WASHINGTON — Democratic congressional leaders blamed Wall Street's historic decline Monday on Reagan Administration policies they charge are encouraging high interest rates and large budget deficits while blocking efforts to raise taxes.
Unless the Administration agrees to negotiate with Congress over immediate deficit reductions and proposals for new revenues, they said, the market's profound tailspin--and other economic instabilities around the world--are likely to continue unchecked.
"These (policies) have been a major cause for the decline . . . especially the Administration's failure to honestly address the problems that everyone knows are out there," said Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee.
Although he said the market's slide was triggered by the sharp jump in the prime interest rate last week, Bentsen charged that it was also fueled by the nation's "persistent trade deficit and budget deficit. Anyone who says otherwise is out of touch with reality."
Last week, the Commerce Department reported that the August trade deficit was $15.7 billion, a higher level than many analysts had expected. Administration officials said the nation's budget deficit would be $157 billion in the fiscal year that ended Sept. 30, or $64 billion less than the record $222.1 billion figure reached in fiscal 1986.
Republicans, responding to the initial news of Wall Street's decline, blamed Democrats for aggravating the market's concerns. On Sunday, for example, U.S. Treasury Secretary James A. Baker III charged that the Wall Street collapse was caused by "panic" over Democratic-sponsored tax increase bills passed last week by House and Senate committees.
Baker, appearing on NBC-TV's "Meet the Press," said: "I think that the writing of these tax packages had a major effect in what's happened to the stock market over the course of the past three or four days."
Monday, House Speaker Jim Wright (D-Tex.), setting the tone for Democratic congressional leaders, denounced Baker's remarks as "balderdash . . . utterly ridiculous," saying the Administration's economic policies were to blame.
Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, termed Baker's comments "absurd," saying that they "can only increase the market's concerns about the prospects for a budget compromise."
Rostenkowski, whose panel voted 23 to 13 along party lines last week for a legislative package including $12.3 billion in new taxes, added that "Wall Street is just not going to believe such a self-serving and inaccurate claim."
Senate Majority Leader Robert C. Byrd (D-W.Va.) charged that the White House had been avoiding a "day of reckoning" on budget and trade deficits, in the belief that it could postpone difficult economic decisions until the next presidential Administration. Now, he added, the President must "put policies ahead of politics (and) begin working with the Congress to reduce these deficits."
Democrats added that the jarring news of Wall Street's collapse might finally bring about an "economic summit" between Congress and the White House over budgetary policies.