The Best-Laid Plans...

Negotiations toward a bipartisan tax cut go astray

Pity poor Dan Rostenkowski. The chairman of the House Ways and Means Committee is finding that his Chicago-bred ability to cut deals is no match for the disparate forces colliding over the tax-cut issue. The Illinois Democrat had no sooner protected his right flank last week, by exploring with the Reagan Administration the possibility of a compromise tax bill, than he found himself stymied by Democrats who want no part of the multiyear cuts being contemplated, and an Administration that seemed unwilling to make further concessions.

Rostenkowski's options were suddenly unattractive. He could abandon hopes of a compromise, as his leader Speaker Tip O'Neill advocated, and thereby provoke a direct confrontation with the Administration. That would leave him open to an end run by the White House, which a month ago corralled enough conservative Democrats on the budget vote to humiliate the House Democratic leadership. Perhaps as bad, Rostenkowski could wind up winning a hard-fought vote against the Administration--only to have his party share the blame henceforth for unsolved economic ills.

For their part, Administration officials had to worry about being forced to fight for some variant of the Kemp-Roth plan--a threeyear, 30% tax cut--which does not enjoy the support that the budget cuts did in the Congress or the country. In fact, all the major players--Rostenkowski, Senate Finance Committee Chairman Robert Dole, Treasury Secretary Donald Regan and White House Counsellor Edwin Meese--hoped to settle the issue by consensus.

But their best-laid plans went astray. On Wednesday morning, Dole laid out his detailed version of a compromise to reporters: a 25% personal income tax cut 'spread over about three years. He met with Rostenkowski to try out his plan. Their talk went well, so they made a breakfast date with Secretary Regan to negotiate further.

The bacon-and-egg breakfast with Regan, however, showed that there was less room for compromise than Rostenkowski had hoped. "What about a two-year program instead of three?" he asked. Replied Regan: "If I went to the President with that offer, I'd be fired." Rostenkowski was surprised by this hardening of the Administration's position. He pledged to work for a palatable compromise, but said, "I can't sell that 5-10-10," referring to a 25% cut.

"What do you think?" Rostenkowski asked a caucus of his Democratic colleagues on the Ways and Means Committee after giving a noncommittal presentation of the Administration's position. Richard Gephardt of Missouri spoke for the majority: "If that's the bottom line, then there are no further negotiations." The Democrats did not like the deficits inherent in a massive, multiyear cut, and were concerned that the middle class was not getting enough of a break. Rostenkowski did some polling. "How many for a three-year tax bill?" he asked. One member raised his hand. "How many for two years?" Only two hands were raised. The chairman left Washington immediately without even calling Regan.

On the advice of Dole, who strongly favors a legitimate compromise rather than a deal with dissident conservative Democrats, the White House invited the top Democratic leadership to a meeting this week. Dole urged the President to soften his hard stance and prevent a drawn-out battle neither side could be sure of winning. But Administration officials felt the time had come to prepare for possible battle, and three Southern Democrats, considered potential allies, were invited to the White House late last week. Plans were also made for a $4 million media campaign financed by the Republican National Committee, featuring the Oval Office's best salesman. Reagan was ready to fight. At a Cabinet meeting, Regan told him: "If this thing doesn't work out with Rostenkowski, you may have to go to work on Congress like you did on the bipartisan budget bill." Smiling, the President replied: "Order up the cufflinks, and we'll go to work."

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