Cap on a Hot Tin Roof

By GEORGE J. CHURCH

Buckets of dry ice sent vapors swirling through the Government Printing Office. As the cold steam rose around them, White House aides swathed in heavy sweaters and long scarves handed journalists advance copies of the federal budget for fiscal 1986. For mood music, they piped in the sound track from The Big Chill.

Alas, this valiant attempt to find something funny about the endless columns of figures was already outdated. The sound-and-sight gag did dramatize what Ronald Reagan considers the theme of the budget he was scheduled to present formally to Congress on Monday: the painful necessity of virtually freezing overall federal spending in order to reduce gargantuan deficits. But long before the fat, gray-bound budget volumes appeared over the weekend, that theme had got lost in a spreading uproar over one component of the budget that Reagan, far from freezing, wants to maintain at a rolling boil: military spending.

"Under my budget proposals," proclaims the President in an accompanying message to Congress, "the growth of programmatic spending--that is, total federal spending except for debt service--will be zero next year." After counting increases in interest on the national debt, expenditures during fiscal 1986, which starts next Oct. 1, would rise only 1.5%, to $973.7 billion (including some off-budget outlays). That would be the smallest hike in 21 years. To achieve that goal, Reagan proposes to whack $42 billion out of what would be spent for nonmilitary purposes under existing law. He would freeze, curtail or even eliminate programs that benefit farmers, veterans, students, the sick, small businessmen, exporters and just about everybody else except Social Security recipients.

But military spending under Defense Secretary Caspar Weinberger would rise by more than $31 billion, to a projected $277.5 billion in fiscal 1986. That would be an increase of more than 12%, or about 6% even after allowing for inflation. Moreover, defense outlays would go on increasing rapidly in later fiscal years, partly offsetting the continuing effect of economies in civilian spending. One result: Reagan would fail to achieve his stated deficit-cutting goals. Red ink would indeed dwindle, from an expected record $222.2 billion in the current financial year to $180 billion in fiscal 1986 and $144.4 billion in 1988. But that would be well short of the $100 billion target the Administration had set for itself.

All these numbers had been leaked and widely discussed. But as they hardened into a printed proposal, they produced a rebellious mood in Congress. Reagan's Republican allies, who control the Senate, took the lead in insisting that the President did not stand a chance of winning slashes in civilian outlays unless he also agreed to some significant slowing of military spending. Bob Packwood of Oregon, chairman of the Senate Finance Committee, let it be known that his committee is willing to approve cuts in civilian spending going even beyond those that Reagan asks--but only on condition that defense outlays be chopped too. John Heinz of Pennsylvania implied that voting for deep cuts in domestic spending and continued expansion of military expenditures could endanger some of the 22 Republican Senators up for re- election in 1986, and thus threaten G.O.P. control. That underlined a startling change in sentiment from the very recent days when lawmakers feared casting any vote that could be labeled "against defense."

Indeed, it seems likely that the pivotal figure in this year's battle of the budget will be not the President but the Secretary of Defense. It was Weinberger who persuaded Reagan to reject pleas that the Administration pare its military-spending requests sharply before presenting them to Congress. Consequently, the man once known as Cap the Knife (when he was President Nixon's Budget Director) has become the target of congressional budget cutters. After a meeting last week at which Republican Senators could not get the Secretary to yield a dollar, Mark Hatfield of Oregon termed Weinberger "a draft dodger" in the war against deficits.

Weinberger begins his defense of the Department of Defense this week in testimony before the Senate and House Armed Services committees. Mild- mannered and equably spoken but adamant as always, he gave TIME a preview of his argument. The U.S., he said in an interview, faces a Soviet Union "with a growing military strength, almost all of it offensive in nature. And while you're not precisely sure where they will test you, you have to have an ability to project (military power) rapidly to various parts of the world. This includes the requirement that you may have to be ready to fight in more than one place at a time." To Weinberger the need to be able to counter the Soviets anywhere any time dictates continuing at full speed just about every weapons program the U.S. has under way.

Administration planners also contend that a continued arms buildup now is essential to arms reduction later. General John Vessey, Chairman of the Joint Chiefs of Staff, asserts that the strengthening of American fighting capability has "forced the Soviets to come back to arms-control talks in Geneva," which are now scheduled to resume March 12. If those talks are to succeed, added Weinberger, the Soviets must be convinced that the U.S. is determined to keep adding to its muscle. Testifying last week to the Senate Foreign Relations Committee, Weinberger insisted that "reductions in the defense budget will prolong negotiations . . . and take away Soviet incentives to agree to reductions."

To congressional critics, Weinberger and the Pentagon are simply intent on buying every weapon the generals and admirals put on their wish lists, without any overall strategic design or much attempt to weed out those systems that prove ineffective or excessively costly. In a study submitted to Republican congressional leaders last week, a group of G.O.P. lawmakers led by Senators Charles Grassley of Iowa and Nancy Kassebaum of Kansas contended in effect that much of the roughly $1 trillion spent on defense in the past four years had disappeared into what Grassley called a "bottomless pit" of Pentagon waste.

For example, said Grassley and Kassebaum, the Reagan Administration had provided 76% more money for the purchase of aircraft and 48% more for production of warships than the Carter Administration had in its four years --yet wound up putting 12% fewer warplanes and 17% fewer major fighting ships into service than the previous Administration had. One reason: to get some weapons systems built, "we are paying up to $700 per standard hour for work normally done in the private sector for between $40 and $60." The Pentagon's response: the weapons it is buying are more advanced, technically sophisticated and effective, and thus costly; they take so many years to build that the numbers coming into use still reflect Carter rather than Reagan buying policies.

