PRESIDENT CARTER'S PROPOSAL for a $50 tax rebate is running into surprisingly severe opposition in the Senate. The issue is whether Congress should enact the one-shot repayment that Mr. Carter wants or a permanent tax cut. The case for the rebate is that it can be done quickly, simply and - a point crucial to the administration - without foreclosing any of its future plans for basic tax reform.
The recovery from the last recession has been disappointing, and unemployment remains high. Mr. Carter, on taking office, called for a limited stimulant for the economy. The largest part of that stimulant was the $8 billion in rebates. He also promised a major tax reform bill, but the administration will need a year to prepare it. If he were to accept permanent tax cuts now, he could be giving away prematurely the inducements that will be essential to get his reform bill through Congress next year. Reform means, after all, taking away some of the interminable fabric of exemptions and deductions that comprise the present tax code. If that process is not accompanied by reductions in tax rates, to relieve the pain, the bill will never be enacted. The President has also got himself firmly (and unwisely) committed to a balanced budget by 1981, and he cannot under any circumstances give away much of the government's revenues if he is to come anywhere close to keeping that promise.
Some of the senators have been arguing that people won't spend the $50 checks. But that's wrong.Previous experience offers plenty of evidence that most people do indeed spend it, and rather promptly. As for the claim that the rebate would be inflationary, there's not much to that one either. Business is quite slack enough these days to permit another $8 billion in spending without forcing prices up.
It's startling, when you come to think of it, that a Democratic President should be having trouble persuading a heavily Democratic Senate to along with a bill to speed up business activity and create jobs. It's particularly startling when you consider the present unemployment rate. Part of the reason may be the congressional preference for public works. They are visible and tangible, even though they are generally very inefficient as a means to raise employment; the money is spent too slowly and, usually, in the wrong places. But there's more to it than that. There's beginning to be a suggestion in the air that the rebate is expendable because the country is getting used to high unemployment. The push for economic growth is losing its urgency.
"The government must act decisively to help restore economic health, and act compassionately to aid those must seriously affected by unemployment," said Gerald R. Ford, in his budge message in January 1975, as he proposed a substantially larger tax rebate of exactly the same sort. That was just a month after the unemployment rate had gone over 7 per cent for the first time in a generation. It was yet to come back down to that level. But, curiously, Congress seems to be losing interest in the matter.