Senate Republicans believe that taxes should not be increased in 1982, but that further "draconian measures" of spending cuts and tax increases may be necessary over the next three years to balance the budget, the Senate majority leader, Howard H. Baker Jr. (R-Tenn.), said yesterday.
President Reagan last month proposed tax increases of $3 billion in fiscal 1982, together with further spending cuts of $13 billion. But this latest round of budget savings has stalled in Congress. Details of the new tax increases, labeled "revenue enhancers" by the administration, and of further cuts in entitlement programs such as food stamps and Medicare, have not yet been decided by the administration nor sent to Congress.
Calling high interest rates and the economy the most important political issue, Baker repeated that congressional Republicans have put together a plan for saving about $115 billion over the next three years, but he refused to give any details. Leading Republicans apparently differed last week over the likely contents of any plan.
Meanwhile, Rep. Dan Rostenkowski (D-Ill.), chairman of the tax-writing House Ways and Means Committee, said in a speech for delivery today that any new tax and budget changes must come from Republicans. With congressional elections looming next year, Republicans, particularly in the House, are loath to propose unpopular tax rises or spending cuts, especially with the economy in recession.
The current high level of interest rates, however, is putting pressure on Congress to come up with measures to reduce the federal deficit, which some analysts say is largely responsible for the high cost of money.
Baker, appearing on "Face the Nation" (CBS, WDVM), said that although tax increases next year should be ruled out, "I'm willing to consider revenue enhancement in out years."
He warned that Congress would need to save more than $115 billion "unless we get a fierce upturn," referring to the fact that when the economy stagnates, the federal government receives less revenue and the deficit grows. However, many economists believe that taxes should not be raised to offset a recession-induced drop in tax receipts.
The president's own plan is to blame for the current economic problems, Rostenkowski said in his speech prepared for the Federal Savings and Loan Council of Illinois. The tax cuts Reagan persuaded Congress to enact are far larger than the spending cuts so far agreed, and it "is precisely this gap," Rostenkowski said, "that concerns Wall Street and brings into public focus the inconsistency of the administration's economic design."
As Baker pointed out, the administration has been much less forceful in the current call for budget savings than it was over the earlier budget and tax measures this year. Senior officials, tacitly accepting that there is far less support for the president's economic measures now than there was earlier, have said that they believe Congress would resist attempts to force through the new savings and tax rises.
But, administration sources say, as Congress realizes the scale of the budget problem--with deficits of $80 billion to $100 billion predicted for the next three years by some analysts--it will likely come up with its own way of meeting Reagan's overall request.
Budget officials also agree that the White House concentration on lobbying for the Airborne Warning and Control System (AWACS) has weakened the push on the economic front. The president and the White House will play a more active role in the budget fight in coming weeks, officials have said.
Rostenkowski cautioned his audience that the administration will probably not want to renew the popular All Savers Certificate, which allows tax-exempt savings up to $1,000 for an individual and $2,000 for a couple, after December, 1982, at present the last buying date for the one-year bonds.
The program was designed to help the ailing savings and loan industry, although many analysts are skeptical of its effectiveness. Rostenkowski suggested allowing All Savers deposits to be reinvested in tax-free Individual Retirement Accounts.