WASHINGTON — As President Reagan Wednesday commemorated enactment of legislation designed to balance the federal budget by 1991, his Administration was developing the massive and controversial domestic spending cuts that Reagan intends to propose in February.
"It's back into the cauldron again," a White House lobbyist shuddered, "except this time the temperature is turned up."
Reagan, in a low-key White House ceremony marking his signing last week of the balanced budget bill, reiterated that he would veto any effort to raise taxes. He insisted that slashing his defense buildup in the interest of meeting the new law's deficit reduction targets would "violate its spirit." And, although he did not mention it Wednesday, he has also ruled out cuts in Social Security.
That leaves the rest of domestic spending to absorb virtually all of the $50 billion in cuts that the Administration says will be necessary to bring the deficit for fiscal 1987, which begins next Oct. 1, from its currently estimated $194 billion to the $144-billion ceiling mandated by the balanced-budget law.
"Next time around, no program will get a free ride," Reagan vowed as legislators including Sens. Phil Gramm (R-Tex.) and Warren B. Rudman (R-N.H.), the leading sponsors of the balanced budget law, looked on.
The President, said one of his strategists, will propose to Congress all of the cuts he has sought in the past "plus the ones we previously considered but didn't propose because they were impossible to achieve."
Among the familiar proposals, sources said, OMB's list of programs to be marked for elimination includes the Small Business Administration and government subsidies for Amtrak. Reagan has regularly proposed these cuts and Congress has just as regularly rejected them.
Some New Targets
And beyond that, the Administration is likely to set its sights on some new targets--ending federal funds for the Agricultural Extension Service, reducing reimbursement to doctors under Medicare and terminating highway-safety grants. All of these programs and more have been the subjects of speculation in the press as the White House scrambles to find $50-billion worth of cuts.
Some officials believe that the Gramm-Rudman balanced-budget law will enhance Reagan's chances of gaining congressional support next year. "It finally puts teeth in the budget process," said Albert R. Brashear, a White House spokesman.
But one Reagan adviser called Gramm-Rudman "an absolute disaster" because it invites a major assault on defense spending and is likely to force Reagan into a tax increase or, at the very least, a veto of a tax increase. The result, he fears, could be paralysis.
"You end up in a total impasse," this adviser said. "The President was sold a bill of goods without knowing the facts and figures."
'Dead on Arrival'
And one Republican adviser who has been involved in the budget process predicted that Reagan's 1987 budget, like those of the last two years, would be labeled "dead on arrival" when it reaches Congress in February. That adviser believes that the budget's domestic spending cuts will be assailed as "draconian, unrealistic and simplistic."
Instead of $50 billion in domestic spending cuts, he predicted "a bigger whack out of defense" than Reagan would like coupled with some sort of "revenue enhancement."
Reagan insisted again Wednesday that his veto pen is "sitting there right now waiting for any tax increase that might come my way."
But many of his own advisers believe that a "revenue adjustment," as they prefer to call it, may be inevitable if the Gramm-Rudman deficit target is to be met without cutting defense or Social Security, the two largest chunks of the budget.
'I Don't Mean Wink'
Senate Finance Committee Chairman Bob Packwood (R-Ore.) predicted that Reagan would have to scale back his defense buildup. And, he declared: "I'm not moving in any direction on a tax without the President's lead, and I don't mean wink, I mean lead."
House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) has said repeatedly that he expects Congress to amend Gramm-Rudman before making the hard choices necessary to meet its deficit targets.
The bill requires automatic, across-the-board spending cuts if Congress fails to meet its annual deficit targets.