When President Reagan and Treasury Secretary Donald T. Regan present themselves at the seven-nation economic summit at Ottawa 10 days hence, they will carry an optimistic forecast, but with undercurrents of unusual uncertainty -- politically, financially, and economically.
Major US banks continue to raise their prime interest rate. Some have already boosted them up to 20.5 percent, one percentage point under the highest in history -- and others may follow soon. If the administration has clearly licked inflation, as some spokesmen have claimed, the cost of borrowing money should come down.
But US producer prices just rose another 0.6 percent in June, equal to an annual rate of 7.2 percent. Secretary Regan, looking over the economic battle scene with reporters at breakfast here, expressed disappointments at this, but said he hoped for lower rates later this year. higher Us interest rates send quivers through world financial channels and will be a major subject of criticism at Ottawa.
The administration has another problem. It is trying to hurry Congress. This is one of the most difficult tasks Washington knows. In this case it's complicated by the administration's desire to pass them in time for the Internal Revenue Service to act on them this fall. Congress has just returned from a 10 -day Independence Day holiday and wants another month's holiday starting Aug. 1. Mr. Reagan is beginning to fume. Is this second vacation necessary, he asked pointedly in his recent speech at Chicago.
Speaker Thomas P. O'Neill Jr. of Massachusetts and House Ways and Means Committee chairman Dan rostenkowski (D) of Illinois see the schedule something like this: clear the tax bill through the committee in a fortnight, then get House and Senate action by Aug. 1.
Possible? Yes, but unlikely. "This is the largest tax bill in the history of the world!" protests Speaker O'Neill. But President Reagan hints that Americans will get no tax break this year if Congress doesn't do its work by Aug. 1. It takes the Internal Revenue Service six weeks to print and distribute new tax-withholding tables. To take effect Oct. 1, the IRS wants the final bill in hand by Aug. 15.
Meanwhile, Secretary Regan told reporters here that he unequivocally opposes a specialized tax relief bill for the hard-pressed savings and loan associations. S&Ls have mounted a $4 million advertizing blitz in support of what's called the "all savers" bill. The bill itself, and the extraordinary drive for it, fit into an unusual time.
Savings and loan associations are the instruments which normally help people finance their homes, but near-unprecedented high interest rates have pushed construction into a recession.
The S&Ls asked permission to issue their own savings certificates ("all savers bonds") that would be partially tax exempt, in competition with tax-exempt municipal and state certificates. The blitz for the program was mounted with stunning speed. Half the members of the Senate, and over 100 of the 435 House members had signed their names in a few weeks to the S&L bill as co-sponsors. By one estimate the partial tax-exemption privilege would cost the treasury $5.4 billion. If enacted, it would be one of the gaudiest presents hung on what has sometimes been called the "tax Christmas tree."
"We don't like this bill. there are better ways of doing it," Mr. Regan declared. "It does not hit its target. We are all looking for alternatives."
Speaking of the Ottawa summit, July 19-21, Mr. Regan defended US economic policies. European economies are depressed and politicians blame high US interest rates. This is unfair, argues Mr. Regan. Charges that cutting taxes will deepen the US deficit are made by nations that themselves have big deficits , he says.