Reagan's troubled revolution
It is the thesis of "The Reagan Revolution," by columnits Rowland Evans and Robert Novak, that President Reagan is a "radical" by any reasonable definition but that he does not percieve himself to be one. He recalls the comfortable days of Calvin Coolidge and Andrew Mellon when the budget was balanced, the poor looked to community help, and the Pentagon wasn't built. Mr. Reagan recognizes that we must adapt to the modern world. But surely government centralization has gone too far, he says, surely it is time to limit New Deal growth and extension of the federal government into our lives.
"Indeed, the Reagan Revolution was in some ways even more remarkable than the New Deal," declare the authors "in that Roosevelt faced a stricken land nearing financial collapse and yearning for radical change, while in 1981 the American people, though troubled, did not see themselves as perched on the brink of disaster as Reagan did.
"Reagan was convinced it was indeed 'the last chance for America' -- the last chance to revive its leadership in the world, the last chance to halt pervasive growth of government, the last chance to revive the free market."
This sympathetic rush job on the Reagan administration by conservative Washington veterans went to press about last June. Budget director David Stockman had by then completed his brilliant analysis of federal expenditures, and the administration's four-fold plan was making its breathless way through Congress; cuts in the budget, cuts in taxes (under the Kemp-Roth supply side formula intended to raise more money by sparing the upper brackets), increased defense spending, and reduced regulation.
"Why do you think your tax rate reduction will revive the economy?" the authors asked the President in an exclusive interview for the book, March 23.
"'Cause it always has," Mr. Reagan replied firmly. "It did when Kennedy did it. It did in the time of Coolidge. Andrew Mellon has written about the tax cuts and they worked." Mr. Reagan reminisced about his own experience in Hollywood: rather than enter the "excessively high tax bracket after World War II," he said, by accepting contracts, "I just turned 'em down. I wasn't going to go to work for 6 cents on the dollar."
In the 1924 book Mr. Reagan refers to, Andrew Mellon sounds like Reagan tax theoreticians Judge Wanniski and Arthur Laffer: "The history ot taxation shows that taxes which are inherently excessive are not paid," he says. Mellon acknowledges that no one knows the golden mean of tax rates, but the multimillionaire secretary of the treasury observes that "it is estimated that by cutting the surtaxes in half, the government, when the full effect of the reduction is felt, will receive more revenue from the owners of large incomes at the lower rates of tax than it would have received at the higher rates."
So Mellon cut tax rates, the economy boomed, the stock market soared, and the unfortunate Hoover had a devastating crash on his hands. The Laffer Curve people today don't usually mention the 1929 crash and the depression. Nor do the advocates of sharp tax cuts who cite the success of such reductions in the Kennedy-Johnson administration of 1964 cite the important point that in the middle '60s inflation was at a low level. This year Mr. Reagan has proposed the biggest single tax reduction ever requested by a president. He does so as inflation is high, though receding. He wants a big increase in military expenditure, but this now is in process of modification.
Congress set up a policeman over inflation, the Federal Reserve Board, whose duty is to tighten money and credit if the situation threatens to get out of hand. That is just what is threatened now, and the Fed has pushed down the brakes to impose horrendous interest rates, rising to 20 percent. Business shrieks protests. It remains to be seen whether Mr. Reagan will continue to support Paul Volcker, chairman of the Fed, or blame him for present difficulties.
That's the problem of producing a book on Washington: things are always changing. The Evans-Novak study is good up to last June: Reagan really is a radical, I think; his extraordinary program of decentralization amounts to a revolution. But it's more complicated than he thought. Maybe the Pentagon should wait a bit. Other problems arise. Wall Street is anxious. The public is confused. The revolution is in trouble.