WASHINGTON — A reluctant and angry President Reagan said Saturday that he will sign a bill raising the national debt limit, although it may force him to choose between higher taxes and cuts in defense spending.
Attacking Congress for "trying to force my hand," Reagan said in his weekly radio address that he is compelled to sign the "cluttered" bill to avert a calamitous default on the nation's debt.
But the President, sounding bitter, vowed to continue his struggle with Congress over spending.
"This decision is not easy," he said. "I have no choice but to sign this bill to guarantee the United States government's credit. But I also will not permit Congress to dismantle our national defense, to jeopardize arms reduction or to increase your taxes. I am determined that will not happen."
The President was caught in a political squeeze because the Treasury's authority to borrow had expired, and the government would have been unable to pay its debts beginning next Thursday, Oct. 1, the start of the 1988 fiscal year.
Reagan sought an increase in the debt limit to $2.8 trillion, up from the current $2.1 trillion. The increase, the biggest in history, would enable the Treasury to borrow money until May, 1989, when Reagan's successor will be in office.
The President wanted a "clean" bill increasing the debt limit with no amendments, but the Democratic Congress gave him the debt-ceiling extension combined with a deficit-reduction program he does not like.
The bill restores an automatic "trigger" to the Gramm-Rudman law that requires a balanced federal budget.
It further mandates $23 billion in deficit reduction for fiscal 1988. Democrats want $12 billion of that total to come from higher taxes, but the President adamantly opposes any tax increase.
If the President and Congress cannot agree on a deficit-reduction package, automatic cuts in federal spending will take place, shared between defense and domestic programs. Any cuts in military outlays are highly objectionable to the President, who believes that Congress has already cut too much from the Pentagon budget.
Reagan made clear his disdain for the choices Congress is forcing upon him through this legislation, saying: "For those who say the only choice is undermining our national security at a time when the United States is close to an agreement with the Soviet Union on reducing nuclear weapons, they are wrong. For those who say more taxes will solve our deficit problems, they are wrong."
Packing the debt ceiling and the Gramm-Rudman fixes in a single bill "puts me in a position of accepting legislation with which I fundamentally disagree," the President said.
But he decided to sign it rather than grapple with Congress while the financial markets grow nervous.
A default would mean the Treasury, lacking borrowing power, could not raise new money to pay off its bonds, bills and notes as they came due. The financial consequences would be dire, the President noted. "Interest rates would skyrocket, instability would occur in financial markets and the federal deficit would soar."
He blamed the legislators for imposing the unpalatable choices on him.
"Unfortunately, Congress consistently brings the government to the edge of default before facing its responsibility," the President said. "This brinksmanship threatens the holders of government bonds and those who rely on Social Security and veterans' benefits."
Reagan indicated that he will take a tough line in dealing with with Congress over the deficit-reduction efforts in coming weeks.
Will Veto Excess Spending
"I will not hesitate to use my veto to hold down excess spending," Reagan said. "And I will spell out the impact that defense cuts will have on our long-term security interests."
The $23 billion in deficit reductions required by the bill represents a relatively tiny portion of the $1-trillion federal budget. But its backers believe action is needed to demonstrate to financial markets that the United States is making progress in reducing the huge budget deficit. Left uncontrolled, the deficit would ultimately be disastrous for the U.S. economy, as fast-growing federal borrowing drove up interest rates, harming corporations and consumers who must borrow funds.
The bill the President will sign calls for a deficit target of $144 billion for the fiscal year beginning next week, and requires a balanced budget by 1993. The deficit for the current year will be approximately $160 billion, far below the record level of $221 billion for fiscal 1986. However, changes in the tax law produced a larger-than-expected flow of cash to the Treasury this year.
The debt-limit bill, the President said, "is yet another example of Congress' trying to force my hand." And he called it another strong argument for the line-item veto, giving the President the authority to reject specific parts of bills, "to separate the good from the bad."