President Reagan said yesterday he will reluctantly sign legislation reviving the nation's balanced-budget law but defiantly vowed he will not knuckle under to Congress' strategy of forcing him to accept either a tax increase or further reductions in defense spending.
"I have no choice but to sign this bill," Reagan said in his weekly radio address, calling the attachment of the budget measure to critically needed legislation raising the national debt ceiling "yet another example of Congress trying to force my hand."
In consenting to sign legislation restoring teeth to the 1985 Gramm-Rudman-Hollings law, Reagan avoided a debt-limit showdown with Congress next week and ended the first round of his nine-month battle with Capitol Hill over spending priorities. But he also set the stage for continued fiscal warfare with the Democratic-controlled 100th Congress.
The president pledged to continue his opposition to higher taxes and lower Pentagon spending and to fight for further cuts in domestic spending that Congress has rejected.
"For those who say further responsible spending reductions are not possible, they are wrong," Reagan said. "For those who say the only choice is undermining our national security at a time when the United States is close to an agreement with the Soviet Union on reducing nuclear weapons, they are wrong. For those who say more taxes will solve our deficit problem, they are wrong."
Reagan said, "I will not hesitate to use my veto to hold down excess spending. And I will spell out the impact that defense cuts will have on our long-term security interests . . . . I also will not permit Congress to dismantle our national defense . . . or to increase your taxes."
Sen. Carl Levin (D-Mich.) said enactment of the revived budget law "will force the president and his people to sit down with the leaders of Congress and talk rationally about how we're going to reduce this deficit. Hollow rhetoric like the president uses isn't going to do it anymore."
"The fact is that Congress, on a bipartisan basis, won this round," Levin added. "The country and the American people won this round."
The legislation, adopted by the House and Senate last week, bolsters the Gramm-Rudman-Hollings law with a new mechanism requiring automatic spending cuts if Congress and the White House fail to meet yearly deficit targets.
The new budget-cutting mechanism would be triggered in late October by the administration's Office of Management and Budget. It is intended to replace one held unconstitutional by the Supreme Court last year because it was to have been implemented by the General Accounting Office, an arm of Congress, and thus violated the separation of powers doctrine.
Although the new law substantially eases the yearly deficit targets of Gramm-Rudman-Hollings by delaying for two years, until 1993, the goal of a balanced federal budget, it does require a $23 billion reduction in the deficit during the fiscal year that begins Thursday. That would theoretically leave the yearly federal deficit at about $144 billion, down from a high of $221 billion in fiscal 1986.
Congressional tax-writing committees plan to report out legislation calling for a tax increase of $10 billion to $15 billion to help meet the deficit goal. The remaining savings would come from spending reductions.
If Congress and the White House cannot agree on such a blueprint -- and Reagan strongly suggested yesterday he would veto the tax increase -- the $23 billion deficit reduction would be achieved by automatic spending cuts equally apportioned between defense and domestic programs.
Some Democrats in Congress believe that the prospect of those defense reductions will force Reagan into a budget compromise. According to a preliminary analysis by the Congressional Budget Office, the automatic reductions would leave the Pentagon with about $285 billion in spending authority for fiscal 1988.
Although that is about $6 billion below the current level of defense spending authority and $27 billion less than Reagan requested in his fiscal 1988 budget, it is only $4 billion below the lowest level considered by Congress in its version of the budget.
Reagan's decision to sign the bill came after an intense battle among top administration officials. Seeking to protect their budgets from the prospect of automatic cuts, Defense Secretary Caspar W. Weinberger and to a lesser extent Secretary of State George P. Shultz counseled the president to veto the measure.
Among those arguing against a veto, because it would have put the president at a political disadvantage on the deficit question and because it would have sparked a debt-limit crisis, were White House chief of staff Howard H. Baker Jr. and Treasury Secretary James A. Baker III.
The legislation Reagan agreed to sign yesterday also raises the government's debt limit to $2.8 trillion, enough to give the United States sufficient borrowing authority to last through May 1989. The existing debt ceiling of $2.3 trillion expired Wednesday, automatically reverting to $2.1 trillion.
When Reagan took office, the U.S. debt was $1 trillion.