Sen. Mark Andrews (R-N.D.) said today that taxes will have to be raised if the nation is "going to get from under" the massive federal budget deficit.
President Reagan has promised that he will not raise taxes in his second term and that the deficit will be reduced by a combination of economic growth and further restraints in spending. But in remarks in different cities, Andrews and Martin S. Feldstein, Reagan's former chairman of the Council of Economic Advisers, both said that tax laws have to be changed to bring in increased revenue.
Andrews, a member of the Senate Budget Committee, said "spending cuts alone" won't sufficiently reduce the deficit to a level that will produce continuing declines in interest rates and a fall in the value of the dollar.
Speaking to the American Bankers Association's annual conference for agricultural bankers, Andrews noted that Democratic presidential candidate Walter F. Mondale was correct when he said that taxes would have to be increased. But politicians in both parties played down the notion, he said, and the race between Reagan and Mondale became a personality contest.
As a result, Andrews told the bankers, the tax issue was never seriously debated during the presidential campaign.
Feldstein, speaking in Boston, proposed a comprehensive deficit-reduction plan with specific changes that he said "conform to many of the preferences that the president has expressed in the past."
The former CEA chairman, who left the administration in August, called for cuts in a variety of domestic programs, including Medicare, of about $40 billion by 1989. Defense spending that year could be reduced by about $30 billion below currently planned levels, he said.
In addition, Feldstein would set an inflation "threshold" so that the personal income tax system, Social Security benefits and other non-means-tested benefit programs would be indexed each year only to the extent that inflation was higher than 3 percent. This would raise revenue and cut spending by a combined $70 billion in 1989.
But since all of those changes taken together would not reduce the deficit by the $175 billion Feldstein said is needed, he also proposed that, after the personal income tax system is "simplified" by reducing both the number of deductions allowed and the system's rates, those rates be increased enough to raise an additional $50 billion. The maximum tax rate would still be below 35 percent, compared with the current 50 percent, he said.
In his address to the American Council of Life Insurance, Feldstein disagreed with President Reagan's contention that economic growth alone could eliminate the deficit. "There is just no basis in experience for the suggestion that we can grow our way out of the projected deficits," he said.
Speaking to the bankers meeting, Andrews, a farmer himself, said that high interest rates and the overvalued dollar are the major sources of the crisis in U.S. agriculture. Increasing numbers of farmers are facing bankruptcies and liquidations because high interest rates raise their cost of production at the same time that prices of their crops are low. At the same time, the overvalued dollar makes U.S. farm exports less competitive abroad and helps keep U.S. farm prices low.
The worsening problems on the farm -- especially in the corn and soybean regions in the heart of the country -- are creating a crisis in many of the small banks whose loans are concentrated almost entirely in agriculture.
According to a survey released here by Southern Illinois university professor William McD. Herr, 60 percent of the farm bankers surveyed by the ABA reported that the overall quality of their loan portfolios deteriorated in the last year. The bankers said that they cut off 3.4 percent of their farm borrowers and estimated that a third of their remaining customers cannot take on any more debt. The bankers expect to discontinue another 3.1 percent of their customers by the middle of 1985.