The Constant Issue

Crises may come and crises may go, but concern about the economy remains clear and constant as the $ sign in a checkbook. No one understands this fact--at least in its political meaning--better than President Kennedy. Yet it was also characteristic that the President scheduled a major speech for this week before the nation's top businessmen at New York's Economic Club without anyone's having thought much about what he would say. Thus a top Kennedy aide, when asked last week for an advance fillin, simply shrugged: "I haven't even started to think about that speech yet. I've had so many other things to do."

The Administration always seems to have so many other things to do. Almost from the beginning of his White House tenure, Kennedy has promised to seek overall tax reform. Yet last week, as Treasury Secretary Douglas Dillon's representatives, along with top aides of other departments, went to present their plans to the White House, the talk seemed more about tax cuts than tax reforms.

To Tie or Not to Tie. Tax reduction will certainly be the Administration's priority legislative proposal for 1963; it may run as high as $10 billion, spread across corporate and individual tax rates, but concentrated on individual taxes. The Administration would like to tie the tax cut to overall tax reform in a "fiscal fitness program for the '60s." Such reform would presumably correct some of the flagrant flaws in the present tax laws--in such areas as depletion allowances, retirement income exemptions and capital gains. But if political considerations threaten tax reform, the Administration apparently will settle for just tax reductions. In any event, there now is little hope of achieving a complete, detailed tax reform.

In the absence of any declarative Administration plan, others began to speak up in increasing volume. New York's Republican Governor Nelson Rockefeller last week attacked those theorists who contend that federal spending should be increased to stimulate the economy. Said Rockefeller before the National Association of Manufacturers' congress in Manhattan: "I completely reject these notions. Economic growth cannot be achieved by such massive Government spending. This panacea has failed every time it has been tried throughout our history." Rockefeller argued that any tax cut should be aimed at increasing industrial investment, not at beefing up consumer purchasing power.

Holding the Line. Frequent warnings that tax cuts should not be accompanied by new federal deficits were heard at a national conference of the Tax Foundation in Manhattan. Said New York Stock Exchange President G. Keith Funston: "If spending reductions cannot be made concurrent with tax-fate reductions, then it would certainly appear wise to at least hold expenditures at the 1963 budgetary level, so that as the economy grows, both federal spending and taxes would begin to absorb a progressively smaller share of national income."

Raymond J. Saulnier, chairman of the Council of Economic Advisers under President Eisenhower, told the conference that a tax cut should not exceed $2.5 billion and should come solely in corporate income taxes. He, too, urged that the line be held on federal spending.

That seemed to be the main point. Nobody was willing to argue all-out against tax cuts as a way of spurring the nation's sluggish economy. But the type of reduction, its relationship to Government spending and budget deficits--perhaps even tax reform, too--will be key issues in 1963.

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