Kemp ready to fight deeper budget cuts

The president's plans for dealing with the economy have been dealt a major blow. Rep. Jack Kemp (R) of New York, a major congressional power on economic issues, says he will resist further Reagan-initiated spending cuts "in the military and elsewhere" simply because he thinks such reductions will do nothing to bring back real health to the economy.

Mr. Kemp, talking to reporters over breakfast on Sept. 16, says the nation's economic recovery must now go beyond the deep tax cuts that he recommended and adopt "monetary reform."

Here, he says, he means he is proposing a return to the gold standard -- convertibility of the dollar into gold.

Kemp's announcement that he will actively oppose new spending cuts, particularly in defense but including entitlement and social programs, poses a major new problem for President Reagan: The opposition of the formidable Kemp will reinforce a growing tendency among members of both parties in Congress to say "no" to Reagan's further efforts to trim expenditures.

In fact, key members of Congress now see in the longtime Reagan ally's resistance a possible turning point in what until now has been the president's successful record in getting his economic initiatives enacted. Thus far, Kemp has been going along with the Reagan budget and the spending trims.

But his position is that such reductions are irrelevant to economic recovery. "First," he said, "we had to have the tax cuts. I put about 30 percent of my emphasis there. Then we must next have monetary reform. I put 100 percent of my emphasis there."

At the same time that Kemp was making it known that he would become a foot dragger on further spending reductions, Reagan was getting the bad news that he no longer could count on full GOP support for such proposals in the House.

This total Republican backing has been the main ingredient in Reagan's coalition, which, along with the support of about a score of Democratic conservatives, enabled him to get his economic program through the house.

Kemp says he has talked to the President and has found him receptive to at least discussing the proposal to return to the gold standard. However, he admits that his old friend, Budget Director David A. Stockman, opposes any quick implementation of the idea.

But by speaking out now, Kemp intends -- and expects -- to get the President's attention, enough perharps to put the return to the gold standard at the top of Reagan's economic agenda.

Kemp talks as though the price he will be asking for voting for further tax cuts is adoption of the gold-standard idea.

As Kemp's voice of resistance is heard, other developments appear to be working againts the President as he settles into what is being referred to here by some observers as "the Gipper's second half."

* The stock market continues to flag, despite administration rhetoric, chiefly from Secretary of Treasury Donald T. Reagan, that now contains a tone of admonishment. Mr. Regan seems to be saying, in effect, that the administration has given Wall Street the tax concessions it wanted -- now it's time for Wall Street to support the administration, or, if it doesn't help, the administration just might have to take back those tax incentives.

* Pressure, particulary from influential Republicans in Congress -- like Barry Gold-water -- increasingly is being exerted on the President to recant his call for cutting $13 billion out of his proposed military budget.

Some of these powerful congressional figures also are saying privately that if defense is slashed as much as that, they will begin to think seriously of withholding support for other Reagan proposals.

The President, sensing that the moment is most critical, is testing his strength.

Actually, the Senate gave him a solid win on Tuesday by voting to cut the costly dairy price support program by about a fourth. And the President issued a threat of possible vetoes of any legislation that is enacted that threatens his control of the federal budget.

But within the White House there is some diminution of the superconfidence that has prevailed there for some time now.

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