President Reagan and congressional leaders yesterday staked out sharply conflicting positions on taxes and government spending as the 99th Congress reconvened for what is expected to be a tumultuous election-year second session.
Picking up where they left off last year, congressional leaders of each party sharply questioned the president's plans to again propose deep cuts in domestic spending, protect defense spending, and avoid a tax increase. Reagan stood his ground, setting in motion a debate similar to the one that dominated the first session.
There was general agreement among Republican and Democratic leaders on Capitol Hill that a budget compromise linked to tax increases will be impossible without active support from the White House.
But at a meeting with GOP leaders at the White House, Reagan drew the line against tax increases for next fiscal year and said defense spending increases are essential to progress in arms control negotiations with the Soviet Union.
Disputing "some voices" on Capitol Hill who are predicting that Reagan will give in on defense and taxes, presidential spokesman Larry Speakes said, "Well, they're wrong and the president says he is going to prove it."
House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) was equally adamant in reiterating his determination to force the White House and its Republican allies in Congress to make the first move toward a tax increase as part of a budget compromise under the new Gramm-Rudman-Hollings budget-balancing law.
The measure sets fixed deficit targets for the next five fiscal years and requires automatic spending cutbacks if the targets are not met, including $11.7 billion for the rest of the current fiscal 1986 and an estimated $55 billion to $60 billion for fiscal 1987 that begins Oct. 1.
"Of course, there should be a tax bill," O'Neill said, but he added that "it's going to originate in the White House."
For the time being, O'Neill said, the Democratic-controlled House intends to focus attention on what he called Reagan's "crazy, nonsensical" budget for fiscal 1987, which is to be submitted to Congress early next month.
Senate Majority Leader Robert J. Dole (R-Kan.) also expressed skepticism about Reagan's "so-called budget," as he put it, and told reporters that he agreed with O'Neill that the White House had to take the first step on tax increases.
"At every opportunity, the president says 'Make my day, send me a tax bill,' " Dole said in reference to Reagan's assertions that he welcomes the chance to veto a tax increase. "Well, we get the message," added Dole, who proposed a budget compromise with tax increases last year, only to get rebuffed at the last minute by Reagan.
"The rug was pulled out from under us [last year]," Dole said earlier in an interview on NBC News' "Today" show. "We're going to be a little more cautious this year. We want to find out precisely what the White House has in mind. We want to make certain their so-called budget provides some reasonable cuts, not just Draconian cuts."
The inevitability of a tax increase was suggested, however, by Senate Budget Committee Chairman Pete V. Domenici (R-N.M.). He predicted a compromise, saying "there will be defense coming down a little bit, some revenues, domestic reform, and we'll get to $144 billion [the deficit target for fiscal 1987]." Asked if he'd been encouraged by Reagan to expect a compromise, he said, "No, he did not -- but it will happen."
At a news conference just before the House convened, O'Neill outlined a Democratic strategy, promising to focus attention on deep domestic spending cuts. He said he would demand that the House vote on the Reagan budget, thereby forcing Republicans to take politically unpopular stands or to break openly with a president of their own party in a congressional election year.
O'Neill complained that in five years as president, Reagan had won "all the glory" for the tax cuts he championed but did not "take any of the knocks" for the pain caused by domestic spending cuts he also has pushed.
"Well, the time for taking the hard knocks has come for Mr. Reagan," O'Neill said. "People don't appreciate what his budget will cut."
Despite the widespread perception in Congress that a tax increase will be a necessary part of any budget compromise with the White House, the speaker also vowed to prevent House consideration of revenue-raising measures unless they are supported by Reagan. "My main power is not to schedule it," he said.
The strategy outlined by O'Neill differed from previous opening Democratic positions in the annual budget battle with the White House. Rather than declaring Reagan's budget "dead on arrival" in Congress, as in the past, House leaders appeared determined to exploit the president's call for massive domestic spending cuts for maximum political advantage while hoping that pressure builds on the White House and congressional Republicans to make the first move toward a tax increase to soften the budget blow.
"This year we are going to make sure the budget debate focuses on the president's budget," Christopher J. Matthews, O'Neill's press secretary, said. "The idea is to keep his fingerprints on the budget this year."
Earlier yesterday, Rep. Richard A. Gephardt (D-Mo.), the chairman of the House Democratic Caucus, predicted that Reagan will eventually agree to a tax increase this year in order to prevent deep cuts in the defense budget under the Gramm-Rudman-Hollings law. But Gephardt echoed O'Neill in saying that the initiative would have to come from the White House.
Gephardt said he did not expect Congress to overturn the balanced-budget law it enacted last month, but added that if a "good faith" effort to reach a compromise fell short of the $144 billion defict target for fiscal 1987 it would probably be politically acceptable to change the target to coincide with congressional action.
In linking defense spending to arms control talks during a session with GOP leaders yesterday, Reagan was quoted by Speakes as saying that Soviet leader Michail Gorbachev "is watching to see how our budget process plays out" and adding: "If we retain our commitment to SDI [strategic defense initiative], to freedom fighters, to isolating radicals like [Libyan leader Muammar] Qaddafi, to adequate security assistance to friends in vital parts of the world, we have a strong chance of making new gains."
Sources said Reagan indicated that he will explore with Congress a resumption of military aid to rebels fighting the government of Nicaragua.
Reagan renewed his call for arms sales to Jordan. Speakes said Reagan will want funding for anti-Marxist forces in Angola.
Adding to uncertainty over defense spending levels, Comptroller General Charles A. Bowsher said Reagan must cut $44.6 million more from defense programs than originally estimated.