The Senate Budget Committee tried to slow the rush toward a preelection tax cut yesterday by refusing, on a straight party line vote, to include one in drafting its final budget resolution for fiscal 1981.
Colliding head-on with the Senate Finance Committee in its hurry-up drive for a tax cut, the Budget Committee approved a $633 billion spending plan that has nearly $20 billion more in outlays than Congress planned in June in its first budget plan -- but no tax cut.
The new budget proposal forecasts a deficit of $17.9 billion, formally dashing hopes for the $200 million surplus that Congress anticipated in June before it had to reckon with the impact of the recession in siphoning off revenues and adding to governmental costs.
But the projected deficit is considerably below the roughly $30 billion figure that had been predicted by both the Carter administration and the Congressional Budget Office after the recession began to take its budgetary toll.
The committee trimmed the deficit largely by computing the anticipated unemployment rate for next year at 8.5 percent rather than 9 percent, reflecting the administration's unemployment forecast and the more optimistic CBO estimate.
If a 9 percent unemployment rate had been assumed by the committee, the projected deficit would be more than $30 billion. It could still be $30 billion if unemployment amounts to 9 percent -- or much more if a tax cut is approved.
While not barring a tax cut during the next fiscal year, the committee's action could hamper -- or at least complicate -- efforts to push one through Congress before the Nov. 4 elections.
Essentially the matter will be up to the Senate itself -- and to Senate Majority Leader Robert C. Byrd (D-W.Va.), who schedules legislation.
Senate Budget Committee Chairman Ernest F. Hollings (D-S.C.) conceded that the budget resolution will have to be amended to incorporate a tax cut if the Finance Committee's tax bill gets to the floor first and wins approval. But if the budget resolution wins the race and is approved without change, a tax cut would not be practical this year, Hollings said.
The tax cut rejected by the committee would have provided a reduction of $20 billion in the fiscal year starting Oct. 1 and ending Sept. 30, 1981, enough to accommodate the Finance Committee's nearly $40 billion tax package, for the 1981 calendar year, according to advocates.
But the proposal was coupled with a hold-the-line position on spending that would have kept expenditures at the $613.6 billion level envisioned in the June budget resolution. Thus there would have been little impact on the deficit.
The cut, proposed by Sen. Pete V. Domenici (R-N.M.), was defeated 12 to 7, with all Republicans voting for it and Democrats opposed.
Leading the fight against acceding to the tax package that the Finance Committee has been rushing all week to patch together, Hollings argued that Congress should take "a little more deliberate" approach and wait until January to consider tax relief.
Domenici argued that the committee was ignoring "reality" by refusing to sanction a tax cut that both Republicans and Democrats are advocating for some time during 1981. "We're saying one will not occur when we know it will," complained Domenici.
To pass a presumably final budget resolution for the year without room for a tax cut, Domenici argued, could require either a waiving of the congressional budget act or passage of a third budget resolution.
Hollings implied that a third resolution might be required for 1981, as it was for 1980, by saying a tax cut could be considered next year. "We're not ruling it out," he emphasized. But he said a tax-cut decision now would send the wrong "signal" to the country, implying that Congress cared more about stimulating the economy than about curbing inflation.
The committee also voted on holding down spending to the $613.6 billion level of the first resolution, defeating the idea 11 to 8 after an earlier 7-to-7 vote on the issue. Only Colorado Democrat Gary Hart joined the Republicans in voting to stick by the original budget targets.
The spending increases in the new budget include $5.7 billion for defense and about $8.9 billion for unemployment costs and other forms of income security, with economic conditions rather than program expansion causing most of the increase.
The committee rejected anything approaching the $12 billion economic stimulus jobs package proposed last week by the Democratic National Convention and actually cut proposed jobs spending by $300 million.