Nonetheless, Grassley and Kassebaum recommend an outright freeze on military spending as the only way to shock the Pentagon into the "substantive management reforms" that would buy fighting efficiency rather than military fat. Other lawmakers advance the idea of a freeze on viscerally political grounds rather than in the cause of efficiency. Their argument to the White House is in effect: Don't ask us to cut spending on food stamps and Medicare while approving higher outlays for missiles, planes, tanks and guns. If you are going to try to freeze overall spending, well, freeze everything. Then at least we can tell our constituents that everyone is sharing in the sacrifices that must be made to shrink the deficit.

Many in Congress, however, agree with Republican Senator William Cohen of Maine that "the freeze talk is not real." A freeze on military spending might not even be technically possible: there is some reason to think that contracts already signed by the Pentagon, under authority granted by Congress in past years, will keep military expenditures rising almost regardless of what the legislature may do now. Les Aspin of Wisconsin, chairman of the Armed Services Committee in the Democrat-controlled House, talks of holding military-spending increases to 3% over the rate of inflation, about half of what Weinberger proposes. One reason: a 3% "real" increase in defense budgets is what the U.S. is urging on its NATO allies.

Inability to agree on a desired level of military expenditures has already | delayed Senate Republican Leader Robert Dole's attempt to frame an alternative budget. With White House blessing, the Kansan had undertaken to get his 52 G.O.P. Senate colleagues to agree on spending cuts that would actually meet Reagan's unfulfilled goal of slashing the deficit to $100 billion by 1988. The Dole budget was supposed to be unveiled last Friday, but it was not; there is no certainty that it will be ready this week either, or in fact ever. The present thinking is that some time this month Dole and Senate committee chairmen will march to the White House with a list of reductions going beyond those Reagan proposes; for example, it might include a freeze on cost of living increases in Social Security pensions. But there will be a conspicuous blank for military expenditures, and a warning that all the other cuts are contingent on Reagan's filling in that blank with a figure well below what Weinberger proposes.

This intense focus on defense, to the near exclusion of the other items in the budget, is somewhat astonishing. Reagan called his nonmilitary cutbacks "the most exhaustive effort ever made to rein in Government's chronic overspending," and in any other year they would have raised a quadraphonic howl of protest. The President proposes to freeze spending on a number of programs, prominently including pensions for retired civilian and military employees (other than those on Social Security) and Medicare/Medicaid reimbursements to doctors and hospitals. Nearly a score of other programs would be "reformed"--that is, cut deeply. Among them: farm price supports, veterans' health benefits, student loans, child nutrition, rural electrification, public housing.

Most striking, Reagan plans to eliminate entirely a clutch of programs, including loans by the Small Business Administration and the Export-Import Bank, subsidies to Amtrak and urban mass transportation, and general revenue- sharing grants to cities and counties. The fact that nearly all of these slashes have been well publicized in advance does not make them any less bold an attempt to carry out Reagan's philosophical objective of reducing the role of the Federal Government in American life. In part, the howl probably has been delayed rather than suppressed. Democrats, cowed by Reagan's 49-state electoral sweep, are lying low, many in the hope that Reagan's budget will self-destruct in a quarrel over military spending. Their strategy for the moment is to let Dole and his Republican Senate colleagues take the lead in trying to negotiate a compromise with the White House that would then have to be further compromised to get past the Democratic House.

A compromise is by no means impossible: Reagan and Weinberger obviously are asking for more military spending than they have any hope of getting Congress to approve. The question, however, is not just how much the lawmakers might trim from defense expenditures but what specific programs they might cut. On that matter, confusion reigns supreme. The MX missile is exceedingly unpopular in Congress, but the betting right now is that it will survive an important test vote in March by a wider margin than the seven House votes that kept it in the budget last May. Reason: lawmakers are hesitant to throw away what could be a valuable bargaining chip in negotiations with the Soviets. Other troubled systems have their staunch defenders too. For that matter, given the long lead times on weapons production, Congress could knock out the 30 top strategic and conventional weapons systems and save only $12 billion in outlays next year. That leaves reductions in planned military manpower.

There is a considerable danger that Congress will close its eyes and slash blindly. That is no way to determine a military budget, which ought to be based on a careful consideration of the needs of national defense as well as a calculation of what deficits are tolerable. Nonetheless, says Rhode Island's John Chafee, who ranks No. 3 in the Senate Republican leadership: "I personally think we will end up giving them (the Pentagon) a number and telling them, 'Do what you will with it.' " That could lead to ill-advised cuts in "operations and maintenance" funds for ammunition, spare parts and training--one place to get quick savings--and stretch-outs in weapons programs that wind up increasing the eventual cost of each item produced.

It is possible, too, that Congress will use a failure to agree on defense spending as an excuse for refusing to enact civilian-spending cuts that many Republicans as well as Democrats dislike. The result could be a melange of halfway reductions in both military and civilian spending that would cause considerable pain without accomplishing any significant reduction in deficits. That would be close to the worst possible outcome to the budget battle. Unfortunately, it is far from the least likely.

With reporting by Neil MacNeil and Barrett Seaman/Washington