Will Continue After Recess : Budget Talks Resume --No Progress Is Made

WASHINGTON —  Budget negotiators for the House and Senate returned to the bargaining table Thursday, two days after their talks broke up in disarray, but they made no progress and pledged to continue after Congress’ Fourth of July recess.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) had brought the budget conference committee back together in hopes that members could resolve the most contentious issue facing them: the Senate’s proposal to deny next year’s cost-of-living increases for Social Security recipients and other federal pensioners.

On Wednesday, House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) had suggested that the conferees consider higher taxes on Social Security benefits paid to people with high incomes, an alternative Domenici said offered “a ray of hope.”

Higher Taxes Suggested

O’Neill had mentioned taxing 85% of the Social Security benefits that are paid to individuals who earn more than $25,000 and couples whose earnings exceed $32,000. Those people, about 9% of all Social Security recipients, now pay taxes on half their benefits.

But Democrats on the House Budget Committee quickly distanced themselves from the Speaker’s statement and said it had been misconstrued.

“It is a little inaccurate to describe the Speaker’s comments as a proposal,” House Budget Committee Chairman William H. Gray III (D-Pa.) said. “They were not a proposal, but simply a restatement of something the Speaker has said in the past on a particular issue.”

Domenici, assuming that the higher tax on Social Security benefits could win House backing, had built an entire package around that prospect. White House Budget Director David A. Stockman and Senate Majority Leader Bob Dole (R-Kan.) also had been involved in putting together the plan, which reportedly would have cut the deficit by $59 billion in 1986.

Democrats Oppose Plan

The proposal would have allowed full cost-of-living increases to Social Security recipients and veterans but would have compensated other federal pensioners only partially for inflation. However, Domenici did not offer the plan once it became clear that the House Democrats refused to endorse the idea of higher taxes on upper-income Social Security recipients.

Now, Domenici said, “we’re in such gridlock that we’re not going to get anywhere without the President or the Speaker” using their influence to move the negotiations along.

Sen. Lawton Chiles (D-Fla.), the ranking Democrat on the Senate Budget Committee, agreed: “I think they have to get in the game. If not, I think they become responsible for the horrendous deficits.”

Still pending before the conferees is a proposal by both Democrats and Republicans on the Senate side that would combine $59 billion in new taxes over three years with sharp domestic spending cuts and a one-year freeze on federal pensions. However, that proposal would face almost certain opposition from President Reagan, who has promised that vetoing a tax increase would “make my day.”