Congressional budget authorities estimated yesterday that President Reagan's $320.3 billion defense budget would have to be reduced by $49 billion if automatic spending cutbacks are triggered this fall under the new Gramm-Rudman-Hollings budget-balancing law.
This would mean "a very different defense establishment than is envisioned by the president," Congressional Budget Office Director Rudolph G. Penner told the Senate Budget Committee after submitting the CBO report containing the defense cutback estimate.
It was the first official projection from Congress of defense appropriations cutbacks that would be required under Gramm-Rudman-Hollings for fiscal 1987. As such, the numbers were quickly seized by Budget Committee leaders as new ammunition in the push for a budget compromise, possibly including tax increases, to avert the automatic cuts.
Meanwhile, President Reagan's defense spending request came under renewed attack by Democratic members of the House Budget Committee, who cited an earlier CBO statement that the administration had underestimated defense outlays for fiscal 1987 by $14.7 billion.
Committee Chairman William H. Gray III (D-Pa.) reiterated his call for the president to submit a "realistic" budget that meets the deficit-reduction targets without underestimating defense spending.
While the CBO defense numbers may help build support for a budget compromise, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) and several colleagues expressed dismay at the budget agency's overall deficit projections, which they contended are too low to help much in forcing a compromise.
The projections differ from those of previous years in that they assume a defense spending increase no larger than necessary to cover inflation. They are also based on brighter economic assumptions, including a higher growth rate and lower interest rates, than many senators consider likely.
"After looking at the[projections], you almost need sunglasses because of the glow," said Sen. Lawton Chiles (D-Fla.), ranking Democrat on the panel. "This is not the usual second opinion," said Sen. Frank R. Lautenberg (D-N.J.), referring to the fact that CBO normally produces more dire deficit predictions than the administration's Office of Management and Budget.
Domenici expressed fear that "these very low deficit numbers [may be] used as an excuse to avoid making hard legislative choices" necessary for a budget compromise to avert the automatic cutbacks this fall.
For fiscal 1987, CBO has projected a deficit of $181 billion; OMB has projected a $182 deficit. Had CBO used the same assumptions as OMB, its deficit figure would have been higher. The deficit reduction target for fiscal 1987 under Gramm-Rudman-Hollings is $144 billion.
Domenici reiterated his support for a tax increase to help produce a compromise and challenged House Democrats to respond. Sources indicated that he may seek to work out a bipartisan tax proposal with House Democrats but, asked about any plans along this line, responded, "Not yet."
Domenici also expressed strong doubts that a deficit-reduction package left over from last year, including spending cuts and tax increases amounting to $74 billion over three years, can be passed this year. Congressional leaders earlier expressed hope that it could be passed quickly to help ease the deficit-reduction burden for this year.
At the House Budget Committee hearing, OMB Director James C. Miller III defended the Reagan defense spending estimate under skeptical questioning by committee Democrats.
CBO has estimated that defense spending in fiscal 1987 would be $296.9 billion, or $14.7 billion more than the administration's estimate. The dispute is over how much actual spending, or outlays, there would be next year under Reagan's request for $320.3 billion in new defense budget authority. Because of multi-year projects -- such as procurement of major weapons systems -- not all budget authority is expended in the year it is authorized.
Gray, siding with the CBO figure, said Reagan's overall budget failed to meet the mandatory $144 billion deficit target for fiscal 1987. He called on the president to resubmit his budget with $14.7 billion in new cuts or additional revenue.
"Otherwise, he has submitted a budget that is really not a budget, after telling the American people in his State of the Union address that he was complying with the law," Gray said.
"We have a difference of opinion," replied Miller, who argued that estimates are necessarily tentative at this point and that because the administration controls the rate of defense spending it could hold outlays within its forecast.
"It's not minor, it's major, involving billions of dollars," Gray said.
Gray said that the new balanced-budget law makes it especially important that early estimates of spending and the deficit be accurate if Congress is to avoid having to make additional last-minute cuts next fall to meet the deficit target. If the early estimates are in error, he said, "Gramm-Rudman comes and bites us."
Rep. Barbara Boxer (D-Calif.) told Miller the administration's budget "is in serious trouble" in Congress.
Miller, however, defended the Reagan request by saying Reagan has already compromised on defense.