Reagan economics: a collision course?
How long will Americans accept rising military expenditures and falling civilian expenditures? Congress has just voted a whopping increase in defense, possibly the biggest in history. And it had just voted an extraordinary cut in civilian exependitures, around $35 billion, thereby reversing a half century movement in the other direction. Is there a collision ahead for these two developments? I am rather inclined to think there is, unless the economy picks up fairly promptly so that there will be a smaller deficit, a reduced interest rate, diminised inflation, and a big enough national dividend to cushion the burden that Americans shall otherwise carry.
The West German government told Washington last week that it contemplates spending less money on defense. The new budget will technically increase 4.2 percent but if there is 5 or 6 percent inflation there will be a real cut of as much as 1.8 percent. The news is received with misgiving in Washington. Will other allies follow? Chancellor Helmut Schmidt had an amiable meeting with Mr. Reagan at Ottawa but complained about the high American interest rate. Now he attributes the proposed drop in military spending to the rates. They are hampering the economies of nations all over the world, it is agreed.
Few Americans doubt that there is valid justification for higher defense spending. As for West Germany's commitment, it is after all, imposing a military draft and the United States isn't. A majority of Americans seem to feel a kind of euphoria at the slashes in government civilian expenditures. Mr. Reagan made a spectacular appeal to listeners to support his austerity drive and the public responded. Congress had already voted to give the President about 75 percent of what he wanted, and with the final successful Reagan appeal, the victory may have reached 90 percent or more. Everybody asks what happens next?
It is like a pair of scales, one side is going up, the other coming down. On the up side, where costs are being lightened the results are impressive: the public service employment program that once offered 300,000 jobs is killed; medicaid payments to states will drop about a billion a year; social security benefits are trimmed, though less than Mr. Reagan wanted; subsidized housing is cut 40 percent; a couple of million people will feel various cuts in food stamps; child nutrition and school lunches are cut about $1.5 billion; another billion was saved in welfare benefits like Aid to Families with Dependent Children. And so on. There are assorted slashes in federal aid to cities. It's really hard to list what amounts to a couple of hundred programs -- funds for foster care and child adoption, the program for public braodcasting, endowments of the arts and humanities -- they're all reduced. I have an idea that a lot of people who are cheering the retrenchments aren't aware that the $ 35 billion cuts will also hit them.
On the other side of the scales the beam is tipping down for bigger proposed defense expenditures. Overall cost of military outlays in five years will double, from about $159 billion to $336 billion annually by one estimate. Total military cost will exceed a "trillion" (whatever a trillion is). Somebody has figured that this means expenditures of over $38 million per hour in 1986. Of course we may need a draft to handle the array of new lethal devices now in the works.
How will public opinion respond? Nobody can know.I have an idea that unless the economy improves to help carry the military load and to prevent a slump there will be a test of national will ahead. The public, I should think, would want strong signals from the White House, that it is demanding rigorous efficiency from the Pentagon, that it is following a coherent foreign policy, and that, above all, it is doing its level best to get the nuclear arms race under control and reduced. Americans will make any sacrifice if the nation needs it. But the pressure on Mr. Reagan to justify defense costs while cutting social funds may become very seve re in years to come.