House tax bill could dull US competitive edge, Baldrige says. Concerns over US foreign trade and jobs lay behind Reagan's lukewarm endorsement of the plan
US industry will be weakened in international competition if the House Ways and Means tax bill were to become law in its present form, Commerce Secretary Malcolm Baldrige says. Concerns over an erosion in American industry's international competitive position are a major reason for President Reagan's lukewarm endorsement of the House bill. He issued his statement on the measure late Wednesday.
While the administration has major reservations about the House tax bill, Reagan economic policymakers have recommended bold action to the President on two other fronts: revision of the antitrust laws and retaliation against allegedly unfair competition from Japan in the electronics industry.
The House bill would shift more than $120 billion in taxes from consumers to business, making it more difficult for companies to come up with new money to invest in new facilities or equipment, Mr. Baldrige said.
``If we transfer the tax burden from consumption to investment, we will simply lose jobs in the long run. That's the point that bothers me about the present Ways and Means bill,'' he said at a breakfast with reporters on Thursday.
President Reagan said he did not want to risk ``damaging, perhaps irreparably, an entire year's effort to achieve tax reform.''
Arguing that tax reform is imperative, the President called on members of the House to ``act affirmatively on this important matter.''
But the President clearly was endorsing the concept of tax reform, not the House bill. ``This can only be considered a good start, not an end product,'' he said. ``More can and must be done to broaden the tax base, reduce tax rates further, and lower the cost of capital.''
The bill faces an uphill struggle in the House, where neither party seemed pleased with the President's stand.
House Ways and Means Chairman Dan Rostenkowski (D) of Illinois said the statement was ``not as strong as we wanted.''
Rep. Dick Cheney (R) of Wyoming, chairman of the House Republican Policy Committee, said, ``I think we ought to vote `no' on final passage unless it's a bill that encompasses our principles.''
While tax reform remains a major economic initiative for the administration, Reagan Cabinet members also are proposing sweeping changes in antitrust laws.
The proposed revisions in the law were unanimously approved Tuesday at a Cabinet-level meeting. Baldrige said he expected a decision from the Oval Office on the package ``within the next 10 days.''
Current law bans mergers that ``may tend to'' create monopolies. Thus many mergers ``never get out of the chute,'' Baldrige said.
If adopted by Congress, the new plan would make it easier for US companies to merge to meet stiffer international competition, he said.
The new bill would weigh international competitive factors in deciding if a merger were allowable and would cut penalties for some antitrust violations from triple to single damanges.
``If a merger will bring increased efficiency and increased competitiveness, we ought to allow it, obviously assuming it does not bring about the ability to fix prices,'' Baldrige said.
The new bill also would give the President the opportunity to offer certain US companies a five-year exemption from antitrust restrictions on mergers. Companies eligible for the exemption would be those seeking relief from import-related injuries under Section 201 of the US trade law.
Baldrige also said Reagan's strike force on unfair trade recently had recommended that the President charge the Japanese electronics industry with illegally dumping 256k computer-memory chips. The President could impose tariffs on the chips. He said the US might extend these penalties to cover the next generation of the chips, an action he claimed could have a significant impact.