Talk of new taxes heard on Capital Hill

By , Staff correspondent of The Christian Science Monitor

To cut food stamps, or levy higher cigarette taxes -- this is the type of option with which the Reagan administration may have to come to terms. President Reagan's September call for $13 billion in additional cuts in the 1982 budget is beginning to sink into the national consciousness. As it does, the phrase "revenue enhancement" is being heard among Republicans in Congress. This refers to new taxes, a cut in defense spending, a postponement of previously voted tax cuts, or a combination of all three.

At a press breakfast here, Senate Finance Committee chairman Robert Dole (R) of Kansas described possible sources of more revenue. A new one is to increase taxes on tobacco, alcohol, gasoline, and telephones. As one GOP leader put it, "there is deepening consensus that it is easier to raise cigarette taxes than to cut food stamps."

The overall GOP goal, of course, is to balance the federal budget by 1984. The difficulty is that the administration has approved a tax cut, a defense increase, and has not compensated these losses so far with equivalent spending cuts.

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It all began Feb. 18 when Mr. Reagan announced his huge budget plan to Congress, incorporating the "supply side" theory of economics worked out by Sen. William V. Roth (R) of Delaware and Rep. Jack Kemp (R) of New York. This argues that judicious tax cuts, offset in part by budget cuts, will stimulate the economy.

Congress passed a compromise "reconciliation" version, which Reagan signed Aug. 13. It soon became evident it hadn't solved the problem. Wall Street couldn't believe that the measure took big enough strides toward balancing the budget; values dropped, interest remained around 20 percent, and international markets shivered.

US Treasury Secretary Donald T. Regan publicly urges Federal Reserve Board Chairman Paul A. Volcker to let up on antiinflationary monetary brakes. Mr. Volcker says no.

President Reagan threatens a veto of the first appropriation bill pending in Congress. The sense of harmony between the newly elected Presi

Spokesmen for low- and middle-income groups complain of being discriminated against in proposed tax schedules. Wall Street hails Mr. Reagan's objectives but investors see the value of stocks decline by around $200 billion since June and bonds perhaps $300 billion. Financial leaders in Congress are now revenue sources to help balance the budget.

Reagan presented a new $13 billion round of spending cuts Sept. 24 to "lead us out of the economic swamp we've been in so long." Congress is now tinkering with it. Difficulties in passage have substantially increased, it is agreed. The Fed is maintaining an iron hand on interest rates, unemployment has risen, and talk of recession is beginning to be heard.

Reagan's formula is to slice another $11 billion from social programs, raise think Congress won't pass it.

Over on the House side, meanwhile, the Democratic majority has passed the first of a dozen specific appropriation bills, a $87.3 billion package for education, welfare, health, and jobs programs. It is about $3.9 billion more than Reagan's spending level. White House spokesman Larry M. Speakes indicated Reagan would veto it. It has still to pass the GOP-controlled senate. House Speaker Thomas P. O'Neill J. (D) of Massachusetts concedes that Republicans probably can find enough votes to sustain a veto. This opens the possibility of protracted debate and deadlock.

If White House and Congress can't come up with a formula to balance the budget, the Fed is left playing the only antiinflation game in town -- through controlling the money supply and interest rates. Traditionally, this practice has resulted in a business slowdown and possible recession. With depressed auto and construction industries, some think a recession is technically already here.

Signs of White House strain appeared here when Secretary Regan told weekend interviewers that the Fed should ease its policy.

"We are coming to a time here where change has to be made," he said. The economy may be in a recession, he added. In San Francisco at a meeting of bankers, Secretary Regan issued a "clarificaion," which seemed to be a restatement of his anxiety. Chairman Volcker, another speaker, remained firm in his policy.

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