Recharging the Batteries?

The U.S. economy resembles a car whose battery is running down in the winter cold. It clearly needs a new charge from the incoming Carter Administration--but how much amperage should be poured in? Last week some dollar numbers emerged from separate meetings between Carter and his transition staff, and the incoming President and chief executives of 15 giant companies, including Ford Motor Chairman Henry Ford II and DuPont Chairman Irving Shapiro. The President-elect's advisers were somewhat more modest than the businessmen. In effect, they called for $20 billion in tax cuts and spending increases, while the corporate chiefs--or at least their spokesman, General Electric Chairman Reginald Jones--opted for $23 billion. But the similarities in the plans were striking. For example, both advocated spending of an additional $5 billion by the government on job-creating programs.

No Rejoicing. The transition staff wants temporary tax cuts of about $15 billion. Part would be in the form of one or more rebates to individuals on 1976 taxes, similar to the rebate scheme of 1975, when taxpayers received checks of $100 to $200. Part would be in the form of lower withholding rates on 1977 income. In the view of Bert Lance, Carter's incoming director of the Office of Management and Budget (see box), permanent cuts would endanger the new Administration's goal of producing a balanced budget by 1980.

Carter's aides also proposed that the new Administration pour $5 billion into direct federal aid for jobs, grants to state and local governments and additional subsidies to keep down interest rates on home-mortgage loans. In all, the transition staffs proposals would increase the budget deficit in fiscal 1977, which ends next Sept. 30, to $76 billion, from $61 billion envisaged by the staff of the Senate Budget Committee. Lance, in an interview with TIME, wryly acknowledged that so large a deficit "is not going to be received with great rejoicing in the minds of the American people" and that the need for it will have to be carefully explained.

The businessmen's plan was drawn up by GE's Jones for an earlier session of the Conference Board, a private research group. Many of its elements reflect conservative business thinking. Like the Carter transition staffs program, the Jones plan calls for $15 billion in tax cuts for individuals--but Jones would make them permanent, not temporary. That would tend to limit the size of the Federal Government in the future, by reducing the revenues available to start new social programs. To boost investment in new plant and equipment, the Jones plan also specifies an increase in the investment tax credit, to 13% from the current 10%.

That would reduce taxes on corporate profits by $3 billion a year.

Tax reductions for individuals under the Jones plan would average 19% for taxpayers with incomes below $20,000, but would only average 4% for taxpayers with higher incomes. About 72% of the benefits would flow to workers earning less than $20,000. They and more affluent taxpayers who would get only the 4% cut would receive benefits either through alterations of existing tax brackets or through increasing the personal tax credit from the current $35 to $50.

About 60% of the $5 billion for job-increasing programs under the Jones plan would be spent during the current fiscal year. It would consist of a $1.6 billion urban youth corps program, a $300 million expansion of the Job Corps program, a $2.1 billion increase in public service jobs and a $1 billion subsidy for job training by industry.

Almost Equal. The President-elect has apparently made no firm decisions as to how much stimulus he will favor. Henry Ford II feels there is little chance Carter will go too far. Said he: "The possibility of erring on the overstimulation side is rather slim. We're at a low enough base that the problem of inflation isn't great."

Carter has told his staff to keep fleshing out the options. But if the economic news continues to be as bad as it has been during the past few weeks, there is no question that the Carter transition team's current $20 billion maximum could turn into a minimum, with business and the new Administration asking for almost equal packages.

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