Reagan, Mondale draw battle lines over taxes, economy

By , Staff writer of The Christian Science Monitor

The election-year battle over how fairly the Reagan administration's economic policies treat the average American is heating up. In his Saturday radio address, President Reagan pledged not to raise tax rates on individual income. He charged that his Democratic challenger, Walter F. Mondale, would have to boost taxes by $135 billion to pay for programs he has promised. That is more than double the $60 billion in new taxes Mr. Mondale has said are necessary.

The $135 billion figure ''averages $1,500 in increased taxes for every American household, and one way or another that means you,'' Reagan told his radio audience.

Mondale responded that the President was using ''hocus-pocus numbers'' and had not ruled out other methods of raising taxes. ''He was very careful not to rule out tax increases that would protect his rich friends,'' Mondale said.

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The parties also are jousting over the meaning of recent economic statistics. While most economic signals remain positive and the stock market is soaring, two key indicators - the poverty rate and the jobless rate - have broken the steady stream of good economic news that has cheered Republican campaign strategists.

The downbeat news started Thursday with word that the poverty rate in 1983 hit its highest level in 18 years as an additional 900,000 people slipped below the poverty level. As a result, 15.2 percent of the population - some 35.3 million individuals - were living below the poverty level in 1983. The level is adjusted each year to reflect changes in inflation and was $10,178 in 1983 for a family of four.

On Friday the government said the unemployment rate, which has been dropping steadily for more than a year, turned up sharply in July. With women bearing the brunt of the increase, the seasonally adjusted civilian unemployment rate rose from 7.1 percent in June to 7.5 percent in July, leaving 8.5 million individuals officially unemployed. Government economists cautioned that the jobless data may have been thrown off by seasonal adjustment problems.

House Speaker Thomas P. O'Neill Jr. (D) of Massachusetts said the figures, ''prove that the smoking gun of Reagan unfairness has two barrels: poverty and unemployment.'' Congress's top-ranking Democrat added, ''While Wall Street booms , the back streets of America are filled with poverty and unemployment.''

White House spokesman Larry Speakes said the recovery is continuing and that the administration did ''not believe (the unemployment) statistics reflect any significant weakening in the labor market.''

The White House blamed the rise in the poverty rate on Carter administration economic policies, which it said had stalled growth. Further, the administration asserted that the poverty figure did not reflect 5 million new jobs created since the report was written. The prospects for a reduction in the poverty rate in 1984 ''appear very good,'' a White House spokesman said.

Census Bureau analysts said two key factors helped explain the rise in the poverty rate. First, the average monthly unemployment rate in 1983 was 9.6 percent, only slighlty less than 1982's 9.7 percent rate. And in 1983 there were 2.4 million more individuals in groups with high poverty rates - persons in families headed by women with no husband present and people living alone or with unrelated individuals.

The Census Bureau's analysis is disputed by John Bickerman, research director at the Center on Public and Policy Priorities, a liberal think tank. While the average remained high, unemployment fell thoughout 1982, he notes. ''It's hard to understand'' how declining unemployment can lead to rising poverty, he said.

Mr. Bickerman also noted that in 1983 for the first time the median family income rose at the same time as the poverty rate increased. He sees that as a sign that Reagan administration budget cuts and other policies are widening the gap between the rich and poor.

In 1983 the US median family income rose 1.6 percent to $24,580 for a family of four. That means that as many families had incomes above that level as below it.

Conservative economists argue that the Reagan administration budget cuts have had only a relatively minor effect on the social safety net. The amount of federal social spending per poor person was $1,700 in 1980 and $1,575 in 1983 (expressed in constant 1980 dollars), according to John C. Weicher of the conservative American Enterprise Institute for Public Policy Research.

''A lot of the cut off'' in social spending affected individuals who are above the poverty level, he says, so the decline in aid for those in poverty is less than it appears.

The link between unemployment and poverty is not ironclad. ''There is really no basic correlation - or very little'' between an individual's employment status and his financial situation, Bureau of Labor Statistics Commissioner Janet Norwood says. She notes that some unemployed individuals escape poverty because they receive unemployment compensation or are in families where others work. On the other hand, some who work are very poorly paid and thus fall below the poverty line.

The unemployment data for July are sending ''some confusing signals,'' Mrs. Norwood said, but on balance she says she thinks the labor market is still improving.

The BLS uses two surveys in its unemployment reporting. A survey of business establishments, which tracks the number of jobs and wages, showed the number of jobs in the US rose 300,000 between June and July after seasonal adjustment. A survey of households, which tracks the number of jobs and also yields the unemployment figure, found a drop in employment of 350,000.

Mrs. Norwood is more inclined to believe the estblishment survey because it is less affected by adjustment for seasonal changes like students looking for summer jobs. As a result, ''both the June decline and the July increase in the jobless rate may have been overstated,'' she says.

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