Domestic Spending Cut of $50 Billion Planned : Defense, Social Security Will Not Be Touched in Drive to Reduce Deficit, Budget Director Says

WASHINGTON —  President Reagan, committed to slashing next year’s federal deficit, is planning to propose spending cuts of more than $50 billion without touching Social Security or tampering with his defense buildup, Budget Director James C. Miller III said Friday.

“I would not flinch in getting rid of a program,” Miller warned. He added that Reagan is determined to avoid a tax increase.

Miller, in a meeting with Reagan and White House officials, presented an outline of the dilemma facing the Administration as it begins focusing on the budget Reagan will propose next February.

$200-Billion Deficits

Later, in his first interview with reporters since taking office in October, he acknowledged that deficits are likely to hover at about $200 billion a year unless spending is cut or taxes increased. He said Reagan is determined to reduce the deficit to $144 billion in fiscal 1987, which begins next Oct. 1.

Total spending in 1987 is expected to exceed $1 trillion, but Social Security and defense, which Reagan has declared off-limits to cuts, and interest on the national debt, which cannot be trimmed, make up more than half the total. That means Reagan would have to extract all the cuts--totaling between $50 billion and $60 billion in 1987--from programs that cost about $430 billion.

Miller blamed Congress for the budgetary predicament. Complaining that “spending seems to be extraordinarily high,” he accused lawmakers of a “very permissive attitude” toward spending. “Rather than going down, we see the deficit going up,” Miller said.

He said legislation already close to passage--including the farm bill and a catch-all package of program cuts and revenue increases--would boost the expected 1986 deficit at least $30 billion above the $172-billion target that Congress set for itself. Miller also acknowledged that weaker-than-expected economic growth should add another $9 billion to the deficit.

As a result, the deficit for the fiscal year that began on Oct. 1 could come close to last year’s record $212 billion, Miller said.

As Miller spoke, however, Senate and House negotiators reached agreement on the so-called Gramm-Rudman plan, which is supposed to balance the budget within five years. That plan sets declining deficit ceilings, and Miller vowed that the President’s fiscal 1987 budget proposal would meet the $144-billion ceiling for that year.

Rules Changed

Congress has rejected many of the spending cuts that Reagan has proposed in the past. But Miller argued that the White House will be more successful this time because, under the Gramm-Rudman bill, “the rules of the game are changed. Congress itself has to come up with a budget that hits those targets.”

If the President is to help Congress by proposing cuts designed to reach the targets, however, he will have to embrace reductions in domestic programs well in excess of any he has suggested in the past.

Unlike last year, when the Reagan Administration’s most ambitious deficit-reduction plan to date included spending cuts of $51 billion, Reagan has vowed not to reduce projected levels of defense spending. In fact, Miller said, the Administration will insist on a 3% defense-spending increase above inflation.

Miller refused to identify which specific domestic spending programs are likely to be targeted for cuts. He said he will present a range of options to Reagan on Monday for the President to consider.

‘Sacred Cows’

To emphasize his point that defense and Social Security will not be cut, however, Miller jokingly pointed to a large painting over the fireplace in his spacious office that showed several cows in a meadow. “Those are our sacred cows,” he said. “The one on the right is defense, (another is) Social Security and all that.”

Miller, acknowledging that his budget-planning instructions to government agencies do not make enough cuts to reach the $144-billion deficit target, said the budget office has already prepared a list of further cuts.

He left open the possibility that some of the deficit reductions might come through rosier economic assumptions than those the budget office is now using. But he said the Administration is still expecting the same 4% economic growth for next year that it projected earlier.