Last June, when Motorola President John Mitchell suggested a tax on imports as a "partial solution" toward easing the growing trade surplus during testimony before the Senate Finance Committee, he caused hardly a ripple.
Since that inauspicious beginning, however, the idea of an import surcharge has gained avalanche momentum in the business community and on Capitol Hill, where it is seen as a possible quick fix for the two biggest problems in the U.S. economy -- the budget deficit of more than $200 billion and the $123.3 billion trade deficit.
So far there is more sound than action on the surcharge, athough it is seen as likely to gain support from lawmakers who are unable to deal with the budget deficit at the same time they see the trade deficit mounting.
"Something big, sudden and unstoppable will take place this summer in Congress," Sen. John Heinz (R-Pa.) told a meeting Tuesday night at the Institute for International Economics.
"An import surcharge is the leading candidate," added Heinz, although he said he favors "a more constructive way" of dealing with the trade deficit by hitting "the worst offenders" with retaliation. "Don't retaliate against the world," Heinz said. "Retaliate against the Japanese. They deserve it."
Although there is no specific surcharge plan before Congress, the one most commonly being discussed calls for a three-year sliding tax on imports that starts at 20 percent in 1986, goes to 15 percent in 1987 and drops to 7 percent in 1988, the final year.
Its most attractive feature, congressional aides said, is the possibility of a quick increase in federal revenue without raising taxes. Under a first-year scenario prepared by the University of Pennsylvania's Nobel Prize-winning economist, Lawrence R. Klein, federal revenue would go up in the first year of a surcharge between $35.1 billion and $58.8 billion -- depending on how the dollar reacts and whether trading partners retaliate.
Richard Heimlich of Motorola said he believes there will be little retaliation because "other countries have more to lose" than the United States, with its massive trade deficit. Its main effect on the trade deficit, he added, would be in cutting the budget deficit, which would drive interest rates down and allow the dollar to fall gradually.
But Harvey Bale of the Office of the U.S. Trade Representative disagreed, saying a surcharge would be seen as a sign of America's inability to get hold of its budget deficit and thus cause the dollar to fall precipitously.
"I'd give the European Community about a week and Canada about the same time to retaliate," he said.
William A. Niskanen Jr., in his final weeks as a member of the White House Council of Economic Advisers, said an import surcharge would have "a disastrous effect" on exports and "little or no effect on the trade deficit except as it influences the fiscal deficit.
"What bothers me about this town," he continued, "is that we take ideas like this one seriously that . . . should be blown out of the water." He said he had hoped the Tuesday night discussion would push the idea of a surcharge further back on the burner "rather than legitimize it."
"It would have been laughed out of the Senate a few years ago" instead of getting serious discussion, said Sen. Max Baucus (D-Mont.).
As an indication of Hill interest, Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, is drafting surcharge legislation.
The highly respected nonpartisan Congressional Budget Office is conducting a study of the import surcharge at the request of Sen. John C. Danforth (R-Mo.), chairman of the Senate Finance Committee's trade panel. The study is due to be completed shortly. State Department economists and academics are creating models to try to learn the effects of a surcharge, while foreign governments are issuing warnings of its potentially bad effects on world trade.
The surcharge idea also has drawn strong opposition from the Reagan administration.