Paul Craig Roberts, assistant secretary of the Treasury for economic policy and a leading "supply sider" in the Reagan administration, yesterday blamed Congress for creating the current recession.
"Congress, panicked by the press, delayed the tax cut and produced a recession," Roberts said in an interview.
If the House and Senate "go out and raise taxes now, there's not going to be any recovery" from the recession, he said.
Roberts was referring to the fact that the original Reagan administration plan for cutting taxes has been modified twice since the administration took office. First the White House agreed to postpone a sought-for 10 percent across-the-board tax decrease from Jan. 1 to July 1 of this year, and later to reduce it to 5 percent effective Oct. 1. Though all these changes were volunteered by the White House, Roberts blamed Congress for them.
As for additional tax increases in the future to close anticipated budget deficits, Roberts said "right now probably every economist in the country is on our side" in opposing tax increases for fiscal 1982 or 1983. "I don't know an economist who wants to raise taxes," he added.
Sen. Pete Domenici (R-N.M.), chairman of the Senate Budget Committee, has proposed new budget plans, including an $84 billion tax increase over the next three fiscal years. President Reagan's latest address to the nation on the budget, in September, called for $3.1 billion in tax increases in fiscal 1982. Roberts dismissed these presidential proposals as marginal changes in the tax code to deal with special situations.
David Stockman, director of the Office of Management and Budget, whom supply-sider Roberts describes as "a traditionalist," has suggested tax increases over the next three years of about $50 billion.
Roberts said the White House effort to make further budget cuts launched in September was a "tactic" intended to exploit congressional concerns with high interest rates, which members discovered were upsetting voters during the August recess. Roberts said the OMB devised the tactic as a way to address these congressional concerns and also make further cuts in spending.
"It was a good tactic," Roberts said. "It didn't work because Congress wasn't about to control spending, regardless of anything."
And the tactic had a bad consequence because it contributed to the idea that reducing the federal deficit would reduce inflation, he added. This is wrong, and it was a mistake to encourage a wrong impression, Roberts said.