Ronald Regan is knocking 'em dead down here over the economic issue. The former California governor is smooth -- a polished and agressive speaker and uncompromisingly conservative.
His message, by any standard, is disarmingly simple: The economy is in the shape it's in almost entirely because of the federal government.
"Very simply," the 69-year-old GOP front-runner tells a fund-raising crowd here, "what all of us have to realize is, government causes inflation and government can make it go away." (Sustained applause.)
Very simply, he asserts, discussing the energy problem: "Here again, just like inflation, it is government that is responsible . . . The answer . . . is to get the government out of the energy indsutry." (More applause.)
Very simply, Reagan says, "The American people today are overtaxed, overregulated and over governed." (Still more applause.)
The audience, for now, is Southern, mostly Republican, middle to upper middle class, and virtually all white. But, as shown in the Wisconsin primary, the theme likely would draw cheering from many Northern Democrats as well.
When Reagan ran for President in 1976, many Democrats -- and some Republicans as well -- seemed almost to fear his economic and energy proposals, often viewing them as Draconian and out of step with mainstream thinking in America.
The Californian was conspicuously alone then in proposing the transfer of $90 billion in federal social programs back to the states, a 23 percent tax cut and a sharp rise in defense spending. It even made some conservatives nervous.
But today, the electorate's mood has shifted enough -- and Reagan himself has tempered his statements enough -- that, in the eyes of many voters, his stark conservative rhetoric now seems downright upright.
The former actor's call for sharp cuts in domestic programs, for a steep boost in military outlays and for new tax incentives for business investment all have been endorsed, to some degree, by leaders of both parties.
Even President Carter has jumped on the bandwagon.
Moreover, Reagan, in person, isn't nearly the fearsome ideologue that some of his detractors paint him. Although the governor has some strong conservative views, he doesn't come across as a zealot. If anything, he's a Mr. Nice Guy.
But for the new respectability that Reagan's economic proposals are receiving this year, the governor still has serious problems in coping with the economic issue on several fronts.
Although Reagan still can wow his audiences with hard-hitting speeches blaming government for all the economie's ills, he's unable -- or unwilling -- under questioning, to provide specifics for any of his key proposals.
He steadfastly refuses to say how much he would trim spending, which social programs he'd cut, or how much he would boost defense. The latter decision "should be made for you by your possible opponent (the USSR)," he asserts.
While some of his stances -- such as the $90 billion spending-cut proposal -- have been tempered, there still are some glaring inconsistencies in what Reagan is proposing.
For example, the string of tax cuts the governor is advocating would add up to $46.3 billion in fiscal 1981 and a massive $293.3 billion a year by fiscal 1985 -- more than enough to erase the projected $158.6 billion surplus.
With that kind of red-ink figure, a Reagan administration would have to slice spending by $134.7 billion or more just to bring the budget back into balance -- almost 10 times the cuts President Carter now is proposing.
Reagan's response is simply to shrug that he's phase in his tax cuts "piecemeal" as the budget permitted. But few analysts -- even those backing these same proposals -- believe the budget could stand them all anytime soon.
The candidate is still undecided between two sharply conflicting -- and seemingly irreconcilable -- sets of advisers and schools of conservative economic thought, with no indications that he'll try to resolve the split very soon.
Reagan recently has begun to seek advice from more traditional, mainstream economists such as Alan Greenspan, former President Ford's economic advisor and