President Reagan yesterday dusted off the veto weapon, warning Congress against passing what he called "bailout" bills to aid selected industries flattened by recession. He said such bills would only create new inflationary fears, higher interest rates, and a delay in economic recovery.
His warning came as the Senate prepared to wade into a 1982 supplemental appropriation bill--containing housing bailout money--which the White House claims is $2.2 billion too high and which congressional sources say the president is almost certain to veto.
Reagan, in a letter to Senate Majority Leader Howard H. Baker Jr. (R-Tenn.), said he is "unequivocally opposed" to bills now at various stages that would assist not only housing, but banks, agriculture, steel, small business, automobiles, and other sectors.
"A bailout for one sector is likely to lead to bailouts for others," Reagan wrote. "Taken together, these bailouts could exceed our budget by tens of billions of dollars. This would compound the deficit problem, keep interest rates excessively high, and weaken the economic recovery."
The president did not say in so many words that he would veto the supplemental bill. But his letter and other administration objections circulating in Congress yesterday were part of a campaign against the supplemental appropriation, which includes a billion dollars to stimulate the housing industry this year.
Debate on the bill was delayed throughout the afternoon as Senate leaders tried to work out an arrangement that might lessen the president's opposition and avoid a veto that would imperil other sections wanted by all sides. As the talks ended for the day, sources said no agreement had been reached.
"I think he's aching to veto this bill," said Sen. William L. Armstrong (R-Colo.), a leading opponent of the housing subsidies section. "It starts new programs. It is $2 billion above his recommendations."
The appropriations bill would be a reversal of sorts for the Senate, which last week beat down almost all budget resolution amendments designed to increase spending in fiscal 1983 beyond what the administration supports.
"Last week, we restrained increases in the rate of growth of programs for veterans, handicapped children, pollution controls and about two dozen others," Armstrong said. "How can we tell our constituents, well, that was last week. . . ."
The $1 billion housing subsidy, similar to one already passed in the House, is the handiwork of Sen. Richard G. Lugar (R-Ind.) and has widespread support. It would subsidize interest rates for certain classes of new-home buyers and is part of a five-year program that would cost $5 billion.
Aid to the "thrift industry"--savings and loans and some commercial banks--was approved 272 to 91 by the House last week in the form of the Net Worth Guarantee Act. It establishes an $8.5 billion fund to guarantee against failure of the slump-ridden savings and loans, mutual savings banks, credit unions and commercial banks whose net worths fall below prescribed levels.
In citing a bailout for agriculture, Reagan apparently was referring to legislation proposed by farm-state House members that would increase acreage being "set aside," or taken out of production, in hopes of raising prices.
As the first of these measures to near passage in both chambers, the housing bailout looms as the most objectionable at the White House. "Housing is a serious concern to" Reagan, Baker said, adding that its inclusion in the supplemental measure may provoke a veto.
Conservative opponents of the bill were circulating a letter from budget director David A. Stockman claiming the supplemental appropriation bill exceeds presidential recommendations by $2.2 billion.