The Tax-Cut Decision

John Kennedy has a way of making decisions privately, then allowing himself to be publicly prodded into doing what he planned all along. The best example was his strategy in ordering a renewal of U.S. nuclear testing: he made up his mind to test after the Russian blasts began, then waited to announce U.S. resumption until almost every segment of the nation was behind his decision. Last week it seemed to many in Washington that he was applying the same strategy to a tax cut. The theory was strong, among his advisers and others, that he has already decided that taxes should be cut to spur the economy, and is only waiting for a prestigous moment.

Frank Language. Whether or not the theory is true. Kennedy had no lack of urging. With U.S. business and labor already on record for a slash. M.I.T. Economist Paul Samuelson, a close Kennedy adviser, wrote a strongly worded article for London's influential Financial Times in which he predicted that the odds are ''at least even that a new downturn will come before the year's end--unless new Government action is taken." His recommendation, duly reported in the U.S.: "A sizable across-the-board reduction in tax rates on persons and corporations." Samuelson was so disturbed by the U.S. economy's state that he even hazarded some political prognostication: that the Democratic sweep he had expected in November does not now seem likely.

If that was frank language, the President heard more of it from a group of 17 top U.S. businessmen whom he had invited to the White House for a lunch that lasted until nearly 4 p.m.*The meeting was cordial, and it helped both Kennedy and the businessmen to understand each other's problems better. Most, but by no means all, of the businessmen favored an immediate tax cut. The businessmen told Kennedy that they liked his new depreciation schedule (see BUSINESS), but took the opportunity to express some complaints right to his face. They asked Kennedy why he had so many Harvard-men around him (Kennedy chuckled), deplored the aggressiveness of the Government's trustbusters, criticized the Administration's penchant for becoming involved in so many collective-bargaining disputes and its habit of making too many public pronouncements about the economy. Kennedy was pleased with the luncheon dialogue, and both he and the businessmen agreed that there ought to be similar get-togethers in the future.

Another Cup of Tea. Next day the President met at the White House with his top economics lieutenants, including Chief Economics Adviser Walter Heller, Treasury Secretary Douglas Dillon, Commerce Secretary Luther Hodges and a half dozen others. Also there in good grace: Paul Samuelson. Heller and his fellow council members had stayed up until 3 a.m. the night before preparing an all-out case for a prompt tax reduction to perk up the economy--and they presented it forcefully to Kennedy.

In plotting any tax-cut tactics, Kennedy would have to find a way to get around some large stumbling blocks. Treasury Secretary Dillon, of course, is against a tax cut because it would imperil next year's tax-reform bill--but as a Cabinet member he would not publicly oppose Kennedy's decision. Virginia's leathery old Harry Byrd, chairman of the Senate Finance Committee, is another cup of tea: he is fiercely opposed to tax cuts without compensating cuts in federal spending, and last week he said: "I'm going to fight them until hell freezes over." But the man who worries Kennedy most of all is Democrat Wilbur Mills, chairman of the House Ways and Means Committee-- the committee that must originate all tax legislation. Mills has let the White House know that he does not want a tax cut now; and Kennedy knows that even if he could persuade Mills not to oppose one actively, Mills would only have to drag his feet to get a tax-cut bill in trouble in Congress.

Trying for a slash and not getting it would not only embarrass the Kennedy Administration, but would likely multiply economic uncertainty. Kennedy cannot afford such an eventuality, and that may well be why he has not acted so far. By seeming to go through an agonizing process of decision, he allows time for pressure to build up until Congress is won over to the idea--and he seems to have a national mandate for doing what he already feels is necessary.

*Among them: Harold Boeschenstein, president of Owens-Corning Fiberglas Corp.; John T. Connor, president of Merck Si Co.; Armand G. Erpf, partner in Carl M. Loeb, Rhoades & Co.; Alfred Hayes, president of the Federal Reserve Bank of New York; Frederick Kappel, chairman of the board of American Telephone & Telegraph Co.; Roy Larsen, chairman of the executive committee of TIME Inc.: Gaylord Freeman Jr., vice chairman of the First National Bank of Chicago; Sidney Weinberg, partner in Goldman, Sachs & Co.; Sigurd S. Larmon, board chairman, Young & Rubicam.

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