Going Reagan Billions Better

By George J. Church. Reported by Douglas Brew and Johanna McGeary/Washington

A Senate panel cuts spending even more than the President did

The 21 men and one woman seated around tables pushed together to form a hollow square called out numbers in what seemed a mystifying code. Aides chalked the figures on blackboards, erased them almost instantly, then chalked new ones. A horse-betting parlor? Commodities trading pit? No, the meeting room of the Senate Budget Committee, which last week gave a flying start to Ronald Reagan's plan to slash federal spending.

In a mere four days, the committee voted to reduce planned expenditures in fiscal 1982, which starts Oct. 1, by $36.4 billion--actually $2.3 billion more than Reagan asked.* Combining bluster and blarney, Chairman Pete Domenici of New Mexico easily held his eleven fellow Republicans together against all attempts by the ten Democrats to narrow reductions in social programs. Frustrated and divided, the Democrats in the end joined in a unanimous vote for the full package. "We are wreaking unbelievable havoc on the lives of millions of poor Americans," mourned Ohio Democrat Howard Metzenbaum --just before he meekly murmured aye on the last roll call.

Strangely, the victory caused no exultation at the White House, where Reagan's aides seemed rather apprehensive. Last week's vote, they cautioned, must be upheld by a long series of further actions in the Democratic-controlled House as well as the G.O.P.-dominated Senate. Also the comparatively low approval rating the President now has in polls (see box) might make those forthcoming fights harder to win. One political aide went so far as to say, "We've lost some momenturn, and I don't know how we will get it back."

There were some reasons for these jitters. An effort by members of Reagan's kitchen cabinet to launch a lobbying campaign for budget and tax cuts fell apart last week. The Coalition for a New Beginning, which was to organize the grassroots effort, disbanded after some of Reagan's corporate supporters complained that they felt they were being dunned for contributions. Also housing starts fell 25% in February, and industrial production declined for the first time in seven months, pointing to a possible spring recession. That, to put it mildly, would not help boost the President's poll ratings.

Despite such concerns, Reagan easily quelled a potential bipartisan congressional rebellion against his budget plans before it ever really got started. When the President journeyed to Capitol Hill for a meeting with Republican congressional leaders on Tuesday, he had to contend with two bits of bad news. The nonpartisan Congressional Budget Office had just predicted that federal spending might soar as much as $25 billion above Reagan's forecast for the next fiscal year, and that the deficit might consequently balloon to a record $70 billion, vs. $45 billion projected by the White House. Reason: the CBO doubted that inflation and interest rates will come down anywhere near as rapidly as the Administration expects. Partly because of this gloomy forecast, Republicans on the Senate Budget Committee agreed during a six-hour meeting Monday night to support a move to trim cost-of-living increases scheduled next year in Social Security pensions and veterans' benefits, two programs that Reagan has ruled sacrosanct.

Arriving for his meeting with the G.O.P. congressional leaders, the President snapped to reporters that the CBO estimates were "phony." Later he retracted that stinging word and observed, accurately enough, that the CBO is projecting a continuation of existing economic trends that his program is designed to change. The opposite side of this argument is that Reagan is counting on a break in inflationary psychology that cannot be supported by figures. Nonetheless, congressional Republicans for the moment swallowed their doubts.

More important, they also swallowed Reagan's insistence that Social Security and veterans' benefits stay untouched. Privately, Administration officials conceded that cost-of-living adjustments eventually will have to be reduced if the President is to achieve his goal of balancing the budget by fiscal 1984. But for now the White House has decided it cannot afford to anger millions of the elderly and veterans. Says one top congressional Republican: "Eighty percent of these people vote, and it is a Republican constituency." Reagan himself told the G.O.P. leaders simply that he had made a campaign promise not to touch Social Security and veterans' benefits, and that was that.

So it was. When South Carolina Senator Ernest Rollings, ranking Democrat on the Budget Committee, moved the next day to chop $7 billion out of the $22 billion in cost-of-living increases likely next year, he lost by eight votes. The splintered Democrats could not prevent the Republicans from cutting Medicaid and unemployment compensation and other social programs $200 million more than Reagan had requested, and all but four went along with a move by Kansas Republican Nancy Kassebaum to lessen a cut in the lending authority of the Export-Import Bank, a step that benefits big corporations.

The resolution this week goes to the Senate floor, where it should pass easily. Cuts in specific programs then must be approved again by committees that actually control those programs, but they will be under instructions to limit spending to the amounts specified in the big budget bill. Concedes Metzenbaum: "When all is said and done, the President will pretty much get what he wanted."

In the House, the controlling Democrats are no more eager for a knockdown fight than their Senate colleagues. Majority Leader Jim Wright of Texas asserts that the Democrats will have to adopt a majority of the spending cuts and then concentrate on cutting taxes by less than Reagan proposes. Says he: "The combination of these two will have to result in a deficit projection no larger than Reagan's." While the Democrats will try to narrow social-spending cuts just enough to soften the wrath of their constituents among the disadvantaged, they will give the President enough to escape public censure for blocking his program. Then if the program fails to spur economic growth and slow inflation, they will put the blame squarely on Reagan. With opponents no more combative than that, White House worries about loss of momentum seem highly exaggerated. --By George J. Church.

Reported by Douglas Brew and Johanna McGeary/Washington

* Though the President calculated that his proposals would slash spending by $48.6 billion, the committee staff estimated the actual reduction at $42.9 billion. Of that, $8.8 billion is to be saved by administrative actions, leaving $34.1 billion, by committee arithmetic, that Congress is being asked to chop.

With reporting by Douglas Brew and Johanna McGeary/Washington

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