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READ BUSH'S LIPS AGAIN - THIS TIME TO INCREASE TAXES

President Bush, reversing a long-standing oppostion to tax increases, announced Tuesday that "it is clear to me" the need to reduce the budget requires "tax revenue increases" and cuts in domestic spending.

In a brief two-paragraph statement following a two-hour breakfast meeting with Republican and Democratic leaders, Bush laid out a new package of proposals, without giving details, and said that the "bipartisan leadership agree with me on these points."The president also said that "growth incentives; discretionary spending reductions; orderly reductions in defense expenditures; and budget process reform" are needed "to assure that any bipartisan agreement is enforceable and that the deficit problem is brought under responsible control."

He said the budget negotiations "will resume promptly with a view toward reaching substantive agreement as quickly as possible."

It was the first time that Bush has mentioned tax increases since the budget summit negotiations, although he had appeared to be easing away from his presidential campaign promise to "read my lips, no new taxes."

The breakfast session, which was attended by Bush, his top policy advisers, House Speaker Thomas Foley of Washington, Democratic leader Richard Gephardt of Missouri; Senate Republican leader Robert Dole of Kansas and House Republican leader Bob Michel of Illinois, was held in the White House residence.

The meeting was described by aides as "off the record" and was not even listed on the president's public schedule. It lasted much longer than expected, going two hours with the leaders coming and going from back gates.

The projected budget deficit for the 1991 fiscal year, which begins Oct. 1, is $160 billion without including the cost of bailing out the failed savings and loan institutions, which has been estimated at $230 billion.

Bush gave no indication of what tax hikes he may be seeking, but it was expected that he would try to keep the income tax rates intact. The so-called sin taxes - those on tobacco and liquor - have often been mentioned.

Nor were there any details on reforming the budget process, which has been bogged down in partisan bickering.

Sen. Phil Gramm, R-Texas, said Republicans "are perplexed" with the talks. "We don't understand what the Democrats expect," Gramm said. "We are ready. Everything that has to be done, has been done."