Editorials
MR. REAGAN CHANGES THE SUBJECT ON JANUARY 20, President Reagan celebrated the end of his first year in office by attending a $ 10,0O0-a-table Republican dinner-dance."The days of sensational ,...
...That it is stubborn doctrine, not facts, which guides the president was revealed in the casual way he bungled the latter at the press conference held a week before the State of the Union address...
...b) the military...
...To reduce the deficit: Cancel the third year of the Reagan tax cut...
...But Mr...
...Voodoo economics" George Bush called it, and very aptly too because Rea-ganomics, like voodoo, was supposed to work through the psychology of those at whom the magic was aimed...
...Investment has, in fact, been going up while productivity has been going down...
...It is one year since Ronald Reagan took office and fifty since Franklin Delano Roosevelt did...
...It is the laid-off auto and steel workers, the working poor losing their supplementary welfare benefits, the victims of the crimes that inevitably follow from prolonged and deep youth unemployment, the several million citizens given just one more push toward despair by the loss of food stamps, the inhabitants of cities coping with crumbling public facilities - these are the Americans on whom Mr...
...Unemployment is hitting new highs, almost nine percent...
...Drop the B-l, the MX, the supercarriers, and a number of other questionable military projects...
...Thatcher's United Kingdom as well, with striking results...
...To encourage savings: Eliminate the tax deducibility for at least some forms of consumer and mortgage interests...
...despite the current maligning of the New Deal, by Reagan among others, a recent poll shows that Americans have a far higher opinion of FDR than they do of Ronald Reagan...
...If his opponents would manifest as much outspokenness, they would be heard...
...Instead of a Trojan horse, this time he dragged out a red herring - the "new federalism" scheme which, whatever its merits (and they appear to be few), will not solve the basic problems of the economy...
...The bottom line of the president's message was, as before, that there is no alternative...
...The days of sensational , quick victories are mostly behind us," the president told his supporters...
...Develop an industrial policy, using government to support crucial research and development, to guide investment toward areas of greater productivity, and to facilitate the transformation of declining industries...
...Our basic objection to the Reagan economic policies is that they are unfair...
...Reagan is bestowing the grit of the long haul, not the well-heeled company assembled that evening in the Washington Hilton...
...Schedule tax increases for 1984 when indexing against bracket creep goes into effect...
...It is doubly wrong when the chosen path, even allowing for the disarray in economic theory, does not itself appear very plausible...
...The president delivered his message in the usual masterly style, although slipping into two moments of venom - one when he conjured up exploded myths of widespread fraud among food-stamp recipients, the other when he referred to investigations of Medicaid fraud without mentioning that the perpetrators were doctors and clinics and not Medicaid users, who were even more victimized than the taxpayers...
...Productivity rose a bit and has recently taken another sharp dip...
...the usual...
...Given the uncertainty prevailing in economic thought these days, it is harder to say with quite the same assurance that they won't work...
...But that very uncertainty militates against a program that takes from the poor and gives to the rich, that tosses out social welfare to make room for military spending...
...With interest rates at current levels, investing in government bonds is more attractive than adding to already idle plant capacity...
...As long as there are equally plausible paths to economic recovery, it is wrong to choose one that presents the bill for economic transformation to the poor and those barely getting by...
...The only winners one could identify in the president's message were (a) those collecting interest on government borrowing, now the fastest growing portion of the federal budget...
...capital allocation is as important as capital formation...
...The losers will be...
...Put a new tax on imported oil, as John Anderson and others (including us) proposed long ago, and which the president can do without congressional approval...
...Manufacturers are operating at 73 percent of capacity, down from 80 percent a year ago and 86 percent in 1979...
...To increase productivity: Investment alone will not solve America's productivity problems...
...We hope Mr...
...President Reagan's response to all this in his State of the Union message was, first, to blame it on Jimmy Carter and "the inheritance of decades...
...The towering national debt that supposedly necessitated all those sacrifices by poorer Americans is now scheduled to shoot a few more miles into the stratosphere...
...Put a windfall profits tax on domestic natural gas, which will profit, under decontrol, from the monopoly power of OPEC in the energy field...
...Reagan at least has the courage of his convictions...
...Watching Reagan perform, Charles Peters, editor of the Washington Monthly, was moved to write, "He is a pleasant, lazy, superficial man whose policies have produced a recession that could very easily and very quickly turn into something much worse...
...Braced by both immediate and promised tax breaks, spending cuts, and deregulation, business would bet on a cheery future by increasing investment, productivity, and jobs now - quickly producing, among other things, the revenues necessary to pay for a huge boost in military expenditures (and thereby offsetting the inflationary pressures of the Pentagon budget...
...Invest in the society's human resources through education and programs to train skilled workers...
...So far, the promise of well over $100 billion in corporate tax breaks between now and 1986, plus parallel reductions in higher-bracket personal income taxes, has produced no additional capital spending by business...
...This is untrue...
...Consider various subsidies for savings or uses of a value-added tax that have been proposed here and abroad in order to promote savings across the entire income spectrum...
...Reagan's friends can survive the loss of glamour, but we rather doubt that "the grit of the long haul" is going to burden them too heavily...
...Then he changed the subject...
...And they have every reason to...
...Now we move from the glamour of initial commitment to the grit of the long haul...
...To reduce unemployment and inflation: Reverse the shocking and self-defeating deterioration of public facilities by genuinely "supply-side" investments in public works...
...Develop a sensible price-and-incomes policy, possibly employing temporary controls plus a system of tax incentives for settlements linked to productivity gains...
...There are plenty of alternatives to be explored - once the country escapes from the anti-government ideological strait-jacket that seems to bind the United States alone among industrial nations (or rather the U.S...
...and Mrs...
...and (c) corporations which will be able to take advantage of the welfare disparities between states resulting from the "new federalism...
Vol. 109 • February 1982 • No. 3
