We are definitely at the beginning of a second chapter in the Reagan presidency. Chapter I ended when Mr. Reagan went off on his August holiday. It had been an exciting, dramatic, and promising beginning. But it was just the beginning. Then came the hiatus of August. Now, to a surprising extent, the feel and temper of the American political scene is something new and different.
During Chapter I there was a sense both of purpose and of direction. Mr. Reagan was obviously serious about wanting to cut taxes, federal spending, and the size of the federal bureaucracy. He proceeded on his predetermined course toward these goals. He swept opposition out of his way. He got his economic program on the road and moving.
There was a splendid decisiveness about it all. The country had grown weary and discouraged by the indecision and apparent vacillation of the Carter administration. there was a craving for strong leadership in a decisive direction. Mr. Reagan seemed to answer that craving.
But while he was on holiday something happened to the momentum. the stock market hesitated, then began slipping backward. The rate of inflation showed signs of rising again, after months of decline. Businessmen complained about the strangling effect of high interest rates on their prospects. Suddenly the stock market started down, sharply. And the dollar, which had been rising steadily on world exchanges, slipped again.
It spelled out doubts about the prospective success of the Reagan economic plan. Could supply-side economics actually work? Back in June and July most Americans were persuaded, whether rationally or not, that it just might. There were hordes of happy converts to Reagan economics. The doubters in Congress were silenced by the very popularity of the idea that taxes could be cut to the benefit of the national well-being.
Was it all too good to be true? No one can be sure of anything except that certainty has given way to rising uncertainty. Everyone seems to be asking questions instead of marching happily along behind the banners of Reaganomics.
This makes for a critical moment in the story of the Reagan administration. When hopes get high, the dawn of doubt is more serious than had the hopes never been so elevated. The United States is still essentially one of the strongest and most prosperous countries in the world. Of the three greatest powers it is the strongest and richest by a wide margin. The Soviet Union trails by a decade or more in almost all measurements of prosperity. China trails both by a half century at least.
But the US still suffers from inflation and economic stagnation. The Reagan plan during the spring seemed to be making strong headway against both. Now momentum has been lost. Progress is slow. The experts predict a sluggish economy through the winter. The change causes surprise and doubt.
For Mr. Reagan the resumption of forward momentum becomes an urgent need. if he cannot regain that lost momentum he is in grave danger of a sharp slump in his prestige and an even more dangerous slump in the credibility of his economics. But how does he regain the lost momentum?
If he could cut another $20 billion to $30 billion from the budget for the upcoming fiscal year, and for each of the following two years, he could probably manage, but the easy cuts have all been made. If you were president where would you cut next? I happen to think that social security payments should be indexed at a slightly lower rate. And I personally think that 62 is too early an age even for "early retirement." But what is going to happen to any politician who would actually come out in favor of such reductions in social security benefits? You and I both know the answer.
And where else can you find big cuts in the federal budget?
There simply is no other place than defense. But the moment Mr. Reagan starts cutting back on defense he is going to have the military-industrial complex down on his back and he will even find himself accused of going soft on communism and Russia.
Chapter II of the Reagan administration is going to be slower and harder going than was Chapter I. And there will be a lot of opposition along the road and a lot more controversy. The easy part of the work is over. The hard part begins -- the part that will test the mettle of the President as he was never tested during the opening chapter.