Ambushed, Humiliated by GOP : Tax Issue Seen as Key Test of President’s Leadership

President Reagan, caught by surprise when House Republicans ganged up this week against the drive to overhaul the tax code, is now fighting to preserve his political leadership and his ability to deal effectively with Congress in the next three years.

And the way in which the Administration was ambushed and humiliated on tax reform, at a time when it seemed to be flying high after the President’s masterful performance at the Geneva summit meeting with the Soviets, suggests that it may have lost the deft political touch that served it so well in Reagan’s first term.

“It’s a warning to the President that nothing is going to be easy, that he can’t waffle, that his leadership has to be much surer than it has been,” said one White House strategist who spoke on grounds that he not be identified.

To be sure, the tax bill, which the President made the centerpiece of his second-term legislative agenda, is not dead. Frantic efforts to revive it could succeed next week, and even its outright defeat might not dent the President’s popularity with voters because it has never attracted passionate public concern despite the attention Reagan has lavished on it.

“For Reagan, the bad news is he could lose tax reform,” said political consultant Greg Schneiders, an aide to former President Jimmy Carter. “The good news is the public doesn’t care.”

In the all-important arena of winning his way with Congress, however, Reagan appears to have taken a body blow. And other recent events--his on-again, off-again support for the balanced-budget legislation that he signed Thursday, the resignation of national security adviser Robert C. McFarlane and the cashiering of Health and Human Services Secretary Margaret M. Heckler--have added to the perception that Reagan’s first-term express is off the tracks.

White House officials realize that lame-duckism--the impotence of presidents in their second term--is a threat even to one so popular as Reagan. Despite Reagan’s phenomenal election victory a year ago, Republican congressmen have apparently decided that their political futures are not necessarily dictated by loyalty to a President who cannot run again.

“There is nothing as fragile as power in Washington,” said Richard B. Wirthlin, the President’s pollster, who acknowledges that Reagan could pay a price if he fails to muscle a successful House vote for the tax bill.

‘Groundswell of Resentment’

If tax overhaul fails, said House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), the chief author of the House tax bill, “it certainly suggests there is a groundswell of resentment against the White House in the Republican Party. I would say it would be the first of an onslaught of issues that will be brought against him.”

Top White House officials are already preparing for what one calls “significant backlash” in Congress on the new Gramm-Rudman budget-balancing law because it could mean even more Draconian cuts in domestic programs, coupled with a defense spending cut. “The President himself is going to be very unhappy when he sees what he has to do,” an adviser said.

GOP senators say they are determined to cut the federal deficit even if it means slashing defense spending or raising taxes, courses that are anathema to Reagan. House Republicans, as they thumbed their noses at Reagan’s repeated pleas for unity on tax reform, amply demonstrated this week that they are no longer the obedient “Reagan robots” they once were.

In assessing what went wrong on tax overhaul, White House political advisers point to Reagan’s uncharacteristic vacillation on the Democratic version of the bill that was slated for floor action on Wednesday. The bill never made it to the floor because the House voted 223 to 202 to reject the ground rules for debating the bill.

Delayed Backing Bill

When the bill emerged from the Ways and Means Committee before Thanksgiving, Treasury Secretary James A. Baker III urged Reagan to give it his strong endorsement even though it departed from some of the President’s original recommendations. Reagan backed off at the last minute on the advice of his chief of staff, Donald T. Regan.

“That was the moment of truth,” a GOP strategist said. “When the President agrees to sign on, you don’t pull it back a few hours later and give the Republicans an opening. The President waffled for 10 days.”

Regan’s recommendation to withhold Reagan’s endorsement was perhaps the most damaging in a road riddled with mistakes because it gave the Republican opposition a chance to mobilize its embarrassing assault on Reagan’s leadership.

GOP critics charge that the selling of tax reform, from Reagan’s listless speeches around the country last fall to the more recent tactical errors, exposed the weakness of the White House staff under Regan.

Never did that weakness seem clearer than immediately after Wednesday’s negative vote. House Republicans who were summoned to the White House for personal arm-twisting reported that Reagan seemed “perplexed” at the divisions in Congress and did not seem to fully understand the significance of his defeat on the procedural rule vote.

‘A Bum Rap’

White House officials called that “a bum rap.” But the perception was further fueled when Reagan, in an address to a tax-reform coalition group several hours after the vote, indicated that he thought the vote on the tax bill was still ahead.

An aide explained that the President’s text had not been changed to reflect the development, a slip-up that reinforced an impression in Congress that Reagan was not central to the tactical decisions being made in his name. “A lot of them are figuring out the President is not really relevant,” a GOP strategist said, “that it’s the people who are advising him who are calling the shots.”

Treasury Secretary Baker and his deputy, Richard G. Darman, also come in for their share of blame for excluding Republicans and consulting exclusively with Rostenkowski, the Democratic Ways and Means Committee chairman, during the drafting of the committee bill.

“Whenever you rely on the opposition party to carry your water, you run the high risk of alienating your base,” Wirthlin said.

Confusion in GOP Ranks

Republicans who consult with the White House say they are bewildered by the current staff’s inability to convert Reagan’s personal popularity into substantive successes, particularly when Reagan’s approval rating soared in the polls after last month’s Geneva summit.

“They don’t have a strategy for translating that into domestic victories,” one adviser said. “They are fundamentally incapable of taking one high and turning it into additional highs.”

White House officials maintain that the glow of the summit does not easily translate into legislative victories. One said Wednesday’s defeat proved little more than that tax overhaul had made many enemies among those who stood to pay higher taxes.

And Wirthlin, whose polls show six out of 10 Americans strongly support Reagan, said the President’s base is so solid that a loss on a procedural rule is virtually meaningless. “They don’t expect him to win every one,” Wirthlin said. “It would take an extremely dramatic loss before the support for his person or his policies would be altered.”

Schneiders believes that if congressional Republicans and Democrats are emboldened by Reagan’s maladroit performance on tax reform to mount a full-scale rebellion on the budget and defense spending, they would do so “at their peril.”

If there is a move in Congress to raise taxes, Schneiders said “Reagan would look like the 800-pound gorilla again.”

Special Interests Cited

Ever since Reagan unveiled the Treasury Department’s first tax overhaul proposal a year ago, special interest groups have been working to torpedo it. At the same time, Reagan has been unable to generate the necessary grass-roots enthusiasm to put pressure on balky legislators.

“Between the entrenched interests and the lack of general interest, the parts have been infinitely more powerful than the whole,” Schneiders said.

As the extent of the discord with House Republicans became evident, some White House advisers advocated bowing out of the process before Reagan suffered further damage. “They should have pulled the plug on this three weeks ago,” one said.