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Tip's last hurrah

HOW Tip O'Neill plays out his last hurrah as House Speaker will have a lot to do with the success of American economic legislation and the recovery of the Democratic Party.

In the popular view, when the Massachusetts congressman concludes his career two years hence, as he has announced he will, he will be remembered as the Capitol Hill foil to the White House's Ronald Reagan. It was an irony of the last election that it left this leadership duo intact. Both are comfortable figures for many Americans; while their policy differences have been sharp and their rhetoric bluntly partisan, they have kept the debate amicable.

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Mr. O'Neill has some fundamental strategy decisions to make. He could seek to thwart the administration again in the House of Representatives, which the Democrats still nominally control. He remembers the defections of the boll weevil Democrats which gave Mr. Reagan his early first-term victories; to ensure no repeat of that, he could conceivably even undermine the budget process to keep it from being used against him. Will he develop an alternative Democratic budget and tax program? That hasn't been the O'Neill style; usually he has kept his distance from the legislative policy process. If the Democrats do develop an alternative plan, the eventual Reagan program, crafted in concert with Senate Republicans, is likely to prevail. The GOP so far has seized the initiative: It will likely fall to moderates within the President's own party, with backup from the House Democrats, who will forge the compromises on revenue and spending that can be expected next year.

Tip O'Neill has a broad view of the political process. He began his career in Massachusetts state politics then under the control of Republicans. He is familiar with the national pattern of Democratic gains in midterm elections when the economy falters, and Republican gains in presidential years when the economy builds a head of steam. The next two years, in legislative terms, are really Phase 3 of the Reagan era. Phase 1, the early success, saw budget slowdowns, particularly in social welfare spending, a defense buildup, and tax cuts. Phase 2, the first revision, saw compromise with the Democrats in enacting tax increases. Phase 3 will aim for long-range budget reform and tax revision, especially affecting the middle class and linked to deficit reduction. But it is still the Reagan era. In all of this the Democrats have been reactive, helping to define the politically possible, but unable to direct the main flow of events.

Mr. O'Neill is handling his exit from congressional life gracefully. In announcing his retirement early, he enables his potential successors to maneuver openly. The likely successor is majority whip Jim Wright of Texas. The risk is the potential for fragmenting Democratic ranks. But the gain is that capable Democrats, such as members of the post-Watergate classes that brought in California's Norman Mineta and Tony Coelho, Colorado's Tim Wirth, and Missouri's Richard Gephardt, will feel freer to show their stuff. Many loyal Democrats, their own careers secure, have felt restless and helpless as their party suffered its devastating 1980 and 1984 defeats. By announcing his exit, he sidesteps that dissatisfaction and permits a more positive focus to surface.

Economic conditions will likely again be the main player in the 1986 contests. The major Democratic task is to convince Americans that it is the party best able to make government respond to changing economic conditions. Judging by his past performance - on divisive issues like immigration law reform as well as budget and tax matters - Americans can expect Mr. O'Neill to let the tough issues come up for direct votes in the House.

Mr. O'Neill's handling of his own succession shows he understands that he must let history proceed: New leaders in his own party and economic policy adjustments must be allowed to emerge.

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