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Supply-side showdown: high drama on Hill

The drama has just begun. Throughout Washington's vast stone buildings small scenes are taking place that reveal the nature of the struggle to control America's economic future:

* Barbara Bergmann is not going with the flow. The Joint Economic Committee is full of supply-side believers and Dr. Bergmann, an economist from the University of Maryland, is telling them that the economy isn't really in such bad shape, that all we need are a few government job programs to put people back to work.

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A Senate staffer bolts from the room, trailing torn paper work in his wake. "Where did they dig her up?" he asks a colleague as they disapper down the hall. "I didn't think anybody believed that liberal junk anymore."

David A. Stockman ism the flow. When he enters the grand caucus room of the Dirksen Senate Office Building, bystanders come rushing up like courtiers toward a prince regent. They pluck at his coat sleeve. They attempt to make small talk. Mr. Stockman takes the stand and tells them the Carter administration presided over a complete breakdown in fiscal policy. Among other things, he says spending on government entitlement programs will have to be controlled.

A report from Stockman's office has proposed food stamps be one of the first entitlement programs to suffer severe budget cuts. Later in the day, the opposition strikes: "This Stockman is not very realistic," growls Rep. Fred Richmond (D) of New York. The food stamp program is pinned onto the yearly general farm bill, says Congressman Richmond, and Stockman is "talking through his hat, overreacting because he is totally inexperienced in the politics of farm legislation."

* The wide-paneled doors fly open and a sudden hush descends on the crowd. They have gathered to watch the Senate Appropriations Committee hold hearings on the economy, but now, in the middle of Federal Reserve chairman Paul A. Volcker's testimony, a jump-suited motorcycle messenger comes striding into the room.

Is a senator being recalled to confer with powerful colleagues? Is the Federal Reserve chief to be told of some extraordinary financial convulsion?

No. The messenger grabs some video-tapes from a camera crew and disappears, rushing back to the studio so the American public can see Mr. Volcker in action on the 12 o'clock news.

These small events seem unrelated. But taken together they illustrate three basic themes of the political drama here:

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1. Supply-side economics is sweeping Washington off its feet faster than you can say "limousine."

2. Nevertheless, the Reagan administration faces a tough battle to keep its economic proposals from becoming bogged down in congressional politics-as-usual. The battle may become a real test of the American government's ability to govern.

3. Economics is hot news. With the hostages freed and the President inaugurated, the media's attention is drifting toward what probably will be the central political issue here in the immediate future.

The first public act of this play has been a series of hearings aimed at informing Congress on the state of the economy. The Joint Economic Committee, the Senate Committee on the Budget, and the Senate Appropriations Committee have listened to such luminaries as Volcker, Alan Greenspan, and the administration's economic team. The budget committee even played hooky from Vice-President George Bush's ceremonial opening of the Senate, so it could hear former Fed chairman arthur F. Burns.

Some observers had felt that the choice of businessman Donald T. Regan as Treasury secretary, coupled with moderate Alan Greenspan's unofficial advisory role, might mean that President Reagan was planning to tone down his economic campaign rhetoric.

But the hearings revealed the administration is sticking to its supply-side theories. Tax cuts to stimulate business production are the first priority of supply-side economists; at separate times both Treasury Secretary Regan and budget chief Stockman emphasized that bold, deep tax cuts would be the administration's first priority. While government spending reductions also were a necessity, they said, the tax cuts were too important to be held up by congressional haggling over whose program would receive less money.

"This tax program cannot wait until budgets are reduced," said Secretary Regan.

Fed chairman Volcker, on the other hand, believes you can't have one without a guarantee of the other. A large man, Volcker let his voice boom across the hearing room as he took issue with Treasury Secretary Regan.

"Substantial tax reductions must not run ahead of budget cuts," he said.

But administration officials rejected "mechanically coupling" the reductions, repeating their belief such a package might stall in Congress, denying any aid to an economy in need of quick assistance.

Richmond's claim that Stockman was "politically inexperienced" seemed to back up the administration's fears.

"I envision no congressional resistance to reducing waste," the congressman was reported as saying, "but there will be strong resistance to any [reduction in] the food stamp program."

The drama's second act will begin with the President's State of the Union address the week of Feb. 16, when he will unveil the outlines of his economic program.

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