President Carter will announce today a new anti-infaltion plan that is expected to include proposals to balance the fiscal 1981 budget through sharp cuts in spending and an oil import fee of $4 to $4.50 a barrel.
Without disclosing details, the White House said Carter will lay out the program in a late-afternoon statement, after the financial markets close, and will also hold a televised news conference at 9 p.m.
Sources hinted the package will also include new steps by the Federal Reserve Board to restrain consumer spending by limiting use of credit cards. The Fed is expected to make a separate announcement today con- cerning its own actions.
As Carter prepared the anti-inflation announcement, his Council on Wage and Price Stability announced it is relaxing its current 7 percent wage guideline to a new and more realistic "range" of 7 1/2 to 9 1/2 percent, as recommended by Carter's new Pay Advisory Committee. [Details, Page E1].
At the same time, Carter's companion Price Advisory Committee threw up its hands in open frustration yesterday, saying the administration's price-restraint program has been so battered by inflation that it is on the verge of collapse.
In an extraordinary formal statement, the six-member panel said the price program was floating on "a wave of inflation generated beyond its reach." It said the guidelines were having almost no effect on prices.
The developments came as the banking industry began a new round of in- teret-rate increases, the second in less than a week. A group of major banks led by Chase Mnahattan Bank raised their prime rates to 18 1/4 percent from 17 3/4 percent.
Announcement of Carter's new anti-inflation plan today will climax 3 1/2 weeks of policy deliberations by the preesident's economic advisers, including more than a week of negotiations with Congress over how to go about balancing the budget.
The turnabout to budget balance came after new fears of inflation sent the bond market to the brink of collapse. Only seven weeks ago, Carter sent Congress a $615.8 billion budget for fiscal 1981 containing a $15.8 billion deficit that he called austere.
Carter hinted to a group of lawmakers yesterday that he does not intend any concessions on one key issue that has held up the negotiations -- demands by some House liberals that he agree to some cuts in defense as well as domestic spending.
House and Senate negotiators agreed late yesterday on proposals that would balance the budget by cutting spending $14.7 billion and raising $3.3 billion in new revenues -- an increase of $6 billion from the negotiators' previous package.
The congressional proposals contain no reductions in defense spending, but the conferees agreed that any major increases in Pentagon outlays would be financed by a new tax increase. Sources said the plan would ask the Pentagon to absorb most of about $4 billion in anticipated extra fuel costs.
At the same time, the negotiators rejected a proposal by the administration to save $5 billion to $7 billion by reducing cost-of-living increases in Social Security and other benefit programs. The increases currently are tied to the now-distorted consumer price index.
Among the major spending cuts Carter is expected to propose are $1.7 billion by eliminating the states' portion of revenue sharing and $1 billion by cutting anti-recession aid to cities.
The administration also is considering slashing $1.6 billion from federal job-creation and summer youth programs, saving $850 million by delaying Carter's welfare reform plan, and saving $800 million by cutting strategic oil reserves.
Carter also is expected to propose raising $3.3 billion in new revenues by requiring banks to collect withholding taxes on interest and dividends that they pay to depositors.
In addition, congressional economizers have suggested cutting out Saturday mail service.
These cuts would be in addition to $5.6 billion in money-saving-measures that Carter proposed in his budget last January. These latter measures included his hospital cost-containment plan and cuts in the school lunch program.
White House officials indicated Carter will ask Congress to approve some cuts beyond those that the group has proved willing to support.
He also will seek $4 billion in cuts for the current fiscal year.
Carter met separately with Republican and Democratic congressional leaders yesterday in a last-minute effort to sound them out personally. Participants in both meeting said he provided no firm details of today's plan. p
Republicans said they told Carter they would react "responsible" to his proposals, but warned that he must "provide the leadership" and that the Democarts in Congress must "assume the burden" of pushing his budget-cuts through.
No one has been anxious in this election year to take the heat for the proposed spending cuts, and even with the past week's House-Senate negotiations at the leadership level, there is no guarantee that the lawmakers will go along with Carter's proposals. Most of the spending cuts discussed by the congressional panel have been rejected by previous Congresses.
Imposition of an oil-import fee would be a way for Carter to make up for any inability by the lawmakers to cut spending enough to eliminate the deficit. The president could impose the fee on his own, without need for Congress approval.
Officials have been considering using the import fee as an interim step, to be followed by a request that Congress enact a 10-cents-a-gallon gasoline tax. Both proposals would raise gasoline prices and cut consumption 100,000 barrels a day.
The administration plans to impose its $4 or larger fee on the approximately 6.2 million barrels of crude oil currently imported daily into the United States. A similar fee apparently will be charged on the 175,000 barrels of gasoline also imported each day.
With a $4 fee and imports at those levels, the fee would raise about $9.3 billion annually, all of which the administration intends should be paid by gasoline users.
To accomplish that, Carter would create a new system of payments among refiners. Administration energy experts believe this would prevent the higher cost of imported oil from dragging up the price of uncontrolled domestic crude.
Nevertheless, a $4 fee on imports would raise gasoline prices by 9 or 10 cents a gallon at the pump, and would boost the consumer price index directly by about 0.4 percent. Indirectly the impact on the CPI would be about twice that large as businesses passed on the higher gasoline cost by raising the price of their goods and services.
Some oil industry executives were skeptical of the administration plan, arguing there is no assurance refiners would in fact simply raise the price of their gasoline by the amount needed to pay the fee. In the short run, they said, a refiner would be encouraged to cut gasoline production to avoid paying the fee, possibly leading to gasoline shortages.
Administration economists, however, said that is highly unlikely. Should a refiner decide to produce more home heating oil and less gasoline, profit margins on heating oil probably would fall and force the refiner to switch back to gasoline, they said.
Industry officials agree that would happen after a while, but remained fearful that the fee would disrupt petroleum product markets this year. They also said the fee might be viewed by "price hawks" in OPEC as evidence that they could raise their prices by that amount without disrupting the American economy.
The fee will be imposed by Carter acting under authority in the 1973 Trade Adjustment Act, which the Supreme Court has said gives him power to limit imports by using a fee. Administration lawyers believe Carter can use the Trade Act also as justification for ordering gasoline producers to pay importers to offset the fee, though they are sure this will be challenged in court.
By citing the Trade Act, as his authority, the president could, if the courts uphold him, keep the fee in place after his authority for controlling oil prices expires in September 1981. Some Carter advisers suggested proposing that Congress enact a 10-cents-a-gallon increase in the present 4-cents federal gasoline tax to replace the import fee. i