Process of Education

With President Kennedy already set on a tax cut this year if he can get it, the Administration last week moved to clear some obstacles out of the way--or at least to chart them carefully for future reference. While deliberately downplaying any idea that the U.S. might be on the brink of another recession--a task that becomes increasingly difficult as more disappointing economic indicators come out--it began the process of "educating" the Congress and the people to the need for a tax cut. The first lesson: public hearings on whether a cut is advisable now.

The Administration persuaded Wilbur Mills, chairman of the House Ways and Means Committee and a reluctant tax cutter at best, to hold the hearings, which are planned to start this week. Since Kennedy has not yet come out publicly for a tax cut--and may not until August, after he has seen the economic figures for July --no Government officials will appear at the hearings. Instead, the hearings will call economic specialists from the A.F.L.-C.I.O., the U.S. Chamber of Commerce and the Brookings Institution, plus businessmen who have to meet payrolls and are presumably more aware of a tax cut's potential effect than Government economists. One invited witness: Federal Reserve Board Chairman William McChesney Martin Jr.

Risky Tactic. To find out how Congress now feels about a reduction, advocates were busy quizzing Democratic members on their attitude toward a quick $5 billion to $7 billion cut that would include both individual and corporate income taxes. Their findings: somewhat more than half of the Senate's 64 Democrats favor such a cut, but only under a variety of ill-defined conditions. As well as educating the public, the Mills hearings are intended to overcome such congressional indecision.

The soundings also revealed a tendency among some powerful congressional Democrats to oppose a tax cut unless it is accompanied by a reduction in the Government's budget deficit--a deficit that final figures released last week showed to be $6.3 billion for fiscal 1962. That was $700 million less than Administration experts had predicted, but it was still the biggest deficit in peacetime, except for the $12.4 billion Eisenhower deficit of 1959. The problem in meeting the demands of such deficit-hating legislators is that immediate cutbacks in federal spending might defeat the very purpose of a tax cut: to prime the economy, whether by spurring busi ness investment and profits or by putting more money into the consumer's pockets -- or both. Strangely, in an Administration noted for its talkativeness, no one has yet whispered anything about what kind of a tax cut the Administration would like, and how much it would amount to.

Nonetheless, the Administration's congressional experts have tentatively deter mined at least their general strategy in the Congress. With fingers crossed, they hope that Wilbur Mills's own hearings will convince him that a cut is needed. If so, they would introduce a separate tax measure in the House, try to get his commit tee's approval and passage on the floor. Fully aware that such Senate Finance Committee powers as Harry Byrd and Bob Kerr are flatly against a cut, they would then try again the risky tactic that exploded on medicare and urban affairs legislation: bypass the Finance Committee and send the tax plan directly to the Senate floor.

Full of Hazards. Such a legislative course is full of hazards, but they are hardly greater than the hazards of letting tax-cut talk go on too long without a public decision by the Administration. Continued talk about tax cuts without any action simply creates more uncertainty about the state of the economy. If Kennedy hopes to quiet that uncertainty, he must soon call an end to the discussion and announce either that he wants a tax cut and will try for it, or that the economy is healthy enough so that it does not need one.

This file is automatically generated by a robot program, so reader's discretion is required.