Washington at loggerheads over how to repair economy

Senate majority leader Howard R. Baker Jr. (R) of Tennessee sees ''the unmistakable signs of a turnaround in the economy.'' He sees it at the critical halfway point through the Reagan administration, when the President is telling Congress in his State of the Union and budget messages what he wants - and when Congress is deciding what he will get.

With 10.8 percent national unemployment, recession abroad, and the possibility of a $200 billion deficit at home, President Reagan is fighting to regain his political initiative. At this critical juncture, his spokesman in the upper chamber, Senator Baker, declares:

''I think we're going to see a steady upward gradient in the next several months, and I think that by election time in 1984, the Reagan accomplishments are going to be very substantial indeed.''

The battle in Washington currently includes a clash between two opposing ideologies on how to get the economy back on its feet. The leading options: stimulate production through government spending at the expense of a balanced budget, or adopt a restrictive policy of tax increases in an effort to balance the budget.

Five former secretaries of the Treasury and a prestigious business group recently launched a ''bipartisan budget appeal'' calling for drastic action to reduce the budget deficit. They did not specifically call for higher taxes.

But the editorial page of the New York Times (Jan. 23) argues that it is too early to slam on the fiscal brakes; that ''there is very little risk that the stimulation produced by a $200 billion deficit would bid up wages or prices. But it would generate much needed economic activity.''

It adds, ''For the immediate future, America's first priority has to be economic growth. Fiscal stimulation and the resulting deficits can only help.''

In the midst of this discussion, Washington scanned closely the views of Senator Baker, given on NBC's ''Meet the Press'' Jan. 23. He will play a leading part in the debate in weeks ahead. Baker, one of the most effective majority leaders of recent times, recently has announced that he will not seek senatorial reelection. He says he thinks President Reagan should run again and, if so, will be reelected. On the other hand, if Reagan withdraws, Baker says, yes, he would be interested in the job himself.

''Where that balance is between restraint on monetary policy on the one hand and stimulative effect on the other to produce the best policy is always a work of political art,'' Baker said. The Federal Reserve System, he added, had made a ''near disastrous'' mistake in restraining the economy too long.

Senator Baker made other points: He is skeptical of standby taxes favored by the administration to be triggered by economic events; he wants a $15 billion cut in the defense budget in fiscal 1984 instead of the administration's indicated $8 billion; he would give priority to negotiating with Moscow on arms control.

President Reagan, in his weekly Saturday radio broadcast Jan. 22, advocated changes on emotion-packed social issues: limit abortion with a constitutional amendment, reinstate school prayer, and give tuition credits to children at parochial schools. Senator Baker said he would schedule time for Senate debate on these issues.

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