President Reagan, entering the first year under the Gramm-Rudman-Hollings law, is determined to protect two basic goals of the Reagan "revolution" -- tax cuts and rearmament -- against growing pressures in Congress to unravel both.
Reagan's Jan. 28 State of the Union address and his budget message a week later will promise to meet the new budget-deficit targets without tax increases or defense cuts but with domestic spending cuts, and will demand that Congress do the same.
In view of early signs of resistance, Reagan and Congress may be heading for another collision over priorities this spring. But a difference from previous years is that the new law sets a deadline for action on the deficit and requires automatic cuts if there is a stalemate.
"One big question around here," said a White House official, "is whether Gramm-Rudman will help Reagan, or hurt him."
It could hurt if the automatic cuts are triggered for fiscal 1987, taking a huge slice out of the defense budget. But it could help Reagan if it moves Congress toward his priorities and results in a compromise to reduce the deficit.
At the outset, Reagan is planning to use a familiar negotiating tactic of taking a hard line against compromise. But knowledgable budget strategists inside and outside the administration say the final outcome could well be a "three-legged" compromise -- more domestic spending cuts, slower growth in defense, and perhaps a small tax increase, even though Reagan has vowed to fight it.
Such compromises are not being considered at the White House as the year begins, however. "We're not going up there" to Capitol Hill "and sit down for purposes of figuring out how we can give away the store," said a top presidential adviser. In his weekly radio speech yesterday, Reagan promised to oppose tax increases or defense cuts.
The adviser said Reagan will go on the "offensive" this month with a message that says: "I am doing something about the deficit . . . . I encouraged Congress to pass Gramm-Rudman. I am meeting the requirements of that law. People who oppose my budget -- they're not responding to the goals and objectives and views of the American public."
Another top White House official said: "We would like to launch the budget in a way that shifts the burden to Congress. This year's presumption ought to be, if you're against this budget, you want to raise taxes."
One reason for this approach to Congress is that White House chief of staff Donald T. Regan and Office of Management and Budget director James C. Miller III are less inclined to bargain early with Capitol Hill. Miller's predecessor, David A. Stockman, often began the negotiations before the budget was published.
Although aides insist that Reagan will "hang tough," as one official put it, the president also seems to be hinting separately that he is willing to strike a deal. The White House announced last week that Reagan will propose that the congressional budget process be changed so he can sign a joint resolution on the budget, creating a "compact" with Congress on spending and averting the Gramm-Rudman-Hollings automatic cuts. White House officials acknowledge that any such deal would succeed only if Reagan were prepared to make concessions.
In preparing the fiscal 1987 budget, Reagan has met the deficit target of $144 billion by trimming about $50 billion from domestic spending. Since defense, Social Security and interest on the national debt are off limits, the "pool" available for cuts is only about $430 billion. Thus, Reagan will seek to cut available domestic spending about 12 percent.
But the cut will not be across the board. Reagan has largely exempted income maintenance programs for the poor, such as Aid to Families with Dependent Children and Supplemental Security Income. He will propose some reductions in medical entitlement and retirement programs. But the biggest bite will come out of the remaining government functions, everything from college student aid to Amtrak subsidies.
White House officials said that about one-third of the $50 billion package are programs that Reagan will propose to eliminate altogether, such as the Small Business Administration and the Interstate Commerce Commission. Most of these terminations Reagan sought last year (except for the ICC) and Congress refused. Another big part of the package, more than a third, come from domestic spending trims, many also sought unsuccessfully last year.
The rest of the $50 billion are new proposals to sell off government assets, such as the Bonneville Power Administration, or to "privatize" government functions by turning them over to businesses. Such proposals have been justified in the past as ways to shrink the government or perform its functions more efficiently. But a White House official said there was another reason as well: "We need the money."
Some of the proposals, such as selling the Naval Petroleum Reserves, were considered and discarded in earlier years. Now they have been put in the budget as the White House struggled to meet the Gramm-Rudman-Hollings target. "It's true, we had to scrounge for everything we could think of," said one official.
Reagan may well get some of the domestic spending cuts, but he probably cannot win support for an after-inflation increase of 3 percent in defense spending. Congress voted slightly less than zero growth last year. One uncertain factor in the defense debate is the blue-ribbon commission headed by David Packard that is to report this spring on procurement reforms. A critical report could fuel sentiment for defense budget cuts.