"Blood, Sweat and Tears"

By GEORGE J. CHURCH

Preparing for more bone-tiring battles over the budget

"Americans have not seen for many years a successful fight on inflation, or balanced budgets, or so massive a tax reduction. A lot of bets on the future are still being hedged against the possibility that you, and we, will not carry through."

--Federal Reserve Chairman Paul Volcker

The Fed chief was testifying to the Senate Budget Committee, but he might as well have been addressing Ronald Reagan. Not that the President needed the warning. As he prepared for a speech this week announcing a new, and drastic, series of budget cuts, White House aides were well aware that the President for the first time was facing a credibility gap. To a large extent, Reagan had opened it himself by delivering on his campaign promises to slash taxes deeply, while starting a huge military buildup. Those astounding successes have raised grave doubts that Reagan can also redeem his equally important pledge to balance the federal budget by fiscal 1984.

Somehow, the President must find $90 billion by his Administration's own estimate ($100 billion by Volcker's) to slash from planned federal spending over the next three years. About $16 billion of that will have to come out of the budget for fiscal 1982, which starts Oct. 1--on top of $35 billion axed in the first round of reductions. Moreover, the President will have to push his new cuts through a Congress that seems much less compliant than it was when it handed Reagan his big budget and tax victories in early summer.

The dimensions of the difficulty produced an unmistakable air of tension last week at the White House. Reagan skipped his Wednesday horseback ride at Quantico, Va., for a budget session and remarked at a Cabinet meeting on Thursday that "there will be blood, sweat and tears for all of you." Though Reagan kept his options open during a Camp David weekend of studying briefing books, aides said he was likely to propose:

> Deferring, until Oct. 1, 1982, cost-of-living increases that under present law would be due three to seven months earlier in eight major classes of federal benefits: Social Security and veterans' benefits; military, civil service and railroad retirement pensions; supplemental security income for the blind and disabled; food stamps and other federally funded nutrition programs; payments to miners suffering from black-lung disease. The Government might save $4 billion to $5 billion next fiscal year, at the price of slicing into some programs that Reagan had earlier defined as part of an untouchable "social safety net." True enough, current formulas are widely believed to reward recipients of some of these benefits, especially Social Security, more than the rise in their real living costs would warrant. Nonetheless, the decision might embarrass the President, who had pledged only last Tuesday that "the budget will not be balanced at the expense of those dependent on Social Security."

> Wiping out the last job programs financed under the Comprehensive Employment and Training Act, which has already been cut from $7.8 billion this fiscal year to $3.5 billion next. In addition to ending the program of hiring 300,000 unemployed people for public-service jobs, the Administration seems ready to end subsidies to private businessmen for the on-the-job training of 500,000 disadvantaged youths.

> Abolishing the $6.4 billion-a-year program of federal revenue-sharing aid to cities and local governments over the next three years, thus cutting off money that now finances programs ranging from airport construction to library maintenance.

> Reducing the 2.9 million-member federal work force by 75,000 over the next three years, primarily through attrition.

> Dismantling the Departments of Education and Energy, which Reagan has often denounced as unnecessary.

> Ordering a 10% to 12% across-the-board cut in spending by all nonmilitary Government departments, exempting only "entitlement" programs for which benefits are fixed by law. The reductions might total $12 billion for the Department of Health and Human Services alone. Just which programs would be cut or abolished to squeeze under these ceilings is most unclear.

In a combative speech to Republican women in Denver on Friday, Reagan acknowledged the difficulty of his task. Said he: "All of us--the Administration, the Congress and the American people--are going to be bone-tired from the budget battles over the next few years."

In fighting those battles, Reagan faces severe problems of legislative strategy. Normally, Congress would vote separately on 13 appropriations bills providing money to run the Government through the next fiscal year. To avoid having his program hacked to bits during these votes, Reagan would like to present some kind of omnibus bill for a single yes or no vote on the spending cuts as a package. Congress agreed to such an all-or-nothing procedure when it set spending ceilings for fiscal 1982 in June. But the Democrats who control the House seem in no mood to go along again. Said House Speaker Tip O'Neill: "We are going the regular road of normalcy as far as the budget is concerned." The White House does not have much time to change minds: the House last week voted a "continuing resolution" putting up money to keep the Government running--but only until Nov. 1.

Even more important is the difficulty of convincing legislators that Reagan has made the right decisions on what to cut and how much. Senate Republican chiefs, including Majority Leader Howard Baker and Budget Committee Chairman Pete Domenici, called at the White House last week to argue that, if Reagan is to have any hope of balancing the budget by 1984, he must cut military spending much deeper than the modest $13 billion over three years he proposed two weeks ago. The Senators contended that he must also take an additional whack out of entitlement programs, such as Social Security and Medicaid. The thought of any major slowing of the growth of Social Security benefits, however, frightens many House Republicans. Frets one: "I saw a bumper sticker the other day: SAVE SOCIAL SECURITY--VOTE DEMOCRATIC."

Military spending will be an especially potent issue in the House, where Reagan faces the all but impossible task of satisfying two ideologically different groups that were essential to his earlier victories. One group is composed of roughly 20 moderate-to-liberal Northeastern and Midwestern Republicans who have nicknamed themselves the Gypsy Moths. They dread the thought of voting for further reductions in social programs that aid their constituents, such as federal money to help low-income people to buy fuel, and are begging Reagan instead to slash military spending in fiscal 1982 far more than the $2 billion he has proposed. Says Jim Jeffords of Vermont: "Political survival is involved. Some of us are obviously getting very nervous that we might not be around here after the next election."

Publicly, the White House has termed Reagan's latest military-spending proposals "nonnegotiable." Office of Management and Budget Director David Stockman, who has consistently argued that the Pentagon must subject itself to budget discipline, has privately hinted that the Administration might not fight to the end against a cut of around $5 billion in military outlays next fiscal year. Even that might not satisfy the Gypsy Moths, who called last week for $9 billion.

But what might be enough for the Gypsy Moths could be far too much for the Boll Weevils-the mostly Southern conservative Democrats, also numbering a hard-core 20, who gave Reagan vital votes for his first round of budget and tax cuts. Besides being ideologically in favor of a strong defense, the Boll Weevils are far from unmindful that heavy military spending benefits their constituents. They have another problem in going down the line with Reagan again. The House Democratic caucus last week voted to let their leaders identify certain key votes, and to deny choice committee assignments or committee chairmanships to any Democrats who buck the party line on too many of these tests.

Moreover, Reagan this time can count on no help from mainstream Democrats. On the first budget and tax votes, House Democrats framed programs of their own, going far toward meeting the President's wishes, only to see the President seize on their concessions to wring still deeper reductions from Congress. This time the Democrats hope to sit back and enjoy the show as the G.O.P. wrangles internally. Democratic Senator Ernest F. Rollings of South Carolina observes sarcastically that the Republicans' motto seems to be: "When in danger, when in doubt, run in circles, scream and shout."

Reagan still has an extraordinary gift for drumming up public support, which helped him win victories in Congress at the start of his term. But that prowess will now be tested to the utmost. Beyond the tactics of legislative battles, the President must convince the nation that his promises to cut taxes, rearm the country, and reduce civilian spending enough to balance the budget while maintaining essential social services are not hopelessly contradictory. --By George J. Church. Reported by Laurence I. Barrett and Neil MacNeil/Washington

With reporting by Laurence I. Barrett, Neil MacNeil

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