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Bush Apparently Stiffens Anti-Tax Stand

Times Staff Writer

The Bush Administration, in projecting Tuesday that future Gramm-Rudman deficit targets are within reach as long as the economy remains healthy, has apparently hardened its position that higher taxes are not needed to achieve a balanced budget by 1993.

The new forecast, as disclosed unofficially a day earlier, indicates that the federal government will escape automatic spending cuts this fall as long as Congress carries out the budget agreement reached with the White House earlier this year.

Smaller Savings Needed

In contrast to earlier claims by several lawmakers in both parties that the government would face an all-but-impossible task of slashing spending by at least $50 billion in fiscal 1991 to achieve that year’s deficit goal, the new White House forecast contends that less than $24 billion in savings may be sufficient to meet the target.

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Some lawmakers have said that White House Budget Director Richard G. Darman has hinted at the possibility that the Administration might accept a tax hike for 1991. But the budget director contended Tuesday that the 1991 Gramm-Rudman deficit target of $64 billion could be reached “on a reasonable basis” without any new taxes.

House Budget Committee Chairman Leon E. Panetta (D-Monterey) disagreed sharply, however, telling Darman during a hearing Tuesday that higher taxes are needed more than ever to solve the nation’s fiscal problems.

Continuing Disagreement

The dispute between Darman and Panetta reflects the continuing disagreement between the White House and Congress over fiscal policy, which could flare up once negotiations over future budget pacts begin.

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Democrats are showing signs of increasing frustration because they believe higher taxes are needed not just to narrow the budget deficit but to allow for more spending on neglected government programs.

But Republicans are showing no signs of wavering from their position that even relatively modest tax increases would undermine the health of the economy and encourage lawmakers to throw the money away rather than cut the deficit.

The critical midyear White House budget estimate for fiscal 1990, starting Oct. 1, is based on a relatively upbeat economic forecast, but one that is much more in line with those by private economists than the Ronald Reagan Administration’s highly optimistic economic assumptions used at the beginning of Bush’s term. The forecast sets the stage for the final act of budget maneuvering, which will take place between now and Congress’ Oct. 1 deadline.

Smaller Growth Expected

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The White House now expects the economy, which has slowed considerably this year in response to a 16-month-long campaign of higher interest rates engineered by the Federal Reserve to help quell inflation, to grow by 2.7% in 1989, compared with an earlier 3.5% prediction.

Administration officials estimate also that interest rates will fall only slightly from current levels, forecasting that short-term rates will average 8% for the year. The initial forecast called for interest rates on 90-day Treasury bills to average 6.7% in 1989.

An unexpected $13-billion jump in federal tax collections and a number of other changes in estimates of both spending and receipts allowed the White House to slash the deficit projection for fiscal 1989, which ends Sept. 30, to $148.3 billion from $164.1 billion.

But the deficit projection for 1990 rose from earlier estimates by about $10 billion. The White House forecast a $105-billion federal deficit, just under the $110-billion ceiling at which the Gramm-Rudman budget law would trigger broad-based cuts in both domestic and defense spending.

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“The Congress is cutting it very, very close,” Darman said. “Clearly, the political system has little margin for slippage or error.”


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