A headline in yesterday's Washington Post stated incorrectly that White House chief of staff James A. Baker III had called the administration's 1981 tax cut program a failure. The headline and the story should have conveyed Baker's point that, while the results of President Reagan's economic program thus far have been disappointing, the program has not had enough time to work.
President Reagan's supply-side tax cuts of last year have "really not started to work" and the promised economic recovery "did not come as soon as we had hoped nor as strongly as we had hoped," White House chief of staff James A. Baker III said yesterday.
In comments reflecting what many Reagan advisers have been saying privately for months, Baker acknowledged disappointment that last year's supply-side tax cuts had not stimulated the economy as the president had promised.
As a result of both the recessionary economy and the tax cuts themselves, ballooning federal deficits have forced Reagan to push for a $98.3 billion tax increase, approved early yesterday morning by a House-Senate conference, that was not envisioned in his original agenda.
"Well, I think he Reagan does acknowledge that the recovery did not come as soon as we had hoped, nor as strongly as we had hoped. I think that's a fair statement. I think the president is candid and forthright in saying that. We'd hoped, quite frankly, that we'd be seeing a little bit more of a recovery about this time," Baker said in an interview on "Face the Nation" (CBS, WDVM).
His sentiments were echoed in a blunter assessment by Sen. Robert J. Dole (R-Kan.), chairman of the Finance Committee. "We have had a disappointment," Dole said of the supply-side tax cuts Congress approved last year. "The economy has not recovered. It's been disappointing to the president and felt very deeply by those who are out of work and continue to be out of work."
Dole, chief architect of the $98.3 billion tax increase Reagan is trying to steer through Congess, said in an interview on "Meet the Press" (NBC, WRC) that the tax bill does not represent a turnaround from the philosophy of last year's supply-side tax cutting. "We're not trying to make a U-turn; we're just trying to avoid going over the cliff," he said.
But he was sharply critical of Rep. Jack Kemp, (R-N.Y.), a chief architect of last year's supply-side tax cuts, who is leading the opposition to this year's tax boost.
"Maybe we went too far last year with some of Mr. Kemp's ideas," Dole said.
"I never really understood all that suppy-side business." Dole added that he had "supported Mr. Kemp last year in some of the things I didn't believe in."
Many economists say that the reason the supply-side tax cuts have not performed as promised is that the Federal Reserve's tight money policy threw the nation into recession last year, and overwhelmed any stimulative effect the cuts might have had.
That tight money policy, however, has had Reagan's blessing.
The senator warned of dire consequences for the GOP should Reagan lose the tax increase bill fight. "I think it would be devastating," he said. "In my view, if the president loses, then he has real problems in the party and in the country and in November of this year trying to help Republicans."
"To me, this is a test of leadership. This is a test of whether or not the president is going to determine economic policy, or a group of Republicans or Democrats who may have a different view. We are in this together," Dole said.
"I never considered the president to be a pure supply-sider. He always believed and always said in addition to cutting taxes, you had to cut spending. Now, some supply-siders would not even worry about the spending side," the senator added.
Baker also warned that economic recovery and declining interest rates would be jeopardized unless Congress agreed to "responsible surgery" on federal deficits. This has been Reagan's leading argument for the tax bill -- that it is necessary to win spending cuts from Congress -- and he is expected to take that tack in his nationally televised address tonight.
Asked whether the runaway deficits are the result of the huge tax cuts Reagan engineered through Congress last year, Baker conceded "there's some relationship between that."
But Baker said following the path Reagan has taken to its "logical conclusion" would mean still further spending cuts next year.
He dodged questions about whether Reagan would trim his defense buildup or take the budget knife instead to Social Security and other entitlement programs.