WASHINGTON — President Reagan, seeking to restore confidence in the nation's financial markets, Thursday abandoned his vow never to raise taxes and ordered his top aides to work with Congress in developing a deficit-reduction plan that "keeps spending and taxes as low as possible."
He promised that "I'm putting everything on the table with the exception of Social Security with no other preconditions, and I call on Congress to do the same."
With Democrats and some Republicans in Congress already pressing for a tax increase as a means of reducing the deficit, the President's statement virtually assures passage of at least a modest tax increase in the near future.
Shows Concern for Markets
Reagan, whose earlier low-key response to the plummeting stock markets had been widely criticized, expressed concern about the volatility of the markets during a nationally televised White House press conference, the first he has held since March 19.
"We shouldn't assume the stock market's excess volatility is over," he said. "However, it does appear that the system is working, so while there remains cause for concern, there is also cause for action."
He said he would take the following steps in the wake of Monday's 508-point plunge in the Dow Jones industrial average:
--Meet with bipartisan leaders of Congress to arrange a procedure for deficit-reduction discussions "that will be productive and constructive."
--Appoint Treasury Secretary James A. Baker III, Chief of Staff Howard H. Baker Jr. and Budget Director James C. Miller III to lead the White House negotiating team and call on the Senate and House leades to appoint their representatives so that negotiations can begin immediately.
--Call on members of Congress to abandon pending legislation to protect American markets from foreign products.
--Appoint a three-member task force headed by former Sen. Nicholas Brady (R-N. J.), now chairman of the Dillon Read investment banking firm, to examine the stock market procedures over the next 30 to 60 days and make recommendations for any necessary changes.
"This situation requires that all sides make a contribution to the process if it is to succeed and a package be developed that keeps taxes and spending as low as possible," Reagan declared.
Before the press conference, investment analysts and other financial experts said it was imperative that Reagan make a strong non-partisan statement calling for action to restore confidence in the markets.
An open, non-political statement, said Arthur Levitt, chairman of the American Stock Exchange, "would do more to restore confidence than anything else I know of."
Silent on Details
The President, while emphasizing his willingness to negotiate with the Democratic Congress about the budget deficit, refused to discuss possible tax and spending compromises. Recalling his days as leader of the Screen Actors Guild, the President said: "You don't talk in advance about strategy or what you will or won't do, or there's no point in having negotiations."
Any tax or other source of new revenues "must not be something that has an adverse effect on the economy," the President said. Some taxes, such as the income tax, have a more potent impact on the economy, he said. "I'm going to do what I think is absolutely necessary for the economy of the United States," he insisted. "And I still happen to believe that taxing is . . . what brought on the troubles that we had when I came here."
Senate Democratic Leader Robert C. Byrd Jr. of West Virginia said Thursday night that he was "very encouraged that the President really is going to work with us without any preconditions as to options . . . with that one exception--Social Security."
Talking with reporters at the Senate after Reagan's press conference, Byrd said: "The President indicated to me in that conference that he is flexible and that he sincerely wants to negotiate and achieve a package we can all support."
Byrd said it "took considerable courage and statesmanship (on Reagan's part) in view of the past statements the President has made" about not raising taxes.
Seen as Alternative
Reagan, by agreeing to consider taxes as part of a deficit-reduction package, opened the way to finding an alternative to the $23 billion in automatic spending cuts that would be imposed next month under the newly revised Gramm-Rudman budget law. Cuts of equal depth will be imposed on most domestic and defense programs if Congress does not enact a $23-billion deficit-reduction bill by Nov. 20.
But such a budget package is still not assured. Despite the relatively small tax hike that would be required, Congress and the Administration are likely to find it difficult to agree on specific tax increases that will both satisfy Reagan's convictions and win support among Democrats for a tax hike that will not hit middle- and low-income families too hard.