U.S.A.

Mending the battered budget

May 17 1982
U.S.A.

Mending the battered budget

May 17 1982

Mending the battered budget

A year ago, when Washington and much of the nation was mesmerized by Ronald Reagan’s appeal, the White House’s political game plan was pure and simple. Only the president’s economic program mattered. Everything else was subordinate; anything liable to distract attention was deferred. The tactic was brilliantly successful. But the same cannot be said of the results of Reaganomics. To many, the president’s economic vision now resembles a mirage. Unemployment surged last month to a 40-year high. Bankruptcy is rampant. Neither the money markets nor the business community seems moved by the administration’s hang-tough optimism that happy days are almost here again.

The new Reagan strategy is the obverse of its predecessor. Now, those issues that the president last year was too preoccupied to address are suddenly flourishing in the Rose Garden: school prayer, tuition tax credits, voting rights, disarmament talks, foreign aid and school busing. When in trouble change-the-subject is an old and often reliable political manoeuvre, and it may even serve the president in publicopinion polls.

But the diversions are not likely to change the basic subject of American political discourse: the 1983 budget and its $182-billion deficit. The president has blamed this ailment on 40 years of economic mismanagement: his own policies, he insists, will soon deliver the cure. Democrats claim the deficits result inevitably from Reagan’s threeyear 25-per-cent tax cut.

Whatever the cause, the swollen federal debt has become an incubus haunting the U.S. economy. Without congres-

sional action to bring down deficits and—it is devoutly hoped—interest rates, the malaise will likely continue. But with the collapse 10 days ago of the White House’s bipartisan debt-cutting exercise, the 1983 budget debate has become Washington’s hottest political football; and the battle will be fought in the congressional election campaign.

Reagan’s opening gambit was a quick, high-profile embrace of a Senate budget committee proposal to bring the 1983 deficit down to a tolerable $106.1 billion. Designed by Senator Pete Domenici (R-N.M.), the plan would raise $95 billion in taxes over the next three years, freeze discretionary spending levels, curb the vast entitlement programs, barely touch military allocations and slice some $40 billion from projected social-security expenditures. These figures, however, are round and loose; the specific cuts and tax hikes are unclear.

Washington’s guess is that the Domenici-Reagan plan can prevail in the Republican Senate but that it will face stiff opposition in the Democrat-controlled House of Representatives. Almost certainly the president will revert to his now-familiar technique: inviting potential allies into the Oval Office for little ceremonies of gentle persuasion. One possible augury: a statement by Texan Phil Gramm, leader of the conservative Democrats, that there was nothing in the Domenici budget plan that he could not accept.

In the argot much-favored by the Reagan administration, the ball is now squarely in House Speaker Tip O’Neill’s court. At 69, the speaker is not as agile as he once was. He is reported, however, to have a wicked backhand.

-MICHAEL POSNER in Washington.