WASHINGTON — The Defense Department has decided to protect President Reagan's proposed "Star Wars" system of space-based missile defense from budget cuts, but to do so it will have to shave funds for the MX missile and trim spending devoted to military readiness, a defense official said Tuesday.
The Administration will announce today the specifics of the defense cuts it plans to put in place March 1 under the Gramm-Rudman balanced-budget law, which Congress enacted last month. It also will disclose the broad outlines of domestic spending reductions required by the law.
But even as bureaucrats in almost every agency struggled to implement the cuts required by the new law, congressional leaders were considering ways to avoid at least some of this fiscal year's $11.7 billion in automatic cuts.
Could Combine Cuts
One alternative being developed by congressional staff members would combine the roughly $5 billion in automatic military spending cuts with approximately $8.5 billion in domestic reductions that Congress considered but failed to approve last year.
That would allow Congress to overturn the rest of the automatic spending cuts--about $6.7 billion from domestic programs--and at the same time trim federal spending by somewhat more than the required $11.7 billion.
However, it would yield lower savings than Congress would achieve by implementing the automatic cuts as well as enacting the spending cut bill that failed at the end of last year. And beyond that, such a tactic would cast new doubts on Congress' ability to carry through on the provisions of the Gramm-Rudman law in future years, when the act will require more severe automatic spending cuts. Although this year's reductions will have wide-reaching and painful effects, they will appear modest compared to at least $50 billion in cuts that the new law is expected to mandate for fiscal 1987, which begins Oct. 1.
The law was born of frustration over the inability of Congress and the President to agree on budgets that could tame a deficit expected to reach $220 billion this year. Known for its chief sponsors, Sens. Phil Gramm (R-Tex.) and Warren B. Rudman (R-N.H.), it sets a series of descending deficit targets that would yield a balanced budget in 1991.
If elected officials cannot devise budgets to meet those targets, the law requires automatic cuts to be made about equally from defense and domestic programs. Social Security and various benefit programs for veterans and the poor are exempt.
A defense official, speaking on the condition that he not be identified by name, said much of the approximately $5 billion that must be pared from the Pentagon's $297.6-billion 1986 budget will come from funds devoted to day-to-day operations and maintenance, primarily in such areas as training and non-deployed forces.
Although these cuts could weaken military readiness, they would provide quicker savings than reductions in weapons programs, which typically stretch over a number of years. About 69 cents of every dollar targeted for operations and maintenance is actually spent in the year in which it is budgeted. By comparison, only 3% of the dollars devoted to shipbuilding are spent in the year they are authorized.
Moreover, to avoid paying penalties for broken contracts, fixed-price, multiyear contracts will be upheld "as much as possible," the defense official said.
Among strategic programs, he added, only the $2.75 billion approved by Congress this year for the Strategic Defense Initiative--the formal name of "Star Wars"--will be left untouched. The Administration had sought $3.7 billion for the controversial program this year.
But he said spending will be trimmed or postponed for other key strategic programs, including Reagan's high-priority MX missile. Congress already has cut the Administration's original MX plan in half, from 100 missiles to 50.
The Pentagon announced last week that almost all the $67 billion devoted to personnel, including salaries and other benefits, will remain intact in the 1986 budget. However, the Defense Department will try to speed up the departure of people already planning to leave the service.
Daily Meetings Held
Senior Pentagon officials, under the guidance of Deputy Defense Secretary William H. Taft IV, have met daily for more than a week, including over the weekend, to review individual budget requests of the military services and Defense Department agencies.
The deficit-cutting law is proving "so complex that just getting to the point of deciding (how programs) should be treated is a real exercise," said one official close to the decision-making. Under the law, the Pentagon has considerably more flexibility in choosing how to allocate its cuts than other federal agencies enjoy.
Some congressional staff members, fearing that Congress will find the Gramm-Rudman law's automatic spending cuts politically intolerable, are trying to devise an alternative. Congressional staff members struggling to draft such an option, however, "are about two weeks ahead of their bosses," who will not end their holiday recess until next week, a Senate aide said.