Miller Says New Budget to Meet Deficit Target

President Reagan’s new budget, the first ever to exceed $1 trillion, will meet Congress’ deficit reduction target, even though it will include a defense spending increase of 3% above inflation while keeping Reagan’s promise not to raise taxes, Budget Director James C. Miller III said Tuesday.

Miller, making his comments during a breakfast session with The Times’ Washington Bureau, said that domestic spending programs will be targeted for severe cutbacks. Although Social Security remains off-limits to presidential budget cutters, he said, the budget will offer major proposals to overhaul agriculture, mass transit and Medicare programs.

Higher Federal Fees

Although Reagan is not prepared to accept any tax hike, Miller said, about half of the necessary deficit reduction will come from such revenue-raising measures as higher charges for users of federal services, beefed-up tax enforcement and sales of government loans and other assets to private investors.

Increased excise taxes on such consumer items as alcohol and tobacco “are not in the budget,” Miller said, although “it’s conceivable they might be added.”

Meanwhile, top budget officials disclosed that the Defense Department appears to have given up its effort to obtain Reagan’s pledge to request the full $318 billion it had been seeking for fiscal 1988, which begins next Oct. 1. Instead, it is expected to settle for a budget request of less than $311 billion--in effect a 3% increase, after adjustment for inflation, over the amount Congress approved for the current fiscal year.

Despite the effort to moderate their defense budget request, Administration officials conceded that they do not expect Congress to give the Pentagon anything more than a fiscal 1988 budget that would keep pace with inflation, rising from just under $290 billion this fiscal year to about $299 billion.

In the last two years, apparently in part because of disdain for Defense Secretary Caspar W. Weinberger’s demands for further huge spending increases, Congress actually has cut the Pentagon budget below the amount necessary to keep up with inflation.

Reagan is firmly determined not to let the deficit exceed the $108-billion Gramm-Rudman target for the next fiscal year, Miller said, even though many members of Congress have called for abandoning or relaxing it. The target is one of a series aimed at reducing the deficit to zero by fiscal 1991.

“The President will not budge on the $108-billion figure or on taxes,” Miller said.

Few Budget Increases

As a result, only a few critical programs will receive budget increases, he added, and even those increases will be less than many advocates of the programs are seeking.

Federal aid for AIDS research and education will be increased, he said. But he conceded that the Administration’s budget request will “not meet the goal, by a long shot,” of the National Institute of Medicine, which called for a fivefold increase in federal AIDS spending by 1991.

Moreover, in a decision that directly affects Los Angeles’ new Metro Rail subway project, Miller promised another effort to cut back on federal aid for urban mass transit. But, instead of simply proposing to eliminate mass transit subsidies, an Administration tactic that has repeatedly failed, Miller hinted that the White House would offer a new approach in next year’s budget.

“We have a surprise,” he said.

On the Hot Seat

Miller, who is racing to meet a early deadline of Jan. 5 for delivering Reagan’s budget to Capitol Hill, is on the hot seat in his second year as director of the White House Office of Management and Budget. It is his job to slash budget requests from each government agency to meet overall Administration spending goals.

“Last Wednesday, until 11 o’clock I was one of the most popular guys in Washington,” Miller joked. “Then, we did the Cabinet presentation and everybody saw the difference between their request and the OMB (ceiling), and I became the most hated and despised and misunderstood person in Washington.”

And, when Reagan’s budget is released next month, “I think the American people generally will have something of the same reaction,” he acknowledged.

Miller said that the White House would offer a dramatic new farm proposal in next year’s budget but suggested that the Administration’s goal is not to immediately slash the current farm support system, which is expected to cost $76 billion over three years. Instead, he hopes to “get on the right path” for future years.

Miller, terming the current farm subsidy program “not politically sustainable,” said the Administration would offer a plan that would “decouple” government farm payments from decisions by farmers on how much to plant. The goal would be to “better direct those subsidies to those who really need them and deserve them,” rather than the current system, in which large farmers receive most of the government crop support payments.

He did not elaborate on proposed changes in Medicare.