Kennedy, Carter spar on economy

President Carter and his chief Democratic challenger urge voters to support very different solutions to the economic problems of the United States. The thrust of Sen. Edward M. Kennedy's approach is to blanket the economy with controls, including gasoline rationing and a clampdown on prices to protect lower-income Americans.

He would swell outlays for social programs, paying for them partly by closing tax loopholes for the rich and by boosting taxes on major US oil firms.

Defense spending also could be cut, according to the senator, despite Soviet-American tensions which have caused a groundswell of congressional support for higher military outlays.

Most of this is anathema to Mr. Carter and his White House economic aides, who claim Senator Kennedy's program -- while it bears a surface gloss of equity -- in the long run would worsen the nation's runaway inflation.

Controls of the Kennedy stamp, according to Carter economists, might reduce inflation slightly in the short run, but would bottle up pressures that would burst forth in higher prices when controls were lifted.

Gasoline rationing, which Senator Kennedy advocates, also is ruled out by the White House, except for an emergency shortage of gas in the magnitude of 20 percent.

Rationing by whatever method, White House aides argue, would inject a vast new layer of bureaucracy into the economy and, in the long run, would leave the well-to-do free to get as much gasoline as they could afford.

These Carter-Kennedy divisions center on short-term solutions to the nation's inflation and energy problems. More deep-seated may be the differing long-term approaches of both men.

The President, zealous to balance the federal budget and to reduce the weight of government spending on the economy, would hold most social programs at current levels and may be forced to cut some.

Mr. Carter's proposed budget for fiscal 1981 is $52 billion larger than the estimated $564 billion worth of spending in the current 1980 budget.

"Of that $52 billion," says budget director James T. McIntyre Jr., "$37 billion is due to uncontrollables and most of the rest is in defense."

Uncontrollables, comprising roughly 70 percent of the total budget, are payments mandated by existing law -- social security and other benefit payments, interest on the national debt, and certain welfare outlays.

"You can see," says Mr. McIntyre, "how difficult it is to get federal spending down, based on the above."

Despite its stringency, Mr. Carter's 1981 budget carries a $15.8 billion deficit. Now the President reportedly is striving to erase that shortfall and balance the budget, through additional cuts.

These, according to White House aides, would have to come at least in part from existing social programs, plus postponement or scaling down of new initiatives.

Beyond this, Mr. Carter and his advisers say they believe strongly in generous tax credits to business, to stimulate investment and improve productivity.

Senator Kennedy would boost federal spending for a variety of social programs , including public-service jobs, youth employment, child nutrition, and housing aid.

To garner tax revenue for such outlays, the senator would, among other things , repeal tax breaks for the oil industry, notably the oil-depletion allowance and so-called intangible drilling cost deductions.