‘High Noon at the Old Corral’ : Reagan and O’Neill Face Off on Budget

WASHINGTON â€”  The fate of the Senate’s latest budget proposal--as well as overall prospects for any federal budget next year--appeared Friday to hinge on whether President Reagan and House Speaker Thomas P. (Tip) O’Neill Jr. can compromise on issues where each has vowed not to budge.

But, in a standoff that one Republican senator described as “playing chicken with the American economy,� each side made it clear that it expects the other to be the first to move.

Or, as Senate Majority Leader Bob Dole (R-Kan.) put it: “It’s high noon at the old corral. We’re out in Dodge City and we’ve got Tip O’Neill on one end of the street and Ronald Reagan on the other. They’re looking at each other and trying to decide who is going to blink first.�

O’Neill Refused

Dole insisted that negotiations cannot begin until the Speaker indicates he is willing to consider the Senate’s proposal to curb Social Security increases. O’Neill firmly refused, saying he wants assurances that the President will not veto the tax provisions contained in the budget offer.

But the Reagan Administration refused to discuss the plan in detail. “We would like to see some response from the House,� White House spokesman Larry Speakes said.

Early in the day, O’Neill, a Massachusetts Democrat, denounced the Senate plan as “gimmickry,� but by late afternoon he had softened his tone.

“If President Reagan agrees to all or even part of the budget proposal made by the Senate Republicans yesterday, then the House will sit down and negotiate on the basis of that budget,� he said.

O’Neill’s more conciliatory tone, sources said, reflects a growing concern that all sides will be blamed if Congress fails to come up with a budget before fiscal 1986 begins Oct. 1.

Political Opportunity

“I’d just hate to give the President the opportunity to take us apart, as I know he will, for failing to pass a budget,� said California Rep. Vic Fazio (D-Sacramento), one of the House and Senate negotiators who have been meeting for more than six weeks in a fruitless effort to forge a budget compromise.

Sen. Dan Quayle (R-Ind.), in a speech on the Senate floor, called for public pressure to resolve the stalemate: “The American people should immediately send their representatives in Washington a resounding message: Stop playing chicken with the American economy.�

The Senate’s latest offer refocuses on two areas that congressional leaders and Reagan had agreed to take off the table: Social Security and taxes.

“Everything is back on the table, and no one is happy about it,� one White House official said.

$12-Billion Savings

The Senate has proposed saving $12 billion over three years by giving those who receive Social Security and other government pensions cost-of-living allowances every other year, rather than the annual increase they get under current law. This would not affect next year’s benefits, but in 1987 the typical retired worker on Social Security would receive $241 less than he or she now can expect. A couple would lose $417 during the year.

Although this is not as sharp a reduction as would have been felt under earlier Senate proposals, O’Neill said it still violates a pledge Reagan made not to tamper with Social Security.

The plan also includes a $5-a-barrel oil import fee that most concede amounts to a tax. Reagan promised during his reelection campaign that he would accept taxes only as a last resort, and the White House official said he would be “really surprised� if the President agreed to the Senate proposal.

Tax Indexing Affected

It also would index taxes--that is, adjust brackets for inflation--every other year, rather than annually. This would increase the amount of taxes that many pay in the years in which indexing did not occur.

Still, in terms of reducing the deficit, the Senate plan is the most ambitious that has been advanced during the negotiations. It would cut next year’s deficit, now projected at almost $230 billion, by $65 billion. Over three years, it would reduce projected deficits by $338 billion, leaving an $89-billion deficit in 1988.

The plan, said Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), is “out there, and I assume that if the Speaker and the President each are waiting for the other to blink . . . we’ll have no (budget).