The Carter administration served notice yesterday it will oppose for at least two years any effort by Congress to head off coming increase in Social Security payroll taxes by shifting financing of the Medicare and disability programs to income-tax revenues.
In testimony before the House Budget Committee, W. Michael Blumenthal, the Secretary of the Treasury, argued the income-tax cuts President Carter has proposed "will protect most taxpayers through 1979," and said the administration will "strongly" oppose any changes until then.
Blumenthal's opposition, couched in far-stronger terms than that of other officials before him, appeared likely to pit the administration in another battle with Congress if the move to ease scheduled increases in payroll taxes keeps gaining momentum.
Immediately after Blumenthal announced the administration's stand on the issue, several members of the panel warned bluntly that they were under intense pressure from constituents to head off the new series of Social Security tax increases.
In his testimony yesterday, Blumenthal also told the panel that while the coal strike could have a "serious" impact if it continued very long, it would have little or no effect if the coal stoppage were settled before April 1. He also discounted the effects of the bad weather.
The secretary also blamed Congress' failure to pass an energy bill for the continuing decline of the dollar on the foreign-exchange markets. Blumenthal said the contrary to congressional assertions, the administration believes its crude oil tax is not dead and still has a chance of passage.
The testimony came as, separately, officials of the AFL-CIO asked members of the House Ways and Means Committee to roll Social Security taxes back to last year's level, and trim back the portion of President Carter's tax-cut package that would benefit corporations and wealthy persons.
The push to avert next January's scheduled increase in payroll taxes has grown into a major drive in Congress during the past several weeks. Several members are pressing to make payroll tax relief a major part of any tax-cut bill congress passes this year.
Ironically, the plan to avert a rise in payroll taxes by shifting financing [WORD ILLEGIBLE] the Medicare and disability programs to income-tax revenues was proposed by the administration last year and rejected by Congress. Now, the two sides are reversed.
In the Budget Committee hearing yesterday, Rep. Jim Mattox (D-Tex.) chided the secretary for overlooking the political implications of taxpayers opposition to the tax rise, noting that Congress has realized its mistake, it would be nice if you'd help us set it straight."
However, Blumenthal insisted that despite the administration's earlier backing of such a plan, to undo Congress' previous action now would disrupt the budget. "One of the responsibilities of an elected official," he told Mattox, "is that they tell the voters the way things really are."
The secretary "particularly" opposed a proposal by Rep. James A. Burke (D-Mass.) that would shift financing of the one-third of the Social Security program to income-tax revenues. He called it "a major move away from . . . self-financing of Social Security."
In his testimony yesterday, Blumenthal also renewed a call for congressional support of U.S. commitments to multilateral aid and oil-financing programs, and praised a recent decision by Saudi Arabia to oppose any increase in basic crude-oil prices.
He also predicted there would be ample supplies of credit for both government and private borrowing this year, with no fears of "crowding out" of smaller borrowers as some critics have warned will come.