Of Druthers & Deficits

"No more important domestic economic legislation has come before the Congress in 15 years," the President of the U.S. told the nation last week. He was referring, in a televised talk, to the $11.1 billion tax-cut bill. And to hear him describe it, the measure was the cure for everything except maybe halitosis and warts.

It offered something for everybody --more jobs, more buying power, more production. For the businessman, there would be new markets equal to the combined gross national products of Canada and Australia, and more "profits in his cash register" as well. For the taxpayer, there would be enough extra money "to pay the installments on a car, or dishwasher, or some other necessary expense."* The bill would ease unemployment, take the sting out of automation, help eliminate juvenile delinquency and racial injustice and provide "insurance against recession."

Inflationary Time Bomb. If the bill was going to do all that, then why was it necessary for the President to drum up popular support for it? The answer is that the bill is in trouble. And if there was more than a touch of demagoguery in Kennedy's 21-minute talk, it was rooted in the worry that his tax-cut measure would be defeated or rendered completely worthless. "There are those who, for one reason or another, hope to delay this bill," said the President darkly, "or to water down its effects."

As usual, Kennedy was talking about Capitol Hill Republicans--and as usual, he was completely ignoring the fact that his own Democratic Party has huge majorities of 257 to 176 in the House and of 67 to 33 in the Senate. Indeed, Administration vote counters are wor ried that as many as 40 House Democrats may jump the party ship.

Yet at the same time, there was no doubt about a determined G.O.P. drive to link a tax cut with a reduction in Government spending. One attempt to do just that was defeated by a single vote in the House Ways and Means Committee two weeks ago, but the so-called "Puritan ethic" amendment touched a responsive chord in the nation. Encouraged by the reaction, House Republicans met last week, overwhelmingly agreed to introduce an even tougher amendment when the bill reaches the floor this week. The proviso would delay the tax cut unless the President, in January's budget message, promises to hold spending to $97 billion for the current fiscal year (v. an already budgeted $98.8 billion) and to $98 billion for fiscal 1965. Without such a rider, said Wisconsin's John Byrnes, ranking Republican on the Ways and Means Committee, the tax cut would "set off a time bomb of inflation."

With the rider, Kennedy feared, the bill would be as good as dead, and his congressional liaison men reported that the vote on it would be uncomfortably close. "If we get five Republicans," said one aide, "that will be four more than I can count now." Worried, Kennedy sent his aides scurrying up to Capitol Hill to line up votes against the amendment. The bill, said Kennedy, "must not be diluted by amendments or conditions. It must not be put off until next year. This nation needs a tax cut now, not a tax cut if and when, but a tax cut now and for the future."

Kennedy's arguments left economy-minded Congressmen cold. "Everyone is for a tax cut," said Republican Ways and Means Committeeman Thomas B. Curtis of Missouri, "but you have to earn it by cutting expenditures." Accusing Kennedy of practicing "creditcard government," G.O.P. National Chairman William Miller demanded equal time to reply, quickly got half-hour spots on two successive evenings from the networks. Opening the counterattack, Byrnes charged that "this Administration is taking an unprecedented gamble" by betting that the tax cut "will give us a noninflationary, continuing economic growth rate far beyond any we have ever achieved." Following up, Curtis claimed that Kennedy has adopted "a new and untried fiscal theory--planned deficits."

Braking the Juggernaut. G.O.P. legislators were not the only Americans who had qualms about a tax cut without a parallel cut in spending. A poll of 1,588 business and professional leaders conducted by the Research Institute of America for General Electric's Forum magazine showed that only 11% favored tax reduction without a comparable reduction in Government expenditures. An overwhelming 85% thought the two ought to go hand in hand.

In key industrial centers, businessmen are all but unanimous in their sentiment for a tax cut--if something is done about spending. Many say that the economic upturn, now 21 years old, shows no signs of slackening and needs no artificial stimulus, but they agree with Inland Steel Chairman Joseph Block that "for the long-range benefit of the economy, we need lower taxes." A significant number are worried, however, that if spending keeps spiraling, the effect of the cut will be very inflationary.

"If I had my druthers," said Vice President W. L. Strong of Los Angeles' Packard Bell Electronics, "it would be for a cut in spending. In the long pull, without reductions in spending, the effect of a tax cut would be to create an inflation so disastrous as to outweigh any advantage." One San Francisco executive wanted some sort of pledge that the Government "is doing its damnedest to put the brakes on this federal juggernaut. I'm thinking of my children and grandchildren, and the whirlwind they will inherit." But Crown Zellerbach President Reed Hunt demurred. "You can't get inflation if demand is fully supplied," said Hunt, echoing Kennedy's argument that a tax cut would stimulate, but not inflate, the economy.

A Cut, But ... Still, nearly everybody is for "a tax cut, but . . ." Everybody wants the extra cash, but most would be happier if there were assurances that it would not mean inflation. Some, notably Ways and Means Committee Chairman Wilbur Mills, would feel better if the bill included a more basic reform of the hodgepodge U.S. tax structure. The Senate has its reservations too. Said Minority Leader Everett M Dirksen, "I would be surprised if we have a bill by Christmas, if at all."

* Not so, retorted Ohio's Republican Representative Oliver P. Bolton. For an $8,000-a-year man with a wife and two children, the category of worker Kennedy was thinking of, the tax cut would mean an extra $4 a week, barely enough to cover interest costs on an installment-plan auto.

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