When the White House and Congress resume the budget summit after Labor Day, they will be under pressure to shift gears and use their negotiations to produce a strategy for fighting recession.
That could mean tax cuts, instead of tax hikes. It almost certainly will mean smaller spending cuts than expected-especially in the Pentagon budget, in light of the Mideast crisis.
”The world that existed at the beginning of the budget summit is over,” explains Rep. Newt Gingrich (R-Ga.), the House GOP whip. He points out that the economy clearly is weaker than it was when the summit began in May and the United States now faces ”a very serious” situation in the Middle East.
Gingrich wants the summit to approve a package of tax cuts, including a lower tax on capital gains and ”a very large” tax deduction for workers who have children to help offset the ever-rising Social Security payroll tax.
Sen. Daniel Moynihan (D-N.Y.) is hoping the summit will deal directly with the payroll tax by adopting his plan to roll back this year`s rate hike. The Moynihan plan faces formidable opposition. Gingrich is proposing the increase in the dependency deduction as a way of achieving Moynihan`s goal, tax relief for workers, without stirring up a hornet`s nest on Social Security.