The Reagan-Regan Flimflam
WEINTRAUB, SIDNEY
PROPHETS OF ALARM The Reagan-Regan Flimfalm By Sidney Weintraub The old circus, replete with pitchmen, is playing in Washington and bamboozlement is the Big Tent feature. The Reagan-Regan Show,...
...Compared to a gnat an elephant is huge indeed...
...The villain remains inflation, which still verges too close to the double-digit torrid zone...
...A most fashionable belated discovery of the Wall Street intelligentsia is that government borrowing to cover deficits collides with monetary policy, and pulls up interest rates...
...But President Reagan, like Britain's Prime Minister Margaret Thatcher, feels that health and strength, and a vibrant economy, are the children of chronic sickness and despair...
...Honest ideological opposition to government spending would be more decorous if it did not invent phony parallels...
...The two are neither parallel nor intimately connected...
...At the projected 1982 outlays of about $710 billion, a comparable deficit would total about $400 billion...
...We could have been on the upgrade again...
...Inflation is a market phenomenon, a happening in the private sector in the prices of the goods we buy...
...Since the tax cut has not yet landed us in the Promised Land, they are designing a gold chariot to get us there, mounted of course on square wheels...
...What does our friend propose for an encore...
...Seldom have so many "reporters" tried so hard to ingratiate themselves to so many insipid lightweight bureaucrats who are overpaid for the harm they do to our nation...
...No private business could keep its accounts this way, mixing and muddling operational outlays with capital expenditures, and ever report a "profit...
...The Reagan-Regan Show, with grim patter by the President and Secretary of the Treasury Donald T. Regan is as wondrous as the illusion of sawing a woman in half...
...All this with budget deficits...
...The Administration reveals an amazing lack of perspective in invoking the bogey of a projected national debt of $ 1 trillion...
...our Wagon Train leader is its herald, bellowing America's retreat from the humane state...
...But the President continues to orchestrate the myth that chopping the government's GNP purchases from 22 to 18 per cent will wring miracles on prices...
...A regulatory abandonment is a one-shot affair...
...goes up-not to mention military hardware, which will certainly scoot skyward-it costs the government more to do exactly the same today that it did yesterday...
...A greater shame attaches to our national press and media generally...
...When it creates enough havoc or loses its glitter the spotlight can always turn to witchcraft or wampum swapping or saw bone surgery or goldsmith banking...
...With practically everyone a billionaire, nobody would care about the mess...
...The assertion immediately stamps its perpetrator as a fiscal neophyte...
...Congressman Jack Kemp of New York, whose football agility has prepared him as admirably as any actor for economic leadership, seems to have been chosen to take the reins in this act...
...Today, in contrast, we are subject to the dark bleats of the Reagan-Regan duo, our Tweedledee and Tweedledum prophets of alarm who are aghast at any governmental action that subverts their trickle-down theories of economic magnanimity...
...Compared to the World Trade Center it is small...
...In voicing what Vice President George Bush once aptly called "voodoo economics," Murray Weidenbaum, chairman of the President's Council of Economic Advisers and a long-time adamant foe of business and environmental regulation, counseled recently: "Don't stand there, undo something...
...The Reagan Ram-pagers are themselves the "authority" for the theory that supply-side tax cuts, tilted toward their pocketbooks, will unleash a burst of plant modernization outlays...
...It can hardly be the size of the budget, therefore, that determines the inflation jolt...
...Government ledgers do not resemble private bookkeeping...
...Such are the absurd dregs on which our inflation dialogue churns...
...Why not...
...A conscious, rational approach without the crying distress would be better...
...Invariably, also, the Reagan Range Riders, with the Treasury Secretary the star offender, misread government expenditures as the "cause" of inflation...
...Nevertheless, over most of the last 52 years the price level has behaved reasonably well by today's abject standards...
...Sidney Weintraub, professor of economics at the t 'Diversity of Pennsylvania, co-edits the Journal of Post Keynsian Economics and is the author, most recently, of Our Stagnation Malaise...
...Casey Stengel would have marveled at this amazing knack for reading things backwards...
...There is a glib, quixotic and too frequent analogy between the government deficit and red ink business losses...
...We not only survived but did quite handsomely in affluence over the 1955-65 period...
...On deficits, interest rates, supply-side economics, and monetary policy cum inflation, distortion rides far and fast on the Reagan White House range...
