Congress and the White House try to forge a tax compromise
On one side was President Reagan, eager to hold to his campaign pledge to cut personal income taxes across the board by 10% in each of the next three years, the so-called "10-10-10" proposal. On the other was House Ways and Means Committee Chairman Dan Rostenkowski and his fellow congressional Democrats, who favor a smaller tax cut offered for one year at a time. Like proud and coquettish students at a prom, each has been eyeing the other, hoping for an invitation to dance. Last week, with congressional Republicans acting as chaperons, they began edging toward one another in a series of private meetings—at the White House, the Treasury Department, in a Capitol hideaway—that laid the groundwork for a possible compromise tax bill.
Reagan came to the cotillion with an aura of invincibility from his decisive, and uncompromising, victory in paring $36 billion from the fiscal 1982 budget, which was formally approved by Congress last week. His extensive three-year tax cut program, however, enjoys far less support both in Congress and throughout the country, mainly because it threatens further to bloat the federal debt and aggravate inflation. As if to dramatize such fears, the nation's leading banks last week raised their prime lending rate to 20.5%, up 3½ percentage points in one month. Moreover, last week's report that the gross national product had surged 8.4% in the first quarter seemed to weaken the case for the economic stimulus that the Administration argues a tax cut would bring.
The Administration has somewhat slowed the momentum of its budget victory by pushing a hastily conceived plan to bolster the troubled Social Security system by trimming benefits—especially for those who retire at age 62. The Senate last week issued Reagan a stinging rebuke by passing, on a 96-to-0 vote, a "sense of Congress" resolution opposing any "precipitous and unfair" reductions in benefits for early retirees and any package of cuts that is more severe than necessary to keep the system solvent in the short run. Congressman Claude Pepper of Florida, chairman of the House Select Committee on Aging, told Health and Human Services Secretary Richard Schweiker, "You have chosen a solution that violates the sacred word of our President and our Government and our Congress to the people." The White House backtracked quickly, releasing a letter from Reagan assuring congressional leaders that "this Administration is not wedded to any single solution." Reagan called for a bipartisan effort to find a way to save the system.