President Reagan told Republican congressional leaders yesterday he would go along with increasing the federal gasoline tax if Democrats propose it and if it is necessary to complete a deficit-reduction agreement with Congress, participants in the meeting said.
Reagan was also pushed by some Republican lawmakers to consider capping the cost-of-living allowances for federal retirement programs, including Social Security, but the president stuck by his position that Social Security reductions should not be considered.
However, in a later meeting with newspaper bureau chiefs, the president sent an ambiguous signal. He refused to say that Social Security is off the table in the deficit-reduction talks, Knight-Ridder reported. ". . . I won't make an answer either way," Reagan said. "As I say in negotiations, you do your negotiating there in the room without any advance notice as to where you stand."
The president's renewed involvement came as the budget talks between Congress and the administration gained some forward momentum on their 10th day. A new deficit-reduction plan proposed by the House Republican leadership won a conceptual endorsement from the White House and some qualified encouragement from congressional Democrats.
The proposal put forward by Rep. Robert H. Michel (R-Ill.) calls for a reduction in the deficit this year of $30 billion -- $7 billion more than required by the balanced-budget law -- and $45.5 billion in fiscal 1989, which begins next October.
The White House's blessing of the plan was seen as significant because Michel's proposal calls for higher taxes and lower defense spending compared with the administration's previous bargaining position in the talks that were spurred by the Oct. 19 stock market dive.
House Budget Committee Chairman William H. Gray III (D-Pa.) called the proposal by Michel a "significant contribution," though he cautioned that the budget summit must still travel "quite a distance" before it succeeds.
Michel and other GOP congressional leaders outlined the plan to Reagan at a morning meeting in the Oval Office where some of the lawmakers urged the president to support cuts in annual inflation allowances for Social Security recipients and others who benefit from federal retirement programs.
But Republicans remain divided on the sensitive issue of capping retirement cost-of-living allowances, and Michel's proposal did not include them.
Republicans described the session as a spirited one in which the president pounded his fist on a table as he denounced the evils of higher taxes, but also one that left them with a clear sense that the president has become more flexible.
Sen. Bob Packwood (R-Ore.) said the meeting with Reagan consisted of "honest ideological passions argued without acrimony."
Reagan's new flexibility on higher taxes, including his qualified endorsement of an increase in the gas tax, represents a softening for the administration.
But a Democratic congressional aide predicted that "nobody on the Democratic side is going to propose" higher taxes on gasoline because "it's a Joe Six-Pack issue."
When the issue was raised earlier this year by House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), it was quickly opposed by industry lobbyists, as well as liberal groups who protested its effect on the poor.
A 5-cent increase in the excise taxes on all motor fuels (the gasoline tax is now 9 cents per gallon) would yield $4.7 billion in fiscal 1988.
A White House official who asked not to be identified said the Michel proposal, which outlined general goals for spending and revenues without getting into specifics, was crafted in consultation with the administration.
Michel's proposal calls for $8 billion in real tax increases in the first year and $12 billion the second. It would raise another $6.4 in additional revenues from user fees and asset sales.
It proposes $9.3 billion in discretionary spending cuts, $4.9 from defense and $4.4 from domestic programs.
Those savings would be achieved by freezing discretionary spending, including defense, for the first half of this fiscal year and increasing it by 2 percent in the second half. An additional $5.1 billion in savings would come from reducing the costs of farm programs, Medicare and student loans, programs known as entitlements.
Two elements that caught the attention of Democrats who have repeatedly criticized Reagan for inflexibility in the talks were an increase of about $2 billion in taxes that the administration is now willing to accept, and another $1.4 billion reduction in military spending below its previous bargaining posture.
Military spending would be about $284.4 billion in Michel's plan, well below what Reagan requested, but about $1 billion above what Congress approved in its budget in June.
"It's a meaningful offer," said Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee. "We are taking a serious look at it."
Sen. J. Bennett Johnston (D-La.) called the "broad numbers a good starting point," but cautioned that "we haven't seen the details." Johnston added, however, that Democrats still will want higher taxes given the level of spending cuts.
Though Michel's plan does not contain any reductions in cost-of-living allowances for those who benefit from federal retirement programs, a White House official said yesterday, "I don't think anything is dead."
Republicans who met with the president were divided on whether any plan cutting back COLAs for Social Security beneficiaries and federal government retirees could be sold in the House and Senate, according to participants in the meeting.
Reagan, Michel said, "affirmed his earlier position" that Social Security should not be on the table in the talks.
Though some Republicans have pushed the talks to consider COLA reductions, others have strongly resisted such a move. "If Social Security is in there, I'm not there," said Rep. Trent Lott (R-Miss.), House minority whip.
Even with yesterday's movement, most lawmakers in the talks said no iron-clad deal acceptable to all parties is imminent. The group does not plan to meet over the weekend.
One Democratic aide said, "It's way too early. It's just a plan. There are some good things in it, but there are some good things in all proposals."Staff writers David S. Broder and Anne Swardson contributed to this report.