President Carter's proposed "real wage insurance" tax credit effectively died in Congress yesterday as the House Budget Committee, in a surprise move, voted not to make room for it in Congress' fiscal 1980 budget.
Carter had proposed the plan as a touchstone of his wage-price guidelines program last October, intended to guarantee workers they would not suffer a loss in real income if inflation exceeded his 7 percent wage standard.
The Budget Committee's action, on a 14 to 11 vote that included six of the panel's 17 voting Democrats, shattered any lingering hopes that the controversial legislation ultimately might be enacted.
The measure has been languishing for two months in the House Ways and Means Committee, with only token support. The Senate Budget Committee yesterday postponed a vote, but there was no doubt it would kill the plan.
One of the major factors behind the congressional reluctance was a fear that the plan would break the budget. Carter originally estimated the cost at $2.3 billion, but inflation boosted this to between $6 billion and $8 billion.
Even more important, congressmen seemed to see no way that the measure would prove influential in persuading major unions to accept lower pay settlements.
Organized labor ranged from luke-warm to strongly opposed to the measure, and the Teamsters' aborted wage settlement-which would have breached the guidelines-dampened any remaining congressional enthusiasm.
Observers said yesterday that if both congressional budget committees strike the plan from their spending and tax legislation recommendations-as the House panel did - there is virtually no chance that it will be resurrected.
The action on real wage insurance came as the House Budget Committee, in a separate decision, rolled back part of an extra cut in defense spending recommended by the panel's Democrats, but still held outlays below Carter's request.
This 15 to 9 vote, on a motion by Rep. Jim Mattox (D-Tex.), effectively reduced the cuts to the more moderate level favored by the panel's chairman, Rep. Robert N. Giaimo (D-Conn.).
Over Giaimo's objections last week, a caucus of committee Democrats had pushed through a recommendation to slash Carter's defense budget by $2.3 billion in actual outlays and $4.1 billion in authority to begin new projects.
The Mattox proposal approved yesterday pared these cuts to $1.8 billion in outlays and $3 billion in authority for new projects-leaving a spending level of $123.9 billion and budget authority of $135.3 billion.
The House committee also trimmed $99 million from Carter's foreign aid budget, primarily as a gesture. That vote was 15 to 10, with only a few Democrats joining in.
In the Senate Budget Committee yesterday, members spent the bulk of the day posturing. A late-afternoon effort to vote on defense spending was blocked by Sen. Orrin Hatch (R-Utah).
Carter's wage insurance plan would have allowed workers who heeded the 7 percent wage standard to claim an income tax credit equal to 1 percent of their first $20,000 in earnings for each percentage-point that inflation exceeded the 7 percent guideline.
However, workers would have been limited to a maximum tax credit of $600. And the credit itself would have been subject to tax. Carter's rationale was that the money would have been taxable had it been won as a wage boost.
The proposal was drafted by Arthur M. Okun, former Johnson administration economic adviser, and tacked onto Carter's wage-price program at the last minute, both as a sweetener for labor and a public-relations gimmick.
However, it was almost universally criticized, both internally by key admininstration economic officials and outside by economists and labor leaders. Opponents charged that it was too complex, inequitable and costly. CAPTION: Picture, Henry Bellmon (R-Okla.) and Chairman Edmund Muskie (D-Maine) at Senate Budget Committee markup session. By James K.W. Atherton-The Washington Post