WASHINGTON — The defense budget next year might have to be slashed $49 billion more than President Reagan wants, if squabbling over the fiscal 1987 budget triggers automatic cuts in military and domestic programs, the Congressional Budget Office predicted Tuesday.
The projection capped a day in which lawmakers of both parties, fresh from a week's recess, started to sink their teeth into Reagan's nearly $1-trillion spending plan and signaled the President that he must moderate budget priorities or risk a stalemate that could imperil his military buildup.
In the budget he unveiled earlier this month, Reagan called for large cuts in many social welfare programs but proposed a budget of $320 billion for the military, up nearly 12% from the current year.
But Rudolph Penner, director of the bipartisan budget Office, told the Senate Budget Committee that cuts required by the new Gramm-Rudman budget-balancing law if the White House and Congress reach a budget impasse could reduce the defense spending authorization to $271 billion--less than Congress approved for fiscal 1986.
"It means a very different defense establishment than is envisioned by the President," Penner said.
The Gramm-Rudman law mandates across-the-board cuts in spending for a wide variety of military and domestic programs if Congress fails to cut federal red ink from more than $200 billion in fiscal 1986 to $144 billion next year.
Despite Penner's warning, both the Administration and congressional critics appeared to be digging in their heels rather than moving toward a budget compromise.
Both Republican Sen. Pete V. Domenici of New Mexico and Democratic Sen. Lawton Chiles of Florida, the ranking members of their respective parties on the budget panel, took note of a growing consensus that some form of tax increase will have to be approved if Reagan wants to meet the deficit target and still maintain his military plans.
But Treasury Secretary James A. Baker III told the committee that such a solution is out of the question.
"There should be no illusion that tax increases will somehow provide an easy way out," Baker said. "The President has expressed his views on this very clearly. He is firmly opposed to damaging the economy by increasing taxes."
Meanwhile, James C. Miller III, director of the White House Office of Management and Budget, was undergoing a grilling by the House Budget Committee on the accuracy of the projected defense spending estimates he used to calculate next year's budget.
Committee Chairman William H. Gray III (D-Pa.) told Miller that the CBO, several private economic forecasters and Domenici all had estimated that Reagan's budget understated actual defense spending by $14.7 billion. If true, that number would push the deficit to around $159 billion next year and trigger the Gramm-Rudman cutting process.
Another committee Democrat, California Rep. Barbara Boxer of Greenbrae, scolded Miller. "I think your budget is in serious trouble," she said.
Miller, however, denied his numbers were wrong, saying: "We just have a difference of opinion."
In a related development, attorneys for the Senate and the House asked the Supreme Court to uphold the constitutionality of the budget-balancing act, setting the stage for a final ruling on the law's validity before the court adjourns this summer.
In separate appeals, the two legislative bodies urged the court to overturn a decision Feb. 7 by a special three-judge federal panel that struck down the provision of the law that requires automatic spending cuts when Congress fails to meet deficit reduction targets.
The panel, citing the constitutional separation of powers, held that the comptroller general, as an official removable by Congress, could not be given power to decide which cuts are necessary--a function the panel said is reserved to the executive branch.
Lawyers for the Senate said that the comptroller is "ideally suited" to implement neutrally "the hard political choices" that Congress and the President made in enacting and approving the law. And attorneys for the House said that the court should decide how the separation-of-powers doctrine applied in cases like this one, where the panel rested its decision on the general intent of the Constitution rather than on a specific provision.
Times staff writer Philip Hager contributed to this story.