Step in the Right Direction

Reagan and the G.O.P. agree, sort of, on shaving the deficit

Ronald Reagan, the archconservative, surely never imagined that as President he would wind up raising taxes and cutting the Pentagon budget. But he also never figured that his Administration would double the national debt in one term. Reducing the nearly $200 billion deficits has become urgent and politically unavoidable: last week the President finally agreed with his party's Senate leaders to slow the defense buildup and endorse a few modest tax increases. "For months the Administration has stonewalled on the budget," said House Speaker Tip O'Neill. "Today we saw the first crack in the wall."

The Administration bills the scheme as a plan to cut the next three years of deficits by $150 billion, or about onequarter. In fact, Reagan had already provided for half of the total in his February budget proposal. Last week's plan would reduce the deficit by a further $75 billion, or 14%, over three years. It would result in a deficit in fiscal year 1987 of at least $143 billion; without the proposed cuts, the deficit would be closer to $200 billion--or more.

Just weeks ago, prospects for any agreement seemed dim. Meetings between White House aides and Democratic congressional leaders, in response to Reagan's call for a bipartisan effort to make a "down payment" on the deficit, came to nothing. The Democrats then started drafting their own plans to reduce the deficit. Some Republican Senators began doing the same, while insisting to Reagan that he would have to drop his unyielding opposition to defense cuts.

The severest G.O.P. pressure on the President was applied by a pair of key Western Senators: Budget Committee Chairman Pete Domenici of New Mexico and Appropriations Committee Chair man Mark Hatfield of Oregon. Their biggest dispute with Reagan concerned the Pentagon. Reagan had called for an annual defense-budget increase of 13%; Domenici proposed an increase of 5%. Both seemed adamant. "Nobody's moving the last few inches," complained a White House aide last Tuesday.

But John Tower of Texas, the ultra-hawkish chairman of the Senate Armed Services Committee, had become a broker. "Tower got Reagan to come down, and he got Domenici to come up," says one participant in the discussions. "He made the deal possible." The bargain between President and Senators was cut last Wednesday afternoon in the White House Cabinet Room. Reagan made what he said was his final offer: a 7.5% Pentagon increase next year. "We're all supposed to be leaders," he told his G.O.P. comrades, among them Majority Leader Howard Baker. "This is a time for leaders to lead." At Baker's suggestion, the Senators held a 20-minute caucus in the Roosevelt Room. "Mr. President," said Baker when they returned, "we've got an agreement."

The new G.O.P. plan would shrink the deficit in all three ways possible: tax increases, domestic cuts and a slower defense buildup. Each area is allotted about a third of the $75 billion burden. Such "symmetrical" cuts, says Domenici, are "the only fair way to go about this." The tax hikes include 19% more on hard liquor (to $12.50 per gal.), doubling the levy on diesel fuel (to 9-c- per gal.) and restricting tax-shelter benefits. The cuts in domestic outlays would come from, among other places, entitlements like Medicare and from an across-the-board freeze in general discretionary spending.

The G.O.P agreement glances over the most contentious defense issues--which programs to cut back for a three-year savings of $57 billion. Possible targets include procurement monies for the B-1 bomber, the MX missile, the C-5B cargo plane, a new Navy guided-missile destroyer, radar-laden cruisers and nuclear-attack submarines. Realistically, a few of those weapons might be cut back, one or two eliminated, yet the funds for all of them would have to be struck from the 1985 budget to save just $20 billion.

No doubt the rest of the plan will have to be refashioned to win Senate and House passage. "It's a movement in the right direction," says House Majority Leader James Wright, "and I welcome it. But it isn't enough." Administration critics argue that the three-way symmetry of the proposed reductions is unfair, since domestic budgets are already lean and defense spending is fat. House Democrats are working on their own ambitious proposal to cut the deficit by an additional $50 billion over the next three years and a companion plan to link every budget increase to a commensurate revenue increase.

Will the deficit really be tackled? At least the Republicans have left their huddle and have their signals straight. Reagan made the fundamental compromise on defense. The congressional budget process is showing signs of life, even backbone. Senator Lawton Chiles, a savvy Florida Democrat, sensed a political opening. "If they've been able to save this much," he said of the Republicans' proposals, "we're gonna help 'em save some more. We're gonna hug 'em to death."