Using the administration's latest assumptions, the deficit would be over $200 billion for the next two years. If the consensus of 40 "blue chip" economists is used, the deficit would be over $200 billion for three years, he was quoted as saying.
A second reason for the higher deficits is the expectation that appropriations may substantially exceed the budget resolution, and that Congress will vote supplemental appropriations in the next few years that were not counted in the resolution. Finally, the new estimates assume Congress may add funds for such items as the farm bill, toxic waste cleanup and food stamps next year, officials said.