Rep. Henry S. Reuss (D-Wis.), chairman of the Joint Economic Committee, said yesterday Congress should order the Federal Reserve to loosen its "supertight" monetary policy in order to help bring down interest rates.
Although it would be an "unprecedented step," Reuss told the Senate Budget Committee, the alternative to such a directive might be "far greater legislative risks," including credit controls, national usury laws and "political dismemberment of the Federal Reserve System."
He suggested that the directive be included in the first budget resolution for fiscal 1983, which Congress is supposed to adopt this spring. Although budget resolutions do not have the force of law, Reuss said he had no doubt that such a directive would be obeyed.
Reuss also called for repeal of the 1983 tax cut to help reduce budget deficits, along with allowing only half the defense spending increase that President Reagan wants. He said he would favor increases in domestic spending only to cover costs from inflation.
Testifying on behalf of Republicans on the Joint Committee, Rep. John H. Rousselot (R-Calif.) said Congress should stop talking about increasing taxes and concentrate on cutting spending. He said the tax cut scheduled for July of this year should be made retroactive to January, or at least April, to help bring the economy out of recession.
But Senate Budget Committee Chairman Pete V. Domenici (R-N.M.), in a New York speech, said Congress should not flinch from raising taxes as one way of bringing deficits under control.
Domenici, in an apparent reference to the current oil glut, also suggested the time may have come for a tax on imported oil. He said the Organization of Petroleum Exporting Countries "would have to eat most of it" and added: "It seems to me not a bad turnabout for what they made us eat."
Domenici did not make any specific proposals but noted that a $5-a-barrel tax would increase revenues by $10 billion a year, according to a Budget Committee aide. A fee on imported oil is one of many options that Senate Republicans are expected to consider today in trying to put together proposals for reducing deficits projected by Reagan's budget.