Carter, Reagan limber up with budget dispute

There seems to be $90 billion worth of doubletalk going on between Democrats and Republicans as the presidential campaign heats up. The $90 billion -- or most of it -- is real enough. But discussion of it takes on a "never-never" quality because it revolves around the so-called balanced budget for fiscal 1981.

To put it all in perspective:

On March 31, President Carter proposed that $15 billion be sliced from a wide variety of government programs to achieve the first balanced budget in 12 years.

The 1981 budget, Mr. Carter told Congress and the American people, would be balanced by cutting spending, not by raising taxes.

Not so, retorts the Ronald Reagan camp. Mr. Carter's proposed budget would be "balanced," according to the Republicans, because it contains $90 billion worth of tax hikes.

Someone must be wrong.

Meanwhile, two new elements were added to the equation:

* Congress quashed the President's cherished oil-import fee, which would have raised $12 billion yearly in federal revenue and added 10 cents a gallon to the cost of gasoline.

* Recession is spreading so widely and quickly that almost everyone concedes the 1981 budget will, in fact, end up deeply in the red -- in excess of $50 billion by some estimates.

Mr. Carter's goal of a balance budget was based on the expectation of a 7.2 percent jobless rate by the end of 1980. Already the rate is 7.8 percent and rising.

The June unemployment figures, due to be released early next month, may show an unemployment rate well above 8 percent, some analysts believe.

For every percentage point unemployment climbs, roughly $25 billion is lost to the US Treasury -- the bulk of that in lost tax revenues, the rest due to unemployment compensation and related welfare out-lays. Less money comes in, more flows out.

Now, back to that elusive $90 billion, described by former Treasury Secretary George Shultz, now a key Reagan adviser, as a "huge tax increase."

The windfall profits tax on oil companies will pour about $15 billion into US coffers. Another $15 billion will come from individual Americans, pushed into higher tax brackets by inflation.

Well over $30 billion derive from higher payroll (social security) taxes, beginning next Jan. 1. Another $11.7 billion, according to congressional Republicans, will come from "miscellaneous" tax measures.

One item in the Republican tax list, the oil-import fee, is dead. So total tax increases, even by Republican reckoning, may end up less than $90 billion.

No one in the White House denies that there are tax hikes. But they do dispute the Republican implication that President Carter is to blame for them.

On windfall profit taxes, Mr. Carter takes the credit, gladly.

But two other tax boosters, social security taxes and higher income brackets due to inflation, are not of White House making. Congress shared fully in the decision to raise payrol taxes, to ensure future solvency for social security programs benefiting more than 35 million Americans.

So large chunks of the tax increases embedded in the 1981 budget derive from laws passed by Congress or from inflation. They are not Carter initiatives.

This leaves room for both sides to be technically correct. The tax hikes exist, as Republicans charge. But the President is right when he says that no tax increases were introduced specifically to balance the budget.

You've read  of  free articles. Subscribe to continue.
QR Code to Carter, Reagan limber up with budget dispute
Read this article in
QR Code to Subscription page
Start your subscription today