Panetta Offers Stark Budget Scenarios : Deficit: House panel chairman fights uphill battle on constitutional amendment. He would urge big tax hikes and cuts in popular programs.

The chairman of the House Budget Committee proposed Tuesday that Congress should commit to big tax increases and severe cuts in popular federal programs if it adopts a constitutional amendment requiring the U.S. government to balance its budget.

Rep. Leon E. Panetta (D-Carmel Valley), fighting a lonely battle against the balanced-budget amendment, said the House should approve an enforcement mechanism to make sure that any such constitutional change actually eliminates the record-high deficit.

“If the President and Congress were really serious about balancing the budget, he would propose a balanced budget and the Congress would adopt one,” Panetta said. “Instead, we are going through the charade of a constitutional amendment.”

His comments came amid growing indications that the House would muster the two-thirds majority necessary to approve the amendment. A vote is now expected the week of June 7.

The measure also seemed to be picking up support in the Senate, but Sen. Robert C. Byrd (D-W. Va.) has threatened a filibuster and the outcome remains uncertain. If approved by Congress, the amendment would take effect only once it is ratified by three-fourths of the nation’s state legislatures.

Panetta released a report by the budget committee staff outlining three scenarios for slashing $600 billion of debt over five years, bringing it down to zero in 1997.

The report calls for such steps as a 5% national sales tax, possible reductions in Social Security and Medicare and deep cuts in defense.

White House Press Secretary Marlin Fitzwater accused Panetta of “crying wolf” with his suggestions. “We can balance the budget by wise spending cuts and economic growth without tax rate increases,” Fitzwater said.

Panetta replied: “The wolf is there, and neither the White House nor anyone else should blind themselves to the fact.”

Panetta also suggested that Washington should not be allowed to dodge the tough questions until after the November elections. “A constitutional amendment allows the President and the Congress to promise a balanced budget a few months before an election but not worry until later, much later, about how it gets done.”

Rep. Charles W. Stenholm (D-Tex.), leading House advocate of the amendment, suggested that the committee report presented a list of “horrors” to undercut the move to revise the Constitution. He also noted that the plan had not yet been reviewed or approved by the budget committee.

Speaker Thomas S. Foley (D-Wash.) and other members of the House Democratic leadership were reportedly trying to work out a procedure so that those who oppose the amendment could go on record in favor of balancing the budget through alternative legislation.

Panetta, however, said he was not sure whether the plan he released--requiring automatic spending cuts or higher taxes or both if deficit-cutting targets are not met--would be backed by the Democratic leaders.

Under one five-year scenario he outlined, Medicare cuts would total $114 billion through a combination of lower benefits for well-off elderly, increased co-payments, reduced payments to hospitals and cuts in fees to doctors.

Another $98 billion would be saved by reducing annual cost-of-living allowances for Social Security and other retirement programs to two percentage points below the inflation rate. Another $128 billion would be cut from defense beyond Pentagon reductions already made.

Other reductions would be for spending on food stamps, child nutrition, Amtrak subsidies and foreign aid for Israel and Egypt.

Panetta said he favored a second plan that would close two-thirds of the budget gap through spending cuts, including the Medicare and Social Security programs, and one-third by raising taxes. This plan would cap mortgage interest deductions for couples at $20,000 a year and increase tax rates from the current range of 15% to 31% of taxable income to 15.5% to 39%.

Times staff writer James Gerstenzang contributed to this story.