President Carter's controversial proposal for a "real wage insurance" tax credit to protect workers who follow his new wage guidelines appears to be losing some steam in the House Ways and Means Committee.
After an initial reception that was better than expected, the measure is now in limbo, awaiting a decision by senior Democrats on whether to try to push it through or simply allow it to die.
Treasury officials still hope the proposal will win approval, but panel insiders say the committee's earlier interest has waned and skepticism is on the rise.
One of the major factors dampening the measure's outlook is the specter of sharply higher inflation, both from food prices and as a result of the Iranian oil cutoff. Committee members fear that will mean larger payouts and a bigger budget deficit.
Carter's proposal would offer workers who held their pay hikes within the 7 percent wage standard a tax credit of 1 percent of their first $20,000 in wages for each percentage point that inflation exceeded the guidelines. The maximum credt would be $600.
If inflation slows to 7.5 percent this year, the administration figures the tax credit would cost the Treasury $2.5 billion. Carter argues that the cost would be "self-limiting" -- the more workers who sign up, the lower inflation would be.
But the recent spate of bad news -- including a surprise 1.3 percent jump in wholesale prices and the prospect of a longterm Iranian oil cutoff -- has raised fears among some members that inflation will push the cost to $5 billion to $10 billion.
By the administration's estimates, the cost of the "real wage insurance" plan rises by $5 billion for each percentage point that inflation tops 7 percent.
The Ways and Means Committee's 24 Democrats were supposed to have met in caucus this week to decide what to do about the real wage insurance proposal, but that was delayed so the panel could deal with trade legislation.
Although no formal session has been scheduled, strategists say the Democrats may try to meet late next week. Treasury officials are pushing for prompt action, to take advantage of earlier momentum. But few members seem anxious to vote.
Most observers say the key to the fate of the real wage insurance proposal is whether Rep. A1 Ullman (D-Ore.), the panel's chairman, ultimately decides he wants to press for approval of the plan. If Ullman balks, the bill will die.
However, Ullman, while saying all along that the proposal deserves a hearing, remains noncommittal on whether to push for it. He has rapped the plan several times in hearings and private interviews.
Backers of the proposal say 20 of the panel's 24 Democrats have indicated that they will support the measure -- enough to send it to the House floor for a vote. But many of these commitments are week, conditioned on what "everyone else does."
Besides the prospect of outlandish costs, there are these fears about the proposal:
Whether the measure will influence wage settlements this year. Although some unions have endorsed the plan, they also have opposed the broader wage-price guidelines effort -- weakening their support.
How well the tax credit scheme will go over with voters -- particularly in the 1980 election -- if some workers receive the tax credit while others do not.
How well panel members will be able to support any amendments. One proposal, by the AFL-CIO, would tack on an excess-profits tax against corporations and a break for low-wage earners. Some say this could scuttle the bill.
How long Carter will continue to back the measure if it runs into trouble on the floor or in the Senate Finance Committee. Ways and Means members still recall bitterly Carter's turnabouts on the 1977 $50 rebate and energy tax bill.
Meanwhile, the deadline is approaching. Key administration officials have said they would like some sign from the committee by mid-March, to help influence the outcome of the Teamsters union negotiations.
Yesterday, United Auto Workers President Douglas Fraser warned that congressional stalling on the plan is threatening to turn the wage-price guidelines program into a shambles before summer.
Meanwhile, the committee's 12 Republicans -- and a handful of Democrats -- remain adamantly opposed to the proposal, and many others are skeptical. "I wish they'd just let it blow away," one said. "I'd rather not take it up at all."