New Roads for the Unemployed

By Susan Tifft

Support builds for a 5-c- gas tax to create 320,000 jobs

It would take a "palace coup," declared President Reagan at a news conference Sept. 28, to get him to raise taxes, specifically gasoline taxes. As matters turned out, it took only a moderate insurrection. In a curtsy to congressional pressure for legislation to ease unemployment, the President last week endorsed a 5-c--per-gal. increase in the gasoline tax to finance repair of the nation's highways, bridges and urban mass-transit systems and, not incidentally, to create overall an estimated 320,000 jobs. The measure produced an Olympian display of semantic gymnastics at the White House. First of all, argued Reagan, it is not really a tax but a "user's fee." What is more, insisted Reagan to a throng of reporters moments before leaving for a five-day Thanksgiving break at his ranch in Santa Barbara, Calif., "it is not a jobs bill. We'd be doing this if there were no recession at all."

Perhaps. But with the G.O.P. House ranks thinned at the polls in November by 26 seats, some over the issue of rising unemployment, there are growing signs that the Administration is eager to patch more than potholes. Even Senate Majority Leader Howard H. Baker Jr. made it clear to the President soon after the election that he intended to link arms with the Democratic leadership in the House against joblessness, with or without Reagan's support. Some of the Administration's other moves last week may not win any new points on the Hill. A draft proposal to treat unemployment benefits as taxable income, under consideration by an Administration task force, was leaked, perhaps inadvertently, to reporters in Santa Barbara on Thanksgiving Day. Pressed for clarification, White House Spokesman Larry Speakes suggested that the tax's purpose was to make unemployment "less attractive" to the jobless, a comment that ignited a fire storm of outrage from organized labor and congressional Democrats. The next day the President publicly backed away from the notion, said to be the brainchild of Martin S. Feldstein, chairman of Reagan's Council of Economic Advisers. Also under discussion at the White House are such proposals as a subminimum wage for youth and tax credits for employers who hire the chronically jobless. The Administration has no plans to send any of these options to Capitol Hill during the current lameduck session.

As of week's end, however, the Administration was holding firm on one other idea, even though Baker and House Speaker Tip O'Neill have publicly cold-shouldered it. Administration strategists say they may send up legislation to move up the effective date of his third-year 10% tax cut from July 1, 1983, to Jan. 1, 1983. The change would cost the Treasury an estimated $14 billion in forgone revenues over the six-month period. Baker was far from the only G.O.P. power to pooh-pooh the plan. As Senate Finance Committee Chairman Robert Dole drolly commented, "There may be better ways to stimulate the economy."

Despite little enthusiasm in most Washington circles, Reagan is expected to recommend his plan at a meeting with congressional leaders this week. "It's just good politics," explains one White House aide, who sees it as a counterpoint to Reagan's conciliation on the gas tax and as a bargaining tool with Congress.

Reagan aides should have little difficulty assuring passage of the gas tax. In part the product of a 22-month campaign by Secretary of Transportation Drew Lewis to persuade the President to levy a tax that would raise money for repairing the nation's tattered transportation arteries, the proposal received almost instant bipartisan support. The Administration plan, expected to be sent up to Congress this week, envisions a 5-c- levy on refiners, to be passed through to motorists at the pump, that would increase the total federal gas tax to 9-c- per gal. and cost the average driver an additional $30 a year.

The tax is expected to generate revenues of $27.5 billion over the next five years. Of that amount, 20% will be given out in discretionary block grants to states and cities to update and repair urban mass-transit systems. The remaining 80%, earmarked for highways, would be parceled out to Governors based on state population and miles of interstate highway. The program requires states to match 10% of the Federal Government's mass-transit grant and 20% of its highway contribution. Said the President in his regular Saturday radio address: "We simply cannot allow this magnificent system to deteriorate beyond repair."

Not everybody was convinced, however, that the tax would really generate a net gain in jobs. Feldstein predicted the plan would end up siphoning off jobs from energy-related sectors. Some on Capitol Hill complained that the proposal was not aimed at areas hardest hit by high unemployment. Said Wyoming Republican Congressman Dick Cheney: "You can make a case that the roads and bridges need work. But I don't believe that it will add jobs."

Neither do the Democrats, who plan to introduce their own job-creation legislation during the three-week lame-duck session. O'Neill anticipates bringing up a bill to construct more public housing and subsidize mortgages, and a proposal to plump up public repair and maintenance jobs. But given the President's determination to steer clear of conventional remedies for unemployment, even O'Neill's aides refer to the bills as "veto bait."

Neither Reagan's "user's fee" nor O'Neill's foredoomed big-spending plan is likely to do much, however, to reduce the current 10.4% jobless rate. Congressional rumblings to "do something" about unemployment will surely grow, very possibly to a roar, when the more Democratic 98th Congress convenes in January. Last week's moves on the issue may mean that the White House has seen the political future and begun to make its plans accordingly.

--By Susan Tifft. Reported by Douglas Brew and Evan Thomas/Washington

With reporting by Douglas Brew, Evan Thomas/Washington

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