Congressional budget negotiations stalled yesterday as House bargainers rejected a Senate plan to link new defense and domestic spending to tax increases, then offered an alternate plan that drew a chilly response from Senate negotiators.
In its counter-offer, the House proposed to drop tax increases that the Senate would have used to finance expanded defense spending, contending that President Reagan had invited the defense squeeze by holding the line on taxes.
"Mr. President . . . you made a choice . . . you can't have it both ways," House Budget Committee Chairman William H. Gray III (D-Pa.) said in presenting the new House proposal.
Plans to resume talks late yesterday were canceled at the last minute, apparently to allow House and Senate budget committee leaders to confer privately in hopes of avoiding an impasse over taxes and defense.
Gray said after the brief but sometimes testy session that he thought negotiations were "moving forward," but Sen. Lawton Chiles (D-Fla.), ranking Democrat on the Senate Budget Committee, was pessimistic.
Although negotiations appear deadlocked, there is hope, Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said. "Deadlock sometimes yields forward motion," he said.
In rejecting the Senate offer to increase defense and domestic spending if taxes are raised, House bargainers complained that the plan would jeopardize "critical" domestic programs, spend revenues that otherwise might cut the deficit, and push the budget perilously close to the Gramm-Rudman-Hollings deficit target of $144 billion for fiscal 1987.
They also expressed fear that Congress could not muster the two-thirds vote of both chambers that would be necessary to override a veto of tax increases. Deriding Domenici's suggestion that the Senate proposal amounted to budgetary "hardball," Gray said, "If you are going to play hardball, you better go to the game with a bat."
Domenici appeared unenthusiastic about the House counter-offer. He contended that it would count revenue increases for deficit-reduction purposes without any assurance that they would be enacted.
Domenici carried his case for tax increases to the Senate floor yesterday, where he said that tax-overhaul legislation -- under debate in the Senate -- would leave deficits "the same or worse."
With spending on several mandatory programs rising more rapidly than revenues, the country is risking continued deficits of $160 billion to $200 billion unless the White House and Congress are willing to raise taxes, he said.
With no new revenue in the current tax-overhaul package, he added, "All I can say is: What a pity, what a pity."
Meanwhile, the White House renewed threats to veto a catchall spending bill to cover the rest of the current fiscal year as House-Senate conferees on that measure continued working toward a compromise.