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Negotiators Optimistic on Deficit Package : 2 Sides Held Near Agreement on New Tax Revenue, Defense Cuts

November 12, 1987|KAREN TUMULTY | Times Staff Writer

WASHINGTON — White House and congressional budget negotiators said Wednesday that they are very close to a deficit-reduction agreement but that disagreements remain in a number of areas as the talks resume today. House Majority Leader Thomas S. Foley (D-Wash.) told reporters after a five-hour bargaining session that there is "a general sense of confidence and optimism" over the prospect of an agreement.

Sen. Pete V. Domenici (R-N.M.), top-ranking Republican on the Senate Budget Committee, described the two sides as "close as can be."

Sources said the negotiators tentatively have agreed on $10 billion in new taxes--more than double the amount that President Reagan had supported in his original fiscal 1988 budget--but they warned that the total may change before the talks are finished.

"They (Democrats) haven't come up enough on the spending side, so we're fixing to go down on the tax side," said Rep. Trent Lott (R-Miss.), the House's second-ranking Republican.

Defense Cuts Unresolved

Another area of remaining disagreement is how much to cut defense spending. One Democratic staff member accused the Administration of backing away from an earlier agreement in an effort to make a final "ideological power grab."

Frank C. Carlucci, Reagan's choice for defense secretary, joined the talks Wednesday in an apparent effort to bolster Budget Director James C. Miller III's argument that the Pentagon should not take the brunt of spending reductions.

By the end of the day, Lott described the defense figure as "not final, but pretty close. . . . We're approaching some agreement on it."

By one source's account, the two sides were only $1 billion apart on defense, with Republicans supporting a cut of about $3 billion and Democrats, $4 billion. Without cuts, defense spending would reach an estimated $289 billion.

Democrats, meanwhile, continued to argue that the Administration is demanding too sharp a cut in domestic spending.

Those three areas--raising taxes, cutting the Pentagon budget and reducing domestic spending--are tied together, and agreement on one apparently is not possible until a deal is struck on the others. "It keeps tipping back and forth," one Democratic source said.

Seek to Reduce Deficit

The negotiators, now in their third week of talks, have as their immediate goal a package of revenue increases and spending cuts that would reduce the fiscal 1988 deficit by $23 billion from the level it otherwise would reach.

A cut of that size would leave the deficit at close to the $148 billion that was recorded in fiscal 1987, which ended on Sept. 30.

Without at least a $23-billion reduction, the Gramm-Rudman deficit-reducing law mandates spending cuts of equal depth from most government programs, excluding Social Security and some other benefit programs. Nov. 20 is the deadline for heading off the automatic cuts.

Realizing that they are under intense scrutiny by shaky financial markets, however, both Democrats and Republicans say that they hope to achieve about $30 billion in deficit reductions.

"Because of the legitimate expectations of both Wall Street and Main Street, the group has no choice but to come to an agreement," said Rep. Pat Williams (D-Mont.), one of the negotiators.

Once the participants of the so-called "budget summit" agree upon a general deficit-reduction outline, it will be up to congressional committees to turn those plans into reality by proposing more specific taxes and spending cuts. That task may prove as tricky as producing the overall framework agreement.

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