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$76-Billion Deficit-Cutting Package Gets Reagan's OK : Tax Hikes Included in Plan

November 20, 1987|Times Wire Services

WASHINGTON — President Reagan today embraced spending cuts and tax increases totaling $76 billion over two years, capping a month of deficit-reduction talks between the White House and the Democratic-controlled Congress.

Reagan said the bipartisan plan would send a "strong signal both at home and abroad" that the United States could deal with its deficit problems. Even so, officials said the plan faced tough sledding in Congress, where conservative Republicans were unhappy with the tax increases and liberal Democrats were displeased over the level of Pentagon spending.

Democratic leaders hailed the plan as they joined Reagan in the White House briefing room.

"Everybody gets something. Nobody gets everything he wants," said House Speaker Jim Wright of Texas. "It isn't painless for the very reason that it is real and not cosmetic."

The announcement of an agreement capped several weeks of tumultuous negotiations that began when the stock market collapsed last month and increased pressure for deep cuts in the record federal deficits.

"We're sending the right message at the right time," Reagan said.

The deal was intended to head off $23 billion in automatic across-the-board spending cuts required to go into effect at midnight tonight under requirements of the Gramm-Rudman budget-balancing act.

Congress Action Required

Those cuts will be rescinded if the package announced by Reagan is approved by Congress within 10 working days.

Rep. William Gray, Democrat of Pennsylvania, speaking of the Gramm-Rudman cuts, said "the ax does not actually fall . . . it starts to fall.

The plan includes a call for $9 billion in new taxes this year and another $14 billion next year.

Asked if Reagan had been provided with a list of specific taxes to be raised, Wright replied: "No and he didn't ask for one."

Wright added in response to questions that under the terms of the agreement there would be no increase in income tax rates. "I don't think it's achievable in this climate to have rate increases," he said, noting that Reagan had promised to veto any boost in tax rates.

Reagan, standing next to Wright, commented: "What the Speaker says is correct."

The agreement would reduce the deficit in fiscal 1988, which began Oct. 1, by $30.2 billion, to about $149.7 billion, based on congressional estimates. Both the Administration and congressional estimates show the deficit shooting up from last year's $148 billion if no action is taken.

In fiscal 1989, the deficit would be reduced by nearly $46 billion.

To accomplish that, the plan, in addition to the tax increases, calls for legislation to:

--Increase fees for some government services, and increase enforcement of current tax laws.

--Restrain military and domestic spending increases, including Medicare and farm price supports. This year's Pentagon outlays would be held to $285.4 billion, $12 billion less than Reagan requested.

--Sell government assets, possibly including the refinancing of rural electric cooperative loans.

Although many decisions on the specific cutbacks would be left for the upcoming legislation, the negotiators agreed not to reduce cost-of-living increases for Social Security recipients or other pensioners.

When translated into legislation and enacted, the pact would replace the Gramm-Rudman cuts, which under the law cut $23 billion--half from domestic programs and half from the military. Social Security, welfare, veterans programs and military pay are exempted from those cuts.

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