The Reagan administration spent much of yesterday trying to quash suggestions by some of its own leading economic spokesmen that the president has gone soft on budget deficits and a windfall profits tax on deregulated natural gas.
First came the secretary of the treasury disassociating himself from the Council of Economic Advisers' seeming acceptance of big deficits. Then came the White House correcting the treasury secretary's seeming approval of a natural gas tax. At day's end there was still a clear impression that the prospect of higher deficits is nudging the administration toward acceptance of a windfall profits tax on gas that the president has pledged in writing he would veto.
The somewhat confusing sequence of statements was triggered Tuesday when William A. Niskanen, backed by the two other members of the Council of Economic Advisers, said that past "concern about the deficit has been misplaced," because there is "no direct or indirect connection between deficits and inflation."
Secretary of the Treasury Donald T. Regan was peppered with questions about that heretical Republican remark at a breakfast with reporters. Regan said he agreed with the council members that the credit markets could accommodate a big deficit next year without serious risk of reviving inflation or damage to the prospects for economic recovery. But he said that as a matter of psychology and principle, "we have to get our deficits down. We cannot go on year after year" flirting with $100 billion deficits.
Regan said predictions from Office of Management and Budget officials of deficits of such magnitude in each of the next three years "horrified" the financial markets and offended "most Americans," who he said believe in balanced budgets.
That declaration was applauded at the White House, where deputy press secretary Larry Speakes said Niskanen's statement "did not reflect the president's opinion or administration policy. Our goal is to reduce deficits and ultimately to balance the budget."
Just in case there was any lingering doubt, Vice President Bush told a luncheon session of the same American Enterprise Institute conference where Niskanen had spoken that the president "is terribly concerned about the deficit."
Other comments Regan made at breakfast did not sit as well with the White House. He indicated the administration was looking with ever greater receptivity on a natural gas windfall profits tax that he said might contribute $10 billion to $20 billion a year in deficit-closing revenues. The tax would be on the proceeds of natural gas price deregulation.
President Reagan has endorsed a speedup in natural gas deregulation but has held off proposing it to Congress. Last summer, when he was seeking support for his budget and tax bills, he sent a handwritten note to Rep. Glenn English (D-Okla.) promising to veto the imposition of a windfall profits tax on deregulated gas. But congressional leaders say there will be no deregulation without a tax.
Regan said the president had not changed his position, but asked then about the English letter, Regan quipped: "I wonder how it would taste cut up with mustard on it." Pressed as to whether the president might renege on the promise, he said, "The letter is on paper; it's not in cement."
The congressman was not amused. "I may be naive," English said, when informed of Regan's remarks, "but I still believe the written commitment of the president of the United States is worth something."
The White House was not pleased either with Regan or with Senate Majority Leader Howard H. Baker Jr. (R-Tenn.), who told the president to his face yesterday morning that deregulation was impossible unless accompanied by a windfall profits tax. Baker told reporters that the president scowled "and would not agree to that." Speakes added that "the president is a man of his word on this."
And Energy Secretary James B. Edwards told The Washington Post there would be no deregulation proposal before next spring and said it would not include a windfall profits tax.