Reagan, GOP Chiefs Accept Budget Plan : Increases in Social Security Limited; Defense Costs Cut

WASHINGTON —  President Reagan and Senate GOP leaders reached agreement today on overall outlines of a budget plan that would limit Social Security cost-of-living increases next year to 2% while making moderate cuts in the President’s defense buildup.

Reagan “is fully aboard. He is going to be an enthusiastic player on this,” Senate Majority Leader Bob Dole of Kanses said in announcing the breakthrough.

The agreement, worked out in lengthy sessions between key Senate Republicans and White House officials, would give Reagan many of his sought-after domestic program reductions in exchange for concessions on defense spending, leaders said.

The package, expected to be debated in the full Senate the week of April 22, would reduce the federal deficit by $52 billion next year, said Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Budget Committee.

Defense 3% Above Inflation

His panel had earlier proposed a plan that would permit defense spending to grow only with the rate of inflation next year--a degree of spending restraint the White House pronounced unacceptable. Reagan had proposed a 5.9% increase in defense spending on top of inflation.

Under the compromise, defense spending would be allowed to rise 3% next year above inflation.

The Social Security aspect of the plan would guarantee at least a 2% hike in benefits for all federal pension plans in each of the next three years.

And, if inflation were to rise above 4%, those receiving benefits would get the 2% hike plus an increase representing percentage points above the 4%, Domenici said.

‘Lot of Give-and-Take’

Reagan is “wholeheartedly in support of this,” Domenici said. “Obviously, there was a lot of give-and-take.”

Negotiators had been aiming for a package of spending cuts designed to reduce the projected $230-billion deficit by roughly $55 billion next year and $300 billion over the next three years without raising taxes.

The agreement to limit Social Security raises came as a surprise. White House Chief of Staff Donald T. Regan had insisted that the Administration “wouldn’t touch” the senators’ recommendation on it.

Sources close to the negotiations said the agreement also accepted several of Reagan’s original budget recommendations, including a freeze on Medicare payments to most doctors and hospitals and termination of most Small Business Administration programs, along with the federal Amtrak subsidy and the Urban Action Development Grant program.