THE CARTER ADMINISTRATION says that it's a bad time for a tax cut. That's the right position, and the administration would do well to stick firmly with it. In due time a tax bill will be necessary. But for the present, procrastination is a virtue.
The traditional view, which draws some scattered support in Congress, holds that a quick tax cut is the remedy for the current recession. But a tax cut this summer would not have much effect on the economy until well into next year, when the recession will be over and the recovery under way. Treasury Secretary G. William Miller says that the worst of the recession is already past. That's probably too optimistic; Mr. Miler's record as a forecaster reflects a tendency to see the sunshine a bit prematurely. But the current decline seems likely to touch bottom sometime in late summer or perhaps autumn, and then shortly to reverse itself. It's too late for the usual countercyclical tax cut to have much effect on that process.
Any attempt to enact tax legislation this summer is certain to produce precisely the kind of cut that the country does not need. Worse, it would preempt the kind of cut that Congress ought to begin designing next year. On the congressional calendar, this year is almost over. After June, the sessions will be short, intermittent and polemical because of the conventions and the campaign. The only way to enact a tax bill this year would be to take the route of least resistance with an absolutely conventional bill, devoid of any unfamiliar or untried ideas -- a bill looking as much as possible like all of the least controversial bills of the past. That means a bill providing a straight reduction in income tax rates for individual taxpayers and, for business, whatever relief it found most popular at the moment.
That bill would do little to mitigate unemployment over the next half-year. But it's the kind of cut best calculated to increase the inflation rate -- and with it, interest rates -- during the years beyond. The challenge for the engineers of taxation is to devise the tax cut that will best reconcile steady growth with low inflation. That presumably means powerful encouragement of savings and investment by both individuals and corporations. It's not legislation that can be rolled through Congress quickly.
Next January, the newly elected, or reelected, administration will have no responsibility more urgent than to begin working out a coherent econopmic strategy. In January 1977, it was still plausible to argue that the sequence of oil crisis, surging inflation and severe recession was a unique phenomenon that had passed. Now it is clear that the cycle will be self-perpetuating until policy finds a way to break it. That requres using taxation differently from the ways in which it has been used in the past. Writing the next tax bill is a job best left to next year.