A Soft Answer Turneth Away Tax Cuts

TREASURY'S ANDERSON

IT was characteristic of Treasury Secretary Robert Bernard Anderson to keep out of the limelight last week when the Administration and the Democratic congressional leadership sealed their agreement to 1) oppose any tax cuts, 2) go along together on a bill that simply extends for one year the taxes now set for reduction at month's end. But both White House and Capitol Hill knew that Bob Anderson was principally responsible for one of the brightest tactical maneuvers of the Eisenhower Administration--a maneuver that had checked Democratic passions for tax cuts, held back such powerful and restive Republicans as Vice President Nixon and Labor Secretary Mitchell, and won a victory for the kind of conservative, second thought that is Bob Anderson's principal stock in trade.

A year ago, when Anderson replaced hearty George Humphrey, it looked to some Republicans as though Treasury might have swapped rock salt for gelatin. Humphrey was categorical, authoritative (said a Cabinet member: "When George speaks, everybody listens"), and dogmatically orthodox. He even inspired last year's hard congressional attack on defense spending and foreign aid by warning that, if spending were not cut, "You will have a depression that will curl your hair.''

Anderson seemed passive. On the record, no slouch could have risen so fast from a poor cotton farm, worked his way through University of Texas Law School at top of his class, become a young expert in the state government's toughest troubleshooting jobs, and managed a $300 million cattle and oil empire. But Anderson's Washington reputation came mainly from his Navy Secretary days (1953-54), when he was known as a flexible, laconic worker who stayed out of headlines and was more willing to listen to others than to voice his own ideas. Now the news spread gradually that here was a man with a tough confidence in a free-operating economy and a determination to keep the U.S. strong in the world. Texan Anderson had one other advantage over George Humphrey: friendship with Texan Sam Rayburn, Speaker of the House of Representatives. Ruled Mr. Sam 15 years ago: "He's reliable."

Anderson's first quiet triumph was a close relationship between the Administration and the jealously independent Federal Reserve System, which controls U.S. bank-credit levels and was once openly at war with Harry Truman's Treasury Department, and continued to keep aloof in George Humphrey's day. Anderson persuaded Fed Chairman William McChesney Martin Jr. to drop around for informal sessions with the President, Anderson, Raymond Saulnier, Chairman of the President's Council of Economic Advisers, and Presidential Adviser Gabriel Hauge. Thus, without binding Bill Martin, the Administration had its first regular forum for voicing its hopes and fears about Federal Reserve policies and their effect on the U.S. economy.

During last fall and winter Anderson stuck close to his job, laying the groundwork for the personal relationships both on Capitol Hill and downtown that were to be the basis for his later operations. As the recession deepened he shrugged off Democratic attempts to make it a big political issue. But when Republicans Nixon and Mitchell broke ranks with a half-promise of a Republican-sponsored tax cut, Anderson moved fast. As he saw it, such party competition for political credit at that uncertain moment could bring huge slashes in tax revenues, in the face of a mounting deficit.

Anderson quickly flew back from a speaking date in Nashville, Tenn., made the rounds of Capitol Hill, touching base with Rayburn, Ways & Means Chairman Wilbur Mills, Republican Leader Joe Martin, Senate Majority Leader Lyndon Johnson. Minority Leader Bill Knowland and others. His message: "Let's avoid making a tax-cut race for political credit." All agreed, and thus was ratified the "Treaty of the Rio Grande," so called because its success rested upon Texans Rayburn, Johnson and Anderson. At the same time, President Eisenhower issued a rebuke to Nixon and Mitchell (TIME, March 24), and Bob Anderson came out front as the Administration's economic spokesman.

His wait-and-see policy was bolstered when Congressmen found little public interest in a tax cut during Easter recess. Then, as the time came for excise taxes to expire, Anderson had trouble getting the President to speak up solidly for no tax cuts. So Anderson got from Rayburn a warning to Eisenhower: if the Administration did not soon make up its mind on a tax bill, the Democratic leadership would end the Treaty of the Rio Grande by bringing out a bill on its own. The White House responded in last week's tax letter to Congress, which put Anderson, the economy and the U.S. itself just about where Bob Anderson wanted it to be all the time.

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