Challenging the Red Sea

By James Kelly

Republicans and Democrats search for ways to cut the budget

Up to Capitol Hill last week went Treasury Secretary Donald Regan to defend his President's red-ink budget. Regan soon learned the feelings of his own party. "Last year I was on your ship," said Senator John C. Danforth of Missouri. "But this year I'm on the dock waving bon voyage." And Danforth gave a small wave to Regan.

Rarely has a presidential budget run into such swift and strong resistance from members of the Chief Executive's own party. "Virtually everyone is unhappy," admitted Republican Representative Lawrence DeHardis of Connecticut. "Only everyone is unhappy for different reasons. It all adds up to a lack of consensus."

The loudest howls, from conservative Democrats as well as from Republicans of all ideological stripes, were directed at the startling deficits Reagan is proposing. For fiscal 1983, the President predicted a $91.5 billion shortfall, shrinking only to $82.9 billion in 1984. Worse yet, the Congressional Budget Office disputed those figures, pegging the 1983 deficit at a staggering $157 billion and predicting a climb to $188 billion in 1984 and a whopping $208 billion in 1985. "There's a lot of panic among the Republicans," said New York G.O.P. Congressman Barber Conable. "They are splattering all over the ceiling."

In the Republican-controlled Senate, Minority Leader Robert Byrd of West Virginia urged Reagan simply to withdraw his proposed budget and submit one less awash in red ink. But Byrd could not resist scoffing at his Republican colleagues for bewailing the huge deficits after they had pushed through Reagan's program of tax cuts last year. "When you buy bologna at the supermarket," said Byrd, "you shouldn't expect to get home and find roast beef."

Amid the hubbub on the Hill last week, the most discussed alternative approach was made by Senator Ernest Hollings of South Carolina, the ranking Democrat on the Senate Budget Committee. His proposal came about almost by accident. Speaking before a group of college presidents gathered in Washington, Hollings casually mentioned a plan to slash the budget. Majority Leader Howard Baker heard about the proposal and, eager to explore any possibility, urged Hollings to present it to the Senate.

So last Wednesday morning, the handsome, gray-haired Hollings rose on the Senate floor and addressed a nearly empty chamber. Baker, however, was pointedly in attendance. Hollings proposed deferring Reagan's hike in defense spending, thereby saving $19 billion in 1983, and eliminating cost-of-living increases in Social Security and other entitlement programs next year, saving another $24 billion. He also suggested saving $5 billion by scrapping a proposed 5% pay boost scheduled for this October for Federal Government workers. To raise more money, Hollings recommended canceling the 10% cut in personal income taxes due this July and slicing in half the 10% cut planned for July 1983. The result: a combined saving of about $106 billion. Using the deficit predictions supplied by the Congressional Budget Office, Hollings estimated his plan would reduce the budget deficit to $42 billion in fiscal 1983, to $19 billion in 1984, and deliver a small surplus of $4 billion in 1985.

The Hollings proposal drew mixed reactions from Senate colleagues. Conservatives were predictably displeased with the trims in defense spending and reduction of the tax cuts, while some liberals criticized curbing the increase in Social Security benefits. But a surprising number of Republicans noted that the proposal was at least a starting point. "The appeal of the plan is that everybody is asked to sacrifice," said Republican Senator Slade Gorton of Washington. "No one escapes."

Howard Baker praised Hollings for making a "brave and courageous" speech and, by reacting favorably, signaled his willingness to strike a bipartisan compromise--and slash those deficits. But at the same time, Baker began urging his fellow Republicans to hold their fire against Reagan's budget. New Mexico's Pete Domenici, G.O.P. chairman of the Budget Committee, retreated from public view so thoroughly that Hollings joked to reporters: "He's hiding from you guys."

In the Democrat-controlled House, few Republicans doubt that the budget will be substantially revised. Conceded Minority Leader Robert Michel of Illinois: "The President can't expect his budget to be swallowed whole." Looking for some cheer amid the dreary economic figures, Michel joked: "Well, it isn't as bad as waking up to the Watergate news."

The House Democrats were badly split over what course of action to take. Many were tempted to sit back and, as an aide to Speaker Tip O'Neill put it, "let the Republicans stew in their own juices." O'Neill has already dismissed the Hollings plan and is pushing his own lieutenants in the House to come up with an alternative. Yet one Democratic leader points out that the Speaker may still be nursing wounds from his humiliating defeat in last year's bruising budget battle. "Tip is afraid to take the lead," he said. "He doesn't want it to turn into Reagan vs. O'Neill again."

Democrats in the Senate also have set up a working group to meet Reagan's challenge of "put up or shut up" and produce their own proposal. Predicted Senator Gorton: "The ultimate budget is not going to be the Hollings plan, but it is not going to be the Administration's proposal either." --By James Kelly. Reported by Neil MacNell and Evan Thomas/Washington

With reporting by Neil MacNell, Evan Thomas/Washington

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