Why Ronald Reagan remains calm in the eye of the storm. Optimism keeps him from facing flaws in his economic policies
The eyes of the world turned toward Washington over the last week, hoping to see radical action aimed at cutting the American trade and budget deficits. There was action, but it was deliberate, not radical. It was tentative and preliminary. And it pointed toward minimum, not maximum response to the hopes of the watchers. The worst week ever on the securities markets of the world had shaken Washington, but only to the point of thinking and talking about a cut of about $25 billion in the budget deficit.
Most of the watchers were probably hoping for double or triple that amount of deficit cutting.
The reason the response fell short of the hopes is inherent in the long-established thinking patterns of President Reagan and his administration.
Mr. Reagan took office seven years ago preaching and believing that tax cutting would cure all America's economic ills and usher in the golden days of a new prosperity. And for six years it seemed to work marvelously. Never had so many made so much money so quickly. America teemed with new ``billionaires'' who thought nothing of buying million dollar ``condos'' and country palaces and the most expensive yachts since the days of J.P. Morgan (``If you have to ask, you can't afford it'').
Tax cutting was the centerpiece of the Reagan administration. The boom on the stock market was a glittering manifestation, and the evidence of the soundness, of Reagan economics.
It is not easy for a government to recognize that its proudest achievement is falling apart.
Mr. Reagan's first reaction (on ``Black Monday,'' Oct. 19) was that ``there is nothing wrong with the economy.'' By Wednesday Oct. 22, he recognized the stock market had made ``a long overdue correction,'' but by Oct. 27 he had been alerted only to ``potential dangers on the economic horizon.''
What to him seemed only a potential danger off on a distant horizon seemed to many a banker and businessman to be a hurricane rattling the windows and threatening to blow in the doors.
Radical action would mean acceptance of an economic crisis. There was no recognition of crisis at the White House during the week while markets strove without success to find the new bottom under security prices. The most Mr. Reagan could bring himself to agree to do was to send a White House team to Capitol Hill to talk things over with the budget and appropriations people from Senate and House.
They all met together on Tuesday over on the Senate side. They talked about working schedules. They agreed to have someone keep score on various proposals. They promised to put partisanship aside and reach for ways and means of trimming the deficits.
But it will be weeks, perhaps months, until anything concrete emerges from these meetings - unless, of course, the values of securities on the world's exchanges drop even farther and there begin to be signs of economic recession. Some day, events may force Mr. Reagan to recognize that there is a genuine economic ``crisis.'' So far, there is no evidence of such recognition.
A corollary to the above is that the Reagan administration is not accustomed to thinking in crisis terms.
Ronald Reagan is the complete optimist. He took office believing that he had the solution to the nation's ills. He applied his solution, by cutting taxes. For five years, everything seemed to be going his way. He liberated Grenada, bombed Muammar Qaddafi into reticence, and watched his friends making millions dispensing influence from their Washington offices or making new fortunes on Wall Street.
But now things are no longer going his way. A year ago, on Oct. 5, a plane was shot down in Nicaragua. There was a single survivor. Mr. Reagan said that man had been flying guns to the contra rebels, an act which, if carried out with any official connection to the US government, would be in defiance of a congressional ban on such things. Then, on Nov. 3, the news broke of the secret ``deal'' to sell arms to Iran in return for hostages.
From then on, the Reagan administration has been involved in one disappointment after another. The nomination of Judge Robert Bork misfired. The contras were a disappointment in Nicaragua. Then came the collapse on the stock markets of the world, beginning on Oct. 16. It hit a political organization untrained in damage control and retreat.
Anyone who expected radical measures from Washington this week was expecting the impossible. The Reagan political machine was built to run a revolutionary movement in American politics. All revolutions are aggressive, not defensive. They are accustomed to drive forward, not dig into the trenches.
Before Ronald Reagan can agree to radical remedies for economic problems, he will first have to admit that his own economic program was flawed. That will not be tomorrow, nor will it come easily.