America turns a corner: President Reagan maps economic recovery plans, as ex-hostages help the nation look ahead
Washington — President Reagan intends to carry out his pledge to reduce personal income taxes by 30 percent over three years, although the date when the first cut should take effect has not been decided.
Other elements of the economic "package" that the White House is assembling -- including the extent and nature of budget cuts -- remain in flux, says US Treasury Secretary Donald T. Regan.
Even before the package is announced, President Reagan reportedly will end price controls on domestic oil, a move that would add up to 10 cents a gallon at one gulp to the retail price of gasoline and heating oil.
Such a move appears to be "imminent," said Secretary Regan, echoing reports from other administration sources, including David A. Stockman, director of the Office of Management and Budget (OMB).
Referring to the new administration's approach in dealing with the economy, Mr. Regan told reporters over breakfast Jan. 27: "We have abandoned the word 'emergency' at my suggestion. I substitute the word 'urgency' to describe what we have to do."
Sometime next week, the Treasury chief said, President reagan will go before TV cameras to tell the nation where the economy now stands.
He then plans, in his State of the Union address before Congress during the week beginning Feb. 16, to unveil the general lines of his economic proposals.
Details of the package -- including proposed tax cuts, budget cuts, and preliminary regulatory reforms -- will go from the White House to legislators on the heels of that address, according to Regan.
Of more immediate impact, however, will be the President's plan to lift what remains of price controls on domestically produced crude oil.
During the presidential campaign, reagan pledged to "unshackle" the US energy industry, with the hope that additional profits might spur the search for more domestic oil and reduce US dependence on overseas supplies.
Under a program introduced by former President Carter, controls are being lifted step by step, with complete decontrol due Sept. 30, 1981. The cost to the consumer would be the same in either case, but its impact would be more gradual under the Carter plan.
Immediate decontrol also would bring more tax dollars into the US Treasury, no small consideration when the budget deficit for the current fiscal year unofficially is estimated at $60 billion.
Because of Reagan's and the nation's preoccupation with the hostage return, said a White House official, any announcement on decontrol has been postponed.
The new administration, said Treasury chief Regan, "has no plans to introduce a tax on motor fuel." Nor will the President propose a withholding tax on interest and dividend income.
Regan forecasts a "phasing out" during the Reagan administration of the windfall profits tax on oil companies, a move bound to raise hackles among consumer groups.
Separately, President Reagan has yet to decide whether to speed up the timetable for decontrol of natural gas, which now runs until 1985.
"If you have budget cuts without tax cuts," said Regan, referring to the President's overall economic package, "you have no economic stimulation. If you have tax cuts without budget cuts, you might run into inflation."
Both elements must go hand in hand, he said, if Americans are to be relieved of some of their growing tax burden, without risking higher inflation.
If President Reagan intends to cut personal income taxes, why is the timing in dispute?
Because, said Regan, there is a debate within the administration between "static loss" people and "supply-siders," as to the effect of a tax cut on budget deficits.
"Static loss" refers to the theory that a tax cut of, say, $30 billion, produces a tax loss to the Treasury of the same amount, greatly swelling the budget deficit.
"Supply-siders" insist that a tax cut will stimulate the economy, promote savings, and improve productivity, with the result that additional tax dollars will be funneled into the US Treasury.
Regan himself finds "static loss no way to measure tax cuts, because you have a flowback" of tax revenues. Hanging in the balance, as the debate goes on, is whether to make a tax cut retroactive to Jan. 1 or to commence it in mid-1981.
Business taxes also will be reduced as part of the package, with emphasis on making it more attractive for corporations to invest in new plants and equipment. This would be done by speeding up tax writeoffs for such investments , though the exact formula remains to be worked out.
As to regulatory reform, said Regan -- the third element in the Reagan package -- each Cabinet secretary will identify regulations that might be abolished or modified by presidential order.
A search also will begin for longer-term ways to reduce the burden on business of "economic regulations," not affecting health and safety.
Regan did little to dispel reports that some rivalry exists between him and Mr. Stockman for economic policy preeminence within the Reagan administration.
Describing Stockman as a "very clever young man," the Treasury chief said that, after his initial phase, the two men would revert to their "traditional roles," with the OMB director having "his hands full" with the budget.
Regan regards himself, he made clear, as chief economic spokesman of the administration. He foresees the development of an economy policy council, chaired by himself, similar to the Economic Policy Group of the Carter reg ime.