President Carter won Sen. Edward M. Kennedy's general support for his new economic program during a White House meeting yesterday that lasted almost an hour and was described by both men as constructive and friendly.
Kennedy, who spent months assailing Carter's economic policies and saying that their inadequacy was the basis of his unsuccessful attempt to take the Democratic nomination, was conciliatory after being briefed on the economic program that Carter will announce Thursday.
"I'm very much encouraged," he said. The program's proposals for revitalizing American industry and to target distressed areas for federal help pleased him. He suggested that the program's effort to create jobs be enlarged and Carter agreed to discuss Kennedy's idea today when he meets again with White House economic advisers, according to Kennedy and presidential press secretary Jody Powell.
The two men met without aides present on the second floor of the White House. They also discussed Kennedy's role in the campaign.
"I'll be of whatever assistance I can," Kennedy said. "It is essential to elect a Democratic president and Congress," the Massachusetts senator said.
Powell said Carter was pleased with Kennedy's pledge to campaign actively.
Kennedy's campaign schedule will be worked out later by campaign aides.
Kennedy said he thinks Carter's chances of winning reelection are improving and said that Ronald Reagan's recent statements on Taiwan's diplomatic status raise questions about the Republican candidate's competence to handle complicated and sensitive foreign affairs issues.
Carter plans to make his new economic program one of the central elements of his reelection campaign and the White House has said it looks forward to full debate of the program -- as well as Reagan's proposals -- before the election.
It will call for about $25 billion in individual and business tax cuts in 1981 and about $5 billion in new government spending, according to administration sources.
Final decisions have not been made, but the tax cuts are expected to be divided roughly equally between individuals and business.
About $12 billion of the cuts will be in form of an income tax credit for individuals and businesses that would be applied against taxes owed, or if it exceeded taxes owed, the difference would be returned to the taxpayer in cash. The credit would offset higher Social Security payroll taxes that will go into effect Jan. 1, the sources said.
About two-thirds of this credit would go to individuals and one-third to businesses, which can already take their share of the payroll tax as a business expense.
Another $4 billion to $5 billion in cuts for individuals is likely to be included. One possibility, sources said, is a change in tax law to reduce the so-called marriage penalty. Under current law, couples with two incomes pay more tax than if they had the same incomes but were not married.
Carter also will propose cutting business taxes by about $5 billion through increasing depreciation allowances, the sources said. By 1985, the increased allowances are expected to cut busines taxes by about $25 billion.
Also, the Commerce Department and the Council of Economic Advisers urged Carter to recommend making refundable the current 10 percent investment tax credit covering business equipment.
If the investment tax credit were refundable, businesses could benefit from it even if they were operating at a loss. One administration official backing the idea said newly established businesses often found themselves in that position, as did some sound companies that are only temporarily in trouble. Ford Motor Co. and U.S. Steel are two examples, the official mentioned.
Other sources said Carter will propose a $4 billion to $6 billion effort to retrain workers from the steel, auto, construction and other industries.
In addition, Commerce's Economic Development Administration may get more money for the local public works projects it supports, and for loans and loan guarantees used to entice businesses to locate plants in economically depressed areas.
One of the final decisions facing Carter is how far to go in proposing a new industrial policy.
For several months, White House and department officials have been studying actions to help ailing industries and promote new industrial technology to make American products more competitive against imports.
Aides predicted, however, that the president's program will say little about specific aid because the issues have proved too complicated to resolve in the time available.
One initiative expected to be included is a sizable increase in federal support for industrial research. A new program of $200 million or more is under consideration, aides said.
Carter has said he does not want action on any of the tax-cut proposals this year. The Senate Finance Committee last week recommended a $39.4 billion tax cut for 1981, but its House counterpart, the Ways and Means Committee, would prefer not to act this year.
The impact on the fiscal 1981 budget deficit would be limited if a tax cut bill isn't passed until sometime next year because the fiscal year will be nearing its end before action is taken.
Without a cut, the administration estimates the federal budget deficit will be $29.8 billion.