The White House-Congress budget and tax-cut battle is shaping up as one of those political brouhahas about which history books are written. President Reagan has ordered his staff to repudiate reports that he is ready to compromise on his three-year across-the-board tax cut. That announcement comes after Democratic House Budget Committee chairman James Jones, who is pushing his own economic alternative, has said that the administration is "willing to compromise on both the spending cut side and the tax-cut side." Meantime, the Ways and Means chairman, Democrat Dan Rostenkowski, is developing his own tax plan, while a group of 40 to 50 conservative Democrats headed by Phil Gramm may even join ranks with the administration on floor votes. Finally, three conservative Republicans helped bring down the Reagan budget-cut plan in the Senate last week.
What is one to make of all this? It would be unfortunate if out of the current political maneuvering there emerged a hodgepodge, jerry-built budget and tax policy which lacked any consistency and would merely have to be revised again in another legislative session. As President Carter discovered, Congress marches to its own drummer on economic policy. In a less demanding period, "politics as usual" and Rube Goldberg-style legislation might not be so bad. But given the economic challenges now facing the US, it is imperative that the tax and budget policy which evolves in Congress this year be the most appropriate and consistent possible. Only then can government, business, and the public undertake the investment measures necessary to spur the US economy into new growth.
While Congress certainly has the constitutional obligation to weigh the Reagan package carefully, and indeed to make any changes absolutely warranted, there are compelling political and economic reasons for giving the administration the benefit of the doubt on its overall approach. Mr. Reagan carried 44 states as well as the Senate last November. So it seems somewhat redundant for opposition lawmakers to attempt to refight the 1980 election (at least regarding economic policy). Yet that to a large extent is precisely what is now happening. The tax policies (though not necessarily the dollar amounts involved) proposed by Congressman Jones and endorsed by Speaker O'Neill, for example, are in many ways similar to those of the Carter administration -- i.e., a reliance on use of taxes to balance the budget, as opposed to the Reagan approach of cutting taxes to stimulate industrial growth and hence eventually larger tax revenues. The Jones cuts are smaller than Mr. Reagan's (by about $19 billion), which will do little to offset upcoming higher levies resulting from bracket creep and new social security taxes.
Mr. Jones proposes giving no tax cut to persons with taxable income over $50, 000, even though these persons (a scant 4.4 percent of all taxpayers) in fact pay roughly one-third of all taxes and, most important, contribute something like two-thirds of all savings and investment dollars.
The fact that the Reagan supply-side economics approach does represent a philosophical change and something untried may in itself justify its adoption at this time. It must be recognized that there are some real risks involved in the plan, especially the three-year tax cut. And the public is ambivalent about the Reagan program. On the other hand, if Reagan-style conservatism is not given a reasonable chance to succeed, how will the country know if it in fact has merit or not? If the President's program proves unworkable, there is nothing to stop Congress from altering it the following year.
Does that mean there is no room for compromise?Not at all. While we believe that the President's plan should go forward at this point, there are aspects of the emerging "Democratic alternative" (on the part of individual party members) that are worthy of enactment. In fact, aspects of it have been endorsed by Mr. Reagan in the past and were even initially proposed by Republican lawmakers. The administration has indicated its willingness to support a number of these proposals in a second tax measure, later this year or in 1982. So the likelihood is strong that variations of these proposals will become law.
Nor should it be forgotten that as governor of California Mr. Reagan proved himself to be quite skilled at compromise -- but usually only after first building a case for his programs to wrest the maximum concessions.
Among Democratic alternatives that could form the basis for legislative compromise are the following:
* Ending or easing the so-called "marriage tax." Support for this is strong in both parties, and some congressional analysts believe that a provision will be included in the current tax package.
* Spurring savings by lowering the maximum tax on unearned (investment) income from 70 to 50 percent. Also, boosting savings through a liberalization of private retirement accounts and providing larger exemption on interest earnings from savings accounts. Finally, lowering capital gains rates further and seeking stepped up depreciation schedules for business.
It is interesting to note that many of these proposals -- now being put together in a package by Mr. Rostenkowski -- are similar in approach to the final package put together last year by the Senate Finance Committee, with substantial Republicanm support. Thus, the Rostenkowski suggestions do in fact offer grounds for possible compromise. Assuming that the lawmakers included some multiyear across-the-board tax cuts, the overall package might be acceptable to the White House.
That determination, of course, would be made later this summer. Government and private economic studies at that time may give a clearer picture about the direction of the economy, and how well the Reagan plan fits immediate conditions. For now, the administration needs to push its program with all the advocacy -- and urgency -- it can muster and get its act together in the Senate. The American people, meantime, must hope that whatever package finally emerges has a sense of internal integrity as well as econ omic justification.