Behind the Headlines Old and New Battles in Congress

Congress is back at work this week after a month-long recess, and the returning legislators will immediately set out to resume some old unresolved battles and to wage a few new ones in a session that is expected to be the stormiest since President Reagan took office.

The issues of special concern to many in the Jewish community are myriad and diverse, ranging from tax reform to arms sales for Arab countries, and from school prayer to an international agreement barring genocide.

But perhaps the greatest source of anticipation in Washington right now is to be found in legislation already adopted at the end of last session. The controversial Gramm-Rudman budget balancing law will force the Administration to reduce the federal deficit in several stages over the next five years, with automatic cuts applied to government programs if Congress fails to meet its mandated targets.

And here, too, many American Jewish organizations are sitting on needles, waiting for some definitive word on how badly domestic social welfare programs will be hurt, as well as what the new law’s impact will be on U.S. aid to Israel.

The Administration announced last week that the law will require a budget-trimming for fiscal year 1986 of $11.7 billion. The cuts, half of which must be taken from the military budget and half from non-military spending, will go into effect automatically on March 1, unless laws are enacted before then that would reduce the deficit by the same amount.

Reagan is expected to present Congress with a budget for 1987 sometime next month that will meet the legislated requirement of cutting $50 billion more out of the nation’s deficit. But if Congress and the White House fail to thrash out a final plan, automatic cuts will go into effect across the board next fall.

FATE OF DOMESTIC SOCIAL PROGRAMS

Of particular concern to many Jewish organizations is the fate of domestic social programs destined to feel the sharp edge of the Gramm-Rudman budget cutting scissors. Jewish groups active in promoting social welfare programs fear that the expected cuts this year will be devastating for many of the nation’s poor, among them elderly Jews.

Jewish Federations are “in jeopardy of losing millions of dollars,” when the cuts take effect, according to Ellen Witman, legislative director at the Washington office of the Council of Jewish Federations.

The Administration has already withheld grants, normally renewed on January 1, for refugee resettlement, money which is used by Federation-funded agencies primarily to resettle Jewish immigrants from the Soviet Union and Eastern Europe, according to Witman. Other Federation-funded programs that can expect to suffer are housing programs, foster care and adoption services, and assistance projects to the elderly.

“A lot of people are really not aware of how much federal, as well as state and local, sources are a part of the network of services that we provide,” Witman observed.

Many Jews already living below or near the poverty line are among those who will be badly hurt by social service cuts in programs administered by Jewish and non-Jewish agencies alike, Marc Pearl, Washington representative of the American Jewish Congress, pointed out. He noted that 16 to 20 percent of American Jews are either currently below the poverty line or would fall below in the event of another recession.

Fears about Gramm-Rudman, however, may prove entirely unwarranted if a current lawsuit challenging its constitutionality is successful. But with or without the new legislation, Congress can be expected to take deficit-reducing measures seriously this session.

ANOTHER SOURCE OF ANXIETY

Another source of anxiety for many Jewish individuals and organizations is the tax reform issue, which will almost certainly be taken up by the Senate Finance Committee early on in the new session.

The House passed a bill to revise the tax code just before winter recess. To the relief of many Jewish organizations it did not include a provision in a similar plan proposed by the Treasury Department that would have prevented non-itemizing taxpayers from deducting any contributions to charitable institutions. The House version would permit the deduction only after the first $100.

A coalition of some 600 Jewish and non-Jewish philanthropic bodies involved in welfare, cultural, educational and religious programs has vigorously opposed the Treasury’s proposal, claiming it would substantially reduce donations to charity.

The Jewish Federations, for example, which raise more than $600 million a year, could lose, according to a study by the coalition, over a sixth of their average annual income.

But the provision is unlikely to be included in the Senate version either, Pearl speculated. There are rumors, however, that the Senate might adopt an alternative option of extending the $100 floor to all tax-filers–those who itemize their deductions and those who do not, according to Witman.

A POSSIBLE VEXING SITUATION

As the April tax filing deadline approaches, Israel Bond holders will almost certainly be relieved of a new tax burden of which most are undoubtedly unaware. A provision of the 1984 Deficit Reduction Act would require lenders to pay tax on the full amount of interest they would get if the loans had been made at prevailing market rates.

If Israel Bonds are not exempted from the 1984 Act, Bond holders would be required to pay tax on more interest than they actually earned, since the Bond’s four percent interest falls well below the current approximate market rate. This could result in a loss of potential Bond purchases, some members of Congress have pointed out.

But the “imputed interest provision” of the 1984 law was aimed against those who make artificially low-interest loans–such as those by parents to children in a lower tax bracket–as a legal means of tax evasion, and was never intended to affect Israel Bonds, these legislators have stressed.

Accordingly, the tax reform bill passed by the House includes a provision correcting retroactively the unintended effect of the 1984 Act on Israel Bonds. The Senate Finance Committee is expected to take up the Bonds legislation as part of a separate bill, in order to prevent it from getting bogged down in wrangling over tax reform, according to a staff member at the Israel Bond Organization office in New York.

ISSUE OF SCHOOL PRAYER

Among other soon-to-be raised issues in the domestic arena is school prayer. The Senate is expected to take up the question of a constitutional amendment allowing silent prayer in schools, sometime at the end of February. Silent prayer has been vigorously opposed by major Jewish groups as encroaching on the barrier between church and state.

Pearl said that although it is difficult to tell at this point where many of the votes will go, it is likely that the proposed amendment can be blocked.

“Who’s for it?” Pearl asked, noting that the staunchest supporters of school prayer would not be satisfied with only silent prayer being permitted in the schools.