WASHINGTON -- The end of the Cold War marks the beginning of a hot war in Congress over the division of billion of dollars of previously planned military spending.

With the Soviet Union fading into history, battle lines are being drawn between those who want massive cuts in the military budget to make room for higher spending on infrastructure and other domestic programs and those who want to use the savings to pay for tax cuts.

Prominent tax cut proponents like Senate Finance Committee Chairman Lloyd Bentsen, D.-Tex., and Senate Budget Committee Chairman James Sasser, D.-Tenn., have called for up to $75 billion of additional defense cuts over the next five years to finance middle-income tax cuts to pump up the sagging economy.

"The issue is how we use the peace dividend to alleviate nearly three years of economic stagnation," Sen. Sasser said in pushing for an immediate, $30 billion tax cut for the middle class.

But proponents of higher domestic spending also have formidable allies in Congress -- including House Speaker Thomas Foley, D-Wash., and House Majority Leader Richard Gephardt, D-Mo. They have been making an equally forceful case for diverting planned spending from defense into public works and other public investment programs to stimulate long-term economic growth.

"A new program for America's economic recovery and revitalization must be centered on long-term solutions," Rep. Gephardt said recently, adding that "we should change the budget agreement to permit defense cuts to fund domestic spending areas such as education, training, and public works."

Each side is bolstered by powerful lobbying groups, which have been mobilizing their forces for what promises to be a monumental clash next year over the nation's spending priorities.

Corporate lobbyists see the debate as a rare opportunity to reinstitute favored tax breaks eliminated with the Tax Reform Act of 1986, such as the business investment tax credit. They are backed by economists who say a temporary investment credit would do a lot to pull the economy out of its current quagmire.

On the other hand, state and local lobbying groups are banding together with dozens of citizens organizations to push for funneling the defense savings into higher domestic spending, adopting such slogans as "invest in America" and "put America first."

At a Congress of Cities meeting this month, the Rev. Jesse Jackson expressed this eagerness to tap the huge defense pot. "We could cut the military budget in half without cutting defense. :et's go get the money," he said.

The National Association of Counties recently adopted a resolution recognizing that in the battle for defense funds, state and local groups must recognize a new enemy -- the tax lobbyists. The resolution urges Congress "not to use defense savings ... for tax cut purposes."

Besides hoping to beat the nation's swords into plowshares, some public interest groups and several influential members of Congress -- including Sen. Sasser and Rep. Gephardt -- want to use at least a little of the defense savings to help reduce what is expected to be a record $360 billion deficit this year.

"Continuing large deficits remain a very serious problem for our economy. We are going nowhere if we don't address that issue," said House Budget Committee Chairman Leon Panetta, D-Calif., at a news conference releasing a $1 trillion, 10-year deficit reduction plan formulated by his committee.

The high hopes on all sides of the debate have been fueled by a collapse of the Soviet empire that has been more rapid and complete than previously expected by Washington policymakers.

A reduction in the defense budget of $182 billion over five years already had been scheduled in the 1990 budget agreement, with some of the savings going toward increased domestic spending and most going toward deficit reduction.

But the rapid demise of former "public enemy number one" promises to escalate that process and turn the previously quiet debate over the "peac dividend" into an unbridled free-for-all next year, analysts said.

"I think it's inevitable" that the $283 billion-a-year defense budget will be cut more significantly, said Stanley Collender, budget director at Price Waterhouse. "I've been telling our defense clients to expect the worst," he said.

Even the Bush administration -- which had been opposed to any further defense cuts -- is now making a contingency plan in its fiscal 1992 budget to size down the Pentagon by another $50 billion, he said. The plan anticipates a large-scale attack on the military establishment in Congress next year, he said.

But the amount that can be cut next year for financing an economic growth package will be disappointingly small, Mr. Collender predicted. "I would be shocked if they could find more than $10 billion of savings in fiscal 1993," he said.

Since most of the growth packages would cost at least $30 billion next year, any plan to offset them with defense cuts would require a change in the budget agreement allowing the revenue loss in one year to be offset by spending cuts over several years, instead of in the same year.

Also, the agreement would have to be radically altered to permit the funding of tax cuts or domestic spending with defense cuts -- a change that many congressional leaders already are advocaging. Mr. Collender said he considers it likely that both reforms will be adopted in the coming year.

"The world is not the same place as it was in 1990. When they cut the budget deal," he said, "it was based on the assumption that the Berlin Wall had come down and there would be no further changes in the world."

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