The chairman of the president's Council of Economic Advisers indicated yesterday the administration might recommend postponing or reducing scheduled Social Security tax increases as a step in the fight against inflation.
But Charles L. Schultze said any retirement tax relief may not be immediate.
President Carter said at a Thursday press conference that he has "no present plans" to ask Congress to reduce the big increase scheduled for Jan. 1, although he said it was still an "option".
Schultze told reporters at a breakfast meeting that "we're sure going to look" at the increase scheduled for Jan. 1, but said it is unlikely the administration would ask Congress to undo it.
Reducing Social Security taxes next year "would make it tough" to keep the 1980 budget deficit under $30 billion, he said. President Carter has pledged to reduce the deficit as part of his anti-inflation program.
"Maybe it's something we could save for 1981," Schultze said. "There's another big jump scheduled for 1981."
The Social Security tax today is 6.05 percent each for employers and employes on the first $17,700 of wages. Next year the rate rises to 6.13 percent on the first $22,900 in income, while in 1981 it jumps to 6.65 percent on the first $29,700 in wages.
Yesterday Rep. Henry S. Reusa (D-Wis.), chairman of the House Banking Committee, said Congress should repeal the Social Security tax increase to reduce costs to employers and give the president's voluntary wage and price restraint program a better chance of success.
Any changes in next year's scheduled Social Security increases could cause something of an administrative nightmare, since Congress will not meet until several weeks after the higher taxes go into effect. Presumably, it would take several months to approve new legislation, and it is not even clear that Congress would go along with such a request if it were made.
In another economic development, Teamsters President Frank Fitzsimmons said that President Carter was mistaken when he said Thursday he had received "fairly substantial encouragement" from the Teamsters about the administration's 7 percent limit on wage and benefit increases.
When Carter announced his voluntary wage-price program two weeks ago, Fitzsimmons said the Teamsters would support it if there was evidence that inflation was slowing and the administration allowed certain exemptions to the 7 percent standard.
But the Council on Wage and Price Stability has ruled that the 7 percent standard applies to all wages and benefits, including pensions. Pensions will be a major cost item in next year's contract negotiations between the Teamsters and the trucking industry. The outcome of the Teamster negotiations is considered critical to the Carter anti-inflation program.
Associated Press reported yesterday that in a interview late Thursday Fitzsimmons said the president did not get any indication from the Teamsters that the union backs the 7 percent guideline. "If he said we endorse his program, then he is wrong," Fitzsimmons said.
Achultze, at yesterday's breakfast meeting, reiterated the administration's position that the recent steps to fight inflation and prop up the dollar will not trigger a recession in 1979.
He said there is a risk that the steps taken by the Federal Reserve Board to slow inflation and helop the dollar could cause a slowdown, but said there is little evidence that it will.
Schultze said the economy will grow "at 3 percent or a smidgen above" in 1979, fast enough to keep the unemployment rate around 6 percent, but slow enough to keep excess demand pressure from exacerbating inflation.
Federal Reserve Board chairman G. William Miller said earlier this week that growth could be as low as 2.5 percent next year, but also said that would be fast enough to keep unemployment from rising.
Schultze also said that if the president's program is going to convince labor unions to moderate their wage dmands next year, 'We've got to see results by mid-1979.'
He said the first evidence that the program is working would be a leveling off of inflation, and then the inflation rate would start to go down. If there is widespread compliance with the program, the inflation rate will subside to about 6.5 percent late next year from the current rate of about 8 percent, Schultze told reporters.
Schultze also defended the anti-inflation program against attacks by AFL-CIO president George Meany that the plan exempts from price guidelines food and energy, the items in the average worker's budge that have been rising the fastest.
Schultze said 60 percent of the consumer's food bill is accounted for by the costs of processing and distributing farm products. Procesors said distributors are covered by the program.
Similarly, Schultze said, while crude oil and natural gas are exempt, most of the cost of fuel to the consumer is accounted for by refiners and distributors, who are covered.