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Reagan's tax battle: explaining a three-layer chess match

By Richard J. CattaniStaff correspondent of The Christian Science Monitor / February 9, 1981



Washington

Washington is reaching hard for ways to describe the economic-political drama fast intensifying here. "It's sort of three-dimensional chess," says one expert of the actions stirring in anticipation of President Reagan's economic plan, to be announced Feb. 18.

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"There's one chess game seen on one level between the Office of Management and Budget, the White House, and the agencies; another between the executive and Congress; then a third between the committees of Congress, the separate fiefdoms on the Hill, and the special-interest groups," says Stephen Hess, a White House- watcher at the Brookings Institution. "It's very complicated."

White House spokesman James Brady cautions that the "black book" tallies of potential budget cuts -- leaked to the press by congressional sources and listing possibly two-thirds of the targets of an eventual $40 million in trims -- are preliminary.

"The process is not complete yet," he says. "As you go into final budget review, it's like an Apollo [space shot] countdown. The people get into the chute. And you get toward what is called the final racking of the numbers -- and that's when all of it comes together. Only then, when it's complete, do you have the final set [of cuts]."

This week the White House will try to reconcile its spending cut totals and its three-year, 10 percent-a-year personal tax cut plan with its forecasts of what will happen to the economy if the package is passed by Congress.

"There's going to be a melding of [Treasury Secretary Donald] Reagan's numbers and [OMB director David] Stockman's numbers," Brady says.

The initial Reagan forecasts picture very, very optimistic and fast results if Congress buys the program. Inflation would be cut almost in half in a year, and the gross national product would leap 7 percent.

Mainstream economists say they are unsettled by such claims. Where a Reagan OMB forecast reportedly puts inflation at 6.5 percent next year, Otto Eckstein's private econometrics firm, Data Resources Inc., sees inflation at 10.2 percent next year, 9.5 percent in 1983. It expects GNP (gross national product) growth to average about 3 percent in 1982 and 1983.

"Iths very hard to deal with," says Brookings budget analyst Robert Hartman of the rosy Reagan forecast. "They're going to assume growth rates that are verym high, and inflation rates that are verym low. the combination of those two things, by themselves, even without the program change [spending cuts], will cut the budget enormously by '83 and '84."

White House sources say they anticipated challenges to their forecasts.

One observer calls Reagan's optimistic budget- balancing timetable the "mirage effect" common to every White House budget. "Out in the third and fourth year in everym administration's budget projection, Republican and Democrat alike, it shows the budget lines come together and shows it balanced out there," he says. "Some administrations say they'll balance it the first year. But it's always the mirage effect."