A brain trust of several of President Reagan's most prominent and longstanding conservative supporters held an "urgent conference" on Capitol Hill last night to plan how to stop what they view as a drift away from the Reagan administration's supply-side economic principles.
The group, including former presidential advisers Martin Anderson and Lyn Nofziger as well as a dozen leading conservative intellectuals and members of Congress led by Rep. Jack Kemp (R-N.Y.), drafted a statement to be released today urging Reagan to reject the $98.9 billion, three-year tax increase now before a House-Senate conference committee.
"You can't have the largest tax cut in history and then turn around and have the largest tax increase in history," said one of the participants after the closed-door meeting.
Climaxing a day in which Reagan called congressional Republicans to the White House to make a forceful and personal appeal on behalf of the tax increase, last night's session represented the most dramatic evidence yet of the growing alarm in conservative ranks that the president has strayed from the course he set in the 1980 campaign.
At one of yesterday's meetings with Reagan, Kemp vowed not to give up his attempts to bury what would be the largest peacetime tax increase in American history. Sources said Kemp clashed with the president and White House counselor Edwin Meese III.
A telegram calling the Reagan brain trust to an "urgent conference on the future economic agenda of the administration" was sent out earlier this week. Among those who responded were Nofziger, former White House political director; Anderson, former White House domestic affairs adviser; Norman Ture, former Treasury undersecretary for tax and economic affairs, and Paul Craig Roberts, former assistant Treasury secretary for economic policy.
They were joined by Jude Wanniski, who helped popularize supply-side tax cuts; political consultant Bill Timmons; neo-conservative intellectual Irving Kristol of Public Interest magazine; direct-mail specialist Richard A. Viguerie; Howard E. Phillips of the Conservative Caucus; former New Jersey Senate candidate Jeff Bell; Sens. Robert W. Kasten Jr. (R-Wis.) and Mack Mattingly (R-Ga.) and Reps. Trent Lott (R-Miss.), Newt Gingrich (R-Ga.). Daniel E. Lungren (R-Calif.) and Kemp.
Kemp said the unifying motivation of those attending was to put a halt to the tax increase. Nofziger refused comment. Anderson said, "These people are all long-time Reagan supporters. We're trying to say, 'Hey look, the Senate has passed a tax bill without any decent evidence of spending control.' "
"You don't hit a struggling economy over the head with a tax increase," said Roberts, adding: "Some people are worried about Reagan being flip-flopped to death" on economic policy.
Last night, just as the conservatives were meeting, the House-Senate conference approved by voice vote the 10 percent withholding on interest and dividends that was vigorously opposed by business interests and many conservatives. The entire tax bill has drawn fire from business groups fearful that it will undo many of the generous provisions they won in last year's tax-cutting blitz.
Reagan embraced the tax increase earlier yesterday in a larger meeting of congressional Republicans at the White House, but there were signs of growing opposition from some of his most loyal supporters.
The bill faces rough sledding in the House, where conservative Republicans who enthusiastically supported last year's presidential program of tax and spending cuts now say a tax increase would violate fundamental tenets of Reaganomics and would be used to finance Democratic spending programs that the House leadership refuses to cut.
But Democrats are pressing Republicans to take the lead in passing the election-year tax bill in the midst of a recession, and leaders of both parties have been calling on Reagan to come out strongly on behalf of the bill.
"At this moment, we don't have the votes in the House," Sen. Bob Packwood (R-Ore.) said as he left yesterday's session with the president. "Votes are going to have to be changed or there won't be any tax bill."
But Senate Majority Leader Howard H. Baker Jr. (R-Tenn.) said that Reagan had declared "without any equivocation his total support" for the bill, suggesting he would work for it.
House Minority Leader Robert H. Michel (R-Ill.) also indicated that the president had promised support, but Michel felt compelled to warn: "We still have a serious problem getting any kind of tax bill enacted in an election year."
Sources said the most contentious aspect of yesterday's meetings involved Kemp, who remains one of the strongest supporters of last year's supply-side economics and who is leading the campaign against this year's tax boost.
At one point in the meeting with all GOP congressional leaders, sources said Sen. Paul Laxalt (R-Nev.), Reagan's closest friend in Congress, bluntly told Kemp: "You are talking about leadership, but the question is whether you want to lead or the president should lead."
Kemp was reportedly the only person present to challenge the tax increase, but his hostility to the measure is shared by a wider base of junior Republicans in the House. Kemp plans to hold a press conference today to release a statement signed by these GOP lawmakers and others denouncing the tax increase.
Last night, Kemp sought to downplay the intensity of his dispute with Reagan, but one source familiar with yesterday's developments said "the White House is really turning up the heat" on the Buffalo congressman and supply-side apostle.
The tax bill was passed by the Senate, but dodged by the House, which warily voted to go directly to House-Senate conference on the Senate version.
In addition to the Republicans, Reagan met yesterday with Chairman Dan Rostenkowski (D-Ill.) of Ways and Means, who has warned that Reagan must marshall a majority of the 192 House Republicans or the tax bill will lose.
Rostenkowski said afterward he was "pleased he the president has recognized that a tax bill is needed."
Michel indicated that an effort will also be made to reduce the bill's business opposition, led by the U.S. Chamber of Commerce, by cutting back on some of the business tax increases.
The chamber, which like Kemp was strongly in Reagan's corner last year, is lobbying hard against the tax bill, although sources said the business organization's leadership is split.
The chamber's executive committee voted 8 to 4 to oppose the bill, but the chairman, Paul Thayer, chief executive officer of the LTV Corp. is reportedly angry that the position violates a personal pledge to Reagan to support "substantial portions" of the measure.
Kemp contended after seeing Reagan yesterday that their dealings remained friendly, although they "disagree strongly." He said he reiterated his disbelief in the theory that a tax increase will help combat the recession by reducing the deficit and lowering interest rates. Reagan believes the tax increase would help control the deficit.