...Or that cutting $13 billion more out of the $710 billion will extinguish our pains although in a $3 trillion GN P this comes to less than one half of one per cent...
...Inflation represents an ongoing mismatch of money incomes and productivity...
...Suppose we gave him his head and eliminated every regulation he deems noxious...
...Unfortunately, we must be prepared for even more inane answers to our national economic disorders...
...If 1962 prices still prevailed-the President is fond of invoking the '60s for his weird uncorrected numbers-the 1982 projected budget outlays would not be $710 billion but only about $240 billion...
...At the close of World War II the numbers were reversed, with debt at $285 billion and the GNP at $255 billion...
...No sacrifice, the President really avers, is too great for the underprivileged to bear so that others can wear designer clothes and vacation on their California range...
...Some circus...
...Even Micawber was more learned in the ways of the world, recognizing that when outlays were firm income had to rise-meaning taxes in the Reagan case...
...It is on inflation that the Reagan-Regan bamboozlement has reached epic proportions...
...The President, too, should make an honest case for his self-serving theology which evades the evidence...
...The same is true for the pending 1982 deficit, variously estimated from $45 billion-$65 billion, which has Wall Street in chronic dither...
...Yet our elegant Doomsday Communicator, with so vapid a message to impart, uses his prestigious pulpit to preach that the world is flat-and that we must believe him...
...The wisdom of the Street, transmitted by our Treasury sages, is that closing the deficit gap will send interest rates tumbling...
...Yet budget pruning is the "antidote" for inflation being purveyed in our highest political circles...
...It may be recalled that we manifestly survived 1933 and went on into the modern half century...
...They have befuddled the nation with the grotesque babble that the size of the budget and the scope of the inflation predicament coincide...
...1 denounced Jimmy Carter's economic policies as preposterous...
...In 1933 the deficit was 57 per cent of Federal outlays and prices fell...
...Consider the world of bliss: no more taxes, no more speeches by the President on government expenditures, no more acerbic confrontations in Washington...
...If the price zoom is a result of too much demand?and that is definitely not the story in autos, housing, steel-then the President should be urging all of us to buy less and even raising taxes to forestall market demands, instead of extolling his ideological switch from a government to a private fizzless binge...
...they expose their own gullibility and partisan ideology in feeding the bunkum in lead editorials, jejune "analysis," and sonorous readings of TV "news...
...Most of us would be quite willing to adopt a vast number of welfare clients, even though no regulation required us to do so...
...A comparable debt total now would be about $3.5 trillion...
...The Reagan communicants refuse to face this evident fact of life...
...Reductions in government expenditure, besides inevitably creating more unemployment, are a means of replacing Federal spending with private splashing among the upper-bracket Reaganites benefiting from the Administration's tax cut for the opulent...
...Between budget cuts and the Federal Reserve as our guardian angel, and without regulations, inflation would disappear...
...Ending the price gush is the onesure way to drive interest rates from their usurious perch, and permit the Federal Reserve to release its iron foot from the monetary brake so as to foster private sector jobs...
...The idea of debt relativity is, after all, not nearly as complex as Einstein's theory of relativity of the universe...
...The manhole cover the President has drawn over government spending as "hazardous to our health" is made of straw-or of the tobacco subsidies to buy North Carolina Republican Senator Jesse Helms' votes...
...Every time the price of paper clips, desks, etc...
...they are the victim far more than the cause...
...The fatcats, notwithstanding their tax bonanza, must eventually become disenchanted by an American Thatcherism that promotes human misery in the form of income losses, unemployment, inflation, and sick financial markets...
...The moral, even for a President, should be plain: Whether an elephant is big or small depends on the object of comparison...
...While charging that excess government spending bears the onus for inflation, the President's staff might consider escaping the tedium of its busy-work propaganda by studying collectivist economies where, despite government control of every major activity, the price performance generally outshines ours...
...Reagan-Regan do have an unconscious Incomes Policy: dry up sales, drive up interest rates, narrow production volume, and thereby force labor to accept lower pay increases...
...Of course, 1981 saw Federal Reserve monetary policy at work, engaging in its destructive charges while the Regan Treasury team blew hot and cold, lecturing the Federal Reserve Chairman Paul Volcker, in the course of a few months, to both tighten and ease monetary policy...
...Since 1929 the Federal government has had only nine years of budget surplus...
...Government lists all outlays as current expenditures, whether they are for paper clips, typewriter ribbons, glue, or (dwindling) school lunch-es(with catsup as a "vegetable"), or are sums allotted for building construction, highways, tanks, missiles, bombers, battleships, submarines, and other items having a durable life that would be calculated as "investment" by private enterprise...
...Sensitivity, however, should alert the Reagan set not to flaunt their opulence when the President blows his bugle for "sacrifices"?by the undeserving poor...
...It is on such trifles that ponderous editorials are written and that TV pundits misinform millions of citizens...
...Relative to the Gross National Product of $3 trillion-and it will be about $4 trillion when the Reagan term expires in 1984, mainly because of inflation-the sum becomes dwarfed...
...Stern theatrical posturings, ideological ram-blings, nonsense, bamboozlement, flim-flammery are the order of the day-and proof of the Reagan-Regan utter mis-perception of our stagflation malaise...
...All are ancient enough for the Wall Street Journal to declare them innovative ideas...
...We must pray that the quality of military thought is not equally convoluted should matters ever come to a calamitous pass...
...Delusion is purveyed in the center ring as the President rehearses McKinley's moth-eaten script that the Federal budget is at the core of all our woes...
...Then I propose that we instantly abandon all regulationsand simultaneously raise all rates of pay, this very afternoon, a bil-lionfold...
...My credentials are thus impeccable, and nonpartisan, in denoting the Reagan-Regan spectacular as flimflam, where the bland coaxes the barker to court job disasters...
...Money incomes, it should be noted, will increase by the order of $300 billion in the next year, yet the President persists in acting as a tough budgeteer over $ 13 billion in cuts, fooling himself and the people that the future of civilization depends on his ideological axe...
...Typically, media economics elevates the hiccups of official sacred cows to a reverent status...
...Supply-siders, who roped Reagan with the tax cut knots, are now foisting on the hapless President a proposal to restore the gold standard...
...Nonetheless, our Wall Street wizards constantly assail deficits as business losses, to score a quick debating point on the unwary by reasoning from a false premise...
...To be sure, the push-up was inspired by the bold, dauntless leadership of Franklin D. Roosevelt, who radiated confidence and bestowed compassion on the underprivileged at every turn...
...It can be grasped with just a little extra effort by the Reagan Intellectual Irregulars...
...An aspect nary mentioned nor criticized, not by the New York Times and certainly not by the H all Street Journal, is that our Chief Executive in his occasional duty hours in the White House, fussed so much over the budget figures that he lost the full year 1981 to inflation: The issue that got Ronald Reagan elected simply was not confronted, as even he admitted when he declared his program would start with the new budget year that began October 1. His piddling budget trims during 1981 were easily offset by higher interest charges on the national debt...
...prodigious failures that destined him for retirement...
...Government outlays rise as a consequence of inflation...
...The forked-tongue "dialogue" was matched a little earlier when they "explained" how the personal income tax cuts would lead to a flood of savings, without ever pausing to mention that 75 per cent of the savings are in the corporate sector, and that savings follow, rather than precede, decisions to invest in plant and equipment...
...Small wonder at the crisis in confidence...
...But let's assume Weidenbaum has stumbled onto something profound?which I don't remotely believe...
...He even revels in the part of the Great Excommunicator in conning the distressed and disadvantaged that they will be better off without assistance, and that our aid to them is a menace to national security...
...Prices rose by about 2 per cent per annum in the 1950s, by about 1 per cent from 1961-67, and 3-5 per cent over 1968-78-a modest inflation compared to the subsequent eruption...
...Profits and production tidings would be compelling Wall Street to mend its ways had President Reagan named a staff that just dimly comprehended the urgency of: (1) an Incomes Policy, and (2) a creditable monetary policy directed at expanding jobs, not contracting them, in tandem with the incomes restraint...
...Assigning even a modicum of credibility to the wild supply-side claims, and using the most elementary economic analysis, it is clear that the replacement of public by private borrowing will dump us back in the high interest pit...
...The ubiquitous TV "expert" panel shows fill time and serve obtuseness in parading solemnity on the budget as comprehension...
...How insulting to our intelligence...
Vol. 64 • October 1981 • No. 19
