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THE ECONOMY

Lyndon Johnson was in a cheery, effusive mood, bustling around a blackboard in the White House Fish Room before an audience of reporters, chalking rapid-fire arithmetic with the authority of the schoolteacher he once was. But the lesson, as the President conceded, was "not pleasant."

With defense and domestic spending now running as much as $8 billion higher than his fiscal 1968 budget anticipated last January, the President announced he was sending to Congress a tax package that would impose, at least through 1969, a 10% surcharge on all corporate and individual income taxes. Along with borrowing and belt-tightening in such programs as public works, the President hopes the surcharge, which should bring in some $6.3 billion, will reduce the national budget deficit from a crushing $29 billion to between $14 and $18 billion.

"Ruinous Spiral." Without the surcharge, the President argued in his ten-page special message, the deficit could cause "a spiral of ruinous inflation which would rob the poor, the elderly, the millions with fixed incomes; brutally higher interest rates and tight money; an unequal and unjust distribution of the cost of supporting our men in Viet Nam, and a deterioration in our balance of payments by increasing imports and decreasing exports."

In the midst of his package presentation, the President slipped in the information that part of a $4 billion increase needed to augment the present defense budget of $75.5 billion was to be used to finance sending 45,000 more men to Viet Nam.

In addition to the individual income tax surcharge, which would become effective Oct. 1 of this year, and the corporate surcharge, retroactive to July 1, the President asked for a speedup in corporate tax collections. The acceleration, which should yield $800 million in fiscal 1968, would require corporations to pay estimated taxes on the basis of 80% of their liability rather than on the present 70%. The tax package also provides for excise taxes on new automobiles and telephone services (now 7% and 10%) to continue at least until 1969, instead of being lowered next year as scheduled.

"Hurtful Uncertainty." Asking Congress to act swiftly on the bill, Johnson declared: "There is nothing as hurtful as uncertainty in the economic community." Businessmen were not exactly certain about the new program, however (see U.S. BUSINESS), since until a month ago the Administration was predicting that the surcharge would amount to no more than 6%.

Nor was Congress in a docile mood. House Ways and Means Committee Chairman Wilbur Mills, without whose support the bill's passage is doubtful, has yet to be convinced that the taxes are wise. Along with Louisiana's Russell Long, chairman of the Senate Finance Committee, Mills has argued that a tax increase now might set off a business slide, thus lowering rather than raising revenues.

Either way, Congress, refracting the tax bill with myriad political and economic considerations, is unlikely to swallow the President's program whole. It will be a cold day in Washington, probably in November, before the bill --or whatever remains of it--emerges from Congress.

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