Nation: Trying to Build Confidence

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Urban Development's first try at a departmental budget and ordered a redraft that knocked out expensive new spending programs. Moreover, Carter pledged that he would try to reduce the role of Government spending in what is now a $2 trillion economy* from about 22% of gross national product next fiscal year to 21% by the time his first term ends in 1981. That is a goal that the most crustily conservative Republican businessman could wholeheartedly endorse, if he happened to believe that the President meant it.

>An anti-inflation program focusing on what sounds like the mildest kind of presidential jawboning. The White House will attempt to knock half a percentage point off the inflation rate (6.5% to 6.8% in 1977, by various measurements) by urging union leaders and corporate executives to hold wage and price boosts below the average for the past two years. To that end, Administration officials will try to convene informal panels of labor and corporate bosses to work out wage-price goals for specific industries, bearing in mind that some will need bigger increases than others. Said Carter firmly, and to much applause, in his State of the Union address: "I do not believe in wage or price controls." In fact, there will be no enforcement provisions, not even numerical guidelines. Says Reginald Jones, chairman of General Electric: "One of the facets of this package most attractive to all of us is that it involves nothing more than discussion."

The program makes some bows to liberal ideology. It gives the most generous income tax reductions to people with taxable incomes of less than $15,000 a year, on the theory that they need help most and will spend every cent that Uncle Sam lets go of, rather than put their tax savings in the bank. Carter also proposes a modest innovation: $400 million this year to companies that hire hard-to-employ workers (details to come in March). The reasoning is that an expanding economy does not automatically reduce unemployment among the groups most plagued by joblessness; employers who need more help turn first to the most experienced workers, and these generally turn out to be adult white males, whose unemployment rate already is low.

Some special inducement is needed to prompt companies to hire blacks, women and youths.

On the whole, though, the President's policy gives the economy only gentle stimulus. In total, the tax cuts Carter proposes will not do much more than cancel the effect of tax increases already legislated, and for a sizable slice of the population they will not even do that for long. The principal reason is that Social Security taxes are rising this year, and will jump much more sharply in 1979 and later years under a law that Congress passed in December at Carter's behest.

Blumenthal estimates that almost 91% of all taxpayers will get a net reduction this year (correcting a figure of 96% that the President tossed out in his State of the Union speech). But in 1979, the Treasury Secretary figures, fewer than 83% of all taxpayers, those earning about $20,000 a year or less, will enjoy a net saving; those earning more will find Social Security increases outweighing the income tax cuts. Two examples: in 1979 a typical family of four earning $15,000 a year would pay $258 less income tax, shell out $42 more to Social Security, and save a net of $216. A family earning $25,000,