The post-election boomlet over a quick $39 billion tax cut this year, which developed so rapidly last week, is fading just as fast.
Although some of Ronald Reagan's closest economic advisers were still on record supporting the tax cut proposal yesterday, other influential Republicans warned that it could become a trap for the president-elect, both politically and economically.
Economically, passage of a large tax cut in the lame-duck congressional session could severely limit Reagan's economic policy options next year, Republican leaders said.
"We want him to have the options he should have," said Rep. Barber B. Conalbe (R-N.Y.), top-ranking Republican on the tax-writing House Ways and Means Committee. Conable, who has favored passage of a simplified tax bill this year, yesterday said Reagan and the Republicans ought to think twice about a rush to cut taxes now.
Politically, Republicans have nothing to gain by giving their approval to tax and spending decisions made in the closing days of the Democratic-controlled 96th Congress, said Rep. David Sockman (R-Mich.), chairman of one of Reagan's congressional task forces. The proposal to attempt a revival of the economy with substantial tax cuts "is a Republican idea," Stockman said. "It ought to be enacted by Republicans next year."
Some Republican legislators are becoming increasingly concerned about the condition of the economy that Reagan will find when he takes office in January. Interest rates are headed up again, and although Reagan advisers like Walter Wriston, e headed up again, and although Reagan advisers like Wriston, Citicorp chairman, hop they will peak by the end of the year, that is no certainty. High interest rates through the winter increase the risk that the economy could slip back into a recession next year.
The second thoughts among Reagan supporters in the House were apparently the last straw for the $39 billion tax bill approved by the Senate Finance Committee -- the object of the sudden tax cut campaign launched in the flush of Reagan's presidential victory by Sen. Bob Dole (R-Kan.) Dole is expected to be the Finance Committee's new chairman when the Republican's take over the Senate in January.
Senate Minority Leader Howard H. Baker Jr. (R-Tenn.) said yesterday he still believes the full Senate should vote on the bill before adjournment, but Senate Republicans concede the effort is futile unless the House supports the bill.
Yesterday, House Majority Leader Jim Wright (D-Tex.) said the bill would not pass the House this year. "We should give the president [Reagan] a chance to present his ideas of a tax cut." Wright said. "I don't think we should preempt him."
Other Democratic sources have given a less magnamimous reason: after a wave of brushing Election Day losses, House Democrats are in no mood to spend the Thanksgiving and Christmas seasons struggling over tax legislation. s
The up-and-down excitement over a post-election tax cut in the past week gave an early look at the difficulties Reagan will face next year, when economic policy becomes his responsibility.
Reagan's top tax priority during the campaign was the Kemp-Roth tax bill, which would cut individual income taxes by 10 percent a year, for three years in a row.
The Senate Finance Committee bill, which includes a variety of reductions on business and captial gains taxes, represents an individual tax cut of only about 6 percent.
More fundamentally, the two different tax approaches symbolize the divisions in economic policy between two camps of Reagan supporters.
The first group continues to press for a full commitment to the three-year Kemp-Roth individual tax cuts. Yesterday, for example, the conservative Heritage Foundation released its recommendations on tax policy stating its case that such tax reductions would trigger a surge in savings and investment that would more than offset the tax revenues lost by tax reduction.
The second group, which includes Reagan adviser Alan Greespan, chairman of the Council of Economic Advisers in the Ford administration, has supported tax reductions tilted more toward improving the investment prospects for business, the chief feature of the Senate Finance Committee bill.
Despite his campaign support for the Kemp-Roth measure, Reagan said last week that enactment of the Finance Committee bill would be fine with him, and his close advisers said they were happy to take the bill now, and get the rest of the individual cuts next year.
But Kemp-Roth supporters fear that if Reagan encounters a stagnant or slumping economy next year and a growing federal deficit, he would be unable to get the full 10 percent individual tax reduction. By avoiding tax legislation in the lame-duck session, they would keep that option open.