In our last gloom-and-doom installment, Captain Reagan was at the bridge, smiling amiably into the fog, as the ship of state headed straight for the iceberg of a second-term, trillion-dollar deficit.
Since then, the sharp-pencil boys have been in to see the President to tell him that the $50 billion supposedly cut from next year`s budget is a phantom, and that the deficit is now projected to go over $200 billion. Worse, even that figure is based on the expectation of a surge in the rate of growth to 5 percent for the rest of the year. If that turns out to be rosy, which is likely, the real level of red ink will rise above a quarter-trillion.
This recalls a routine by the comedian Red Buttons. He told of a bare dinner table in his youth, with the family dressed in overcoats because they couldn`t afford heat, and the mother dividing the half-loaf of stale bread among a dozen kids, who swept up and ate the crumbs. ”Then,” he said, ”came the Depression!”
If the economic growth rate drops to zero or below in the next year, revenues would plunge, government spending would have to rise and we would be in the soup kitchen without the soup: We would be borrowing at a rate to alarm the sunniest growth-nik.
The President understands that most Republican senators blame him for failing to support them in cutting entitlements. These Republicans, mostly conservatives, do not relish campaigning next year on the slogan ”In the last five years, we`ve doubled the national debt.”
Reagan knows he has been led up the Rose Garden path twice by Tip O`Neill. Three years ago, James Baker told him a deal with Tip had been set:
$3 in spending reductions for every new tax dollar raised. But Reagan was double-crossed; the tax increases went in without the spending cuts.
Last month, he was had again. At the famous meeting under the old oak tree behind the White House, with jets roaring overhead, House Speaker O`Neill said there could be no cost-of-living increase reductions in spending. The President agreed to take that off the table if–if–that reduction could be replaced by some other nondefense reduction.
Tip took the COLA concession and pretended never to have heard the
”if,” making the President appear to be a weak demagogue and hurting his reputation as a cost-cutter among more responsible Republicans.
As a result of these two visits to Tip`s Cleaners, Reagan now must deal with a Treasury hemorrhage. Next month, when the Senate must raise the debt ceiling before federal checks go out, he will be embarrassed on the deficit issue by his own kind.
How does he get out of this bind?
Long range, he will press for a balanced-budget amendment. Liberals dismiss this as rhetorical pap, but all other methods have failed. Reagan, Senate Majority Leader Bob Dole and others will stump Michigan next month to get the 33d state to pass a call for a constitutional convention to mandate budget sanity.
Short range, the President will have to rely on Democrat Dan Rostenkowski, chairman of the once-powerful House Ways and Means Committee.
”Rosty” has been in that seat for five years and no tax bill bears his imprint yet.
Now is Rosty`s chance to seize tax simplification: With Reagan encouragement, he is likely to scrap the capital gains reduction, permit state and local interest deductions but with a cap on the total permitted each taxpayer, and use a relatively painless oil import fee to change the present slight bias toward tax reduction into a bias in the other direction.
The result would be a who-me tax increase without Republican finger-pointing, bound tightly to a no-fault entitlement reduction without Democratic handwringing. That change of fiscal course leads to salvation. The current course takes us smack into the iceberg.
