Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) warned yesterday that the Senate Finance Committee may move to scuttle the 10 percent income tax cut scheduled for July, 1983, unless President Reagan and Congress reach a budget compromise.
In what appeared to be a veiled warning to Reagan, who has made the tax cut the cornerstone of his economic recovery program, Baker told reporters he wasn't sure the Finance Committee could be restrained from tampering with it if efforts to draft a compromise budget fail.
It is "certainly a possibility," although "far from a certainty," that a collapse of the budget compromise negotiations could give rise to an assault on the tax cut, Baker said.
The negotiators were reportedly still at odds over most major sticking points as they prepared for today's bargaining session at the White House, which was being touted as a climactic session aimed at producing a package that can be submitted to Reagan and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) within a day or two.
They have come close to agreement on the concept of a three-year freeze on discretionary domestic appropriations, sources said yesterday. But even in that area there still are significant disputes, including what constitutes a freeze and whether further appropriations cuts should be made.
The biggest stumbling blocks remain what they were at the start: tax increases and cuts in benefit entitlement programs, including all the major welfare programs as well as Social Security and Medicare. Democrats were described as wanting more in the way of tax increases and "loophole closings" than the Republicans were willing to give, while the Republicans were holding out for more entitlement cuts than the Democrats want.
"We're not yet within striking distance," said a source close to some of the congressional negotiators.
GOP congressional leaders are scheduled to meet this morning with Reagan in what some, including House Minority Leader Robert H. Michel (R-Ill.), see as an opportunity for the president to send signals that could pave the way for agreement. Several similar meetings recently have been canceled, and the fact that Reagan plans to hold the meeting today gave rise to some optimism that he may be ready to move.
But, even if he does, there were rumblings on Capitol Hill yesterday that selling a compromise to Congress, especially the Democratic-controlled House, may be difficult. "The real problem is where the Democrats will get the votes" to pass what the negotiators are talking about," said one source.
Another indication of the impending problem came from House Education and Labor Committee Chairman Carl D. Perkins (D-Ky.), who issued a statement attacking proposed cuts as a "step backwards in our nation's commitment to education."
Perkins accused House Budget Committee Chairman James R. Jones (D-Okla.) of agreeing to freeze elementary and secondary education spending, an apparent reference to the freeze on domestic appropriations. However, a spokesman for Jones said the congressman had made no such agreement.
Perkins also said the talks are moving in the direction of a $1 billion cutback over three years in spending for child nutrition programs.
Although today's meeting is the last scheduled session in the three-week effort to reach a compromise, some participants said the talks could go on longer if progress is still being made. Senate Majority Leader Baker reiterated yesterday that the Senate Budget Committee will begin drafting its own version of the budget unless a compromise is reached by late this week.
Elaborating on suggestions that the talks have a 50-50 chance of success, Senate Finance Committee Chairman Robert J. Dole (R-Kan.) put out a press release saying the 50-50 odds boil down to "50 percent Reagan and 50 percent O'Neill."