White House chief of staff James A. Baker III strongly suggested yesterday that President Reagan will accept a speed-up of already scheduled Social Security tax increases over the next several years in return for provisions slowing growth of Social Security benefits.
It was the first time a senior White House official had indicated what the president's position might be on the sensitive issue.
In a speech to the Commonwealth Club of California in San Francisco, Baker, who has led White House negotiators in the search for a Social Security compromise, said that despite the president's much-advertised "abhorrence" of tax increases, he "might consider some acceleration of the effective dates of those tax changes already on the books" if they are "tied to reforms on the spending side."
He did not elaborate, but the most important such spending reform that the president's Social Security advisory commission has discussed in recent months has been deferral or curtailment of future cost-of-living increases for Social Security beneficiaries.
The commission is scheduled to report this weekend. The administration had hoped to have the report in time to include some Social Security recommendations in the upcoming fiscal 1984 budget, which Reagan is scheduled to send to Congress Jan. 31.
Baker also confirmed that the president is considering other tax increases for future years if they seem needed to hold down deficits and federal borrowing and stimulate recovery.
There were reports yesterday that one such tax increase under study at Treasury is a broad-based energy tax of some kind. Another is known to be an individual and perhaps corporate income surtax.
"New taxes must be a last resort and only then if they are tied to spending restraint and only if they are restricted to the 'out years' when they will not threaten our hopes for recovery," Baker said. "The president has concluded that we must taken an even tougher stand against the deficits in the so-called 'out years'--the years after 1984 when the recovery must be nourished by healthy financial conditions. We cannot and will not tolerate $1 trillion in new federal debt over the next five years.
"The president insists that these deficits be steadily reduced in size, moving toward a balanced budget."
Baker's unexpected disclosure of the White House position on Social Security came as five conservatives on the 15-member advisory commission rebelled yesterday against a bailout plan being drafted by White House aides and commission leaders on grounds it depended too much on tax increases and not enough on benefit cuts.
His remarks may have been intended in part to head off that rebellion.
In general, commission Democrats have tended to favor shoring up the giant social insurance system with tax increases, while the Republicans have leaned toward benefit cuts. The right mix is what has divided them.
Rep. Bill Archer (R-Tex.) told reporters that the five were "troubled" that the plan being put together by commission leaders "would depend almost exclusively on new revenues, new taxes" instead of "restricting . . . spending."
Later, Archer and Sen. William L. Armstrong (R-Colo.), ex-representative Joe D. Waggonner Jr. (D-La.), businesswoman Mary Falvey Fuller and Prudential Life Insurance Co. President Robert Beck met in commission offices to consider possible plans of their own.
Armstrong said the conservatives are drafting an alternative package that includes no payroll tax increases, United Press International reported. It would require new federal employes to join Social Security and would increase the tax rate for self-employed workers, but would raise the bulk of the money needed by leaning on benefit growth, such as a delay or freeze in this year's cost-of-living increases, according to Armstrong.
He said the conservatives will insist on long-term changes, probably including an increase in the plan's retirement age, UPI reported.
The Social Security compromise is important to the White House for its possible effect on future deficits as well as in its own right. The tentative compromise now being worked on by commission leaders and Baker would, in addition to keeping Social Security solvent over the next seven years, reduce the overall federal deficit by several billion dollars in fiscal 1984 and increasing amounts thereafter, averaging $15 billion annually to the end of the decade.
"Concern about the deficits is fueling the timing of this settlement," said one White House source.
The White House had also been supremely cautious up to yesterday about getting out in front of the Democrats on a compromise, for fear the Democrats would then repeat their charge of past years that the president was seeking to sabotage Social Security. That was why Baker's remarks in California were a surprise.
As one indication of both the delicacy and complexity of the negotiations, Rep. Claude Pepper (D-Fla.), a commission member, said in a telephone interview yesterday that he had assured Office of Management and Budget Director David A. Stockman he would back the compromise on the bargaining table if the administration would drop a provision increasing penalties for early retirement and cut a proposed six-month delay in the cost-of-living increase to three months. He said Lane Kirkland, AFL-CIO president, and House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) would do the same.
Until the Armstrong-Archer group came forward, it had appeared that the White House and commission leaders were moving to the verge of final agreement on a compromise plan that would tax half of the Social Security benefits for higher-income retirees, speed up imposition of Social Security tax increases already scheduled for 1985 and 1990, delay this year's cost-of-living increase for six months, bring under Social Security all new federal employes and all nonprofit group employes and make several other changes.
Under the compromise, a three-tenths of 1 percent increase in the Social Security tax now scheduled for 1985 would be moved forward to 1984, making the total rate in 1984 7 percent instead of 6.7 percent. Later, half of a five-tenths of 1 percent increase now scheduled for 1990 would be moved to 1988, so the rate that year would be 7.4 percent instead of 7.15 percent.
The commission has estimated that Social Security will need net tax increases or benefit cuts of $150 billion to $200 billion over the next seven years to keep solvent. The plan under consideration would produce about $165 billion.
With regard to the Archer-Armstrong revolt, the White House is said to feel that the major danger it represents to a compromise with the Democrats would be in the House, where revolt by a significant block of conservative Republicans to whom the president has political obligations could stay his hand. But sources are skeptical that such a revolt will occur on Social Security because House conservatives are also worried about deficits that a compromise could help cut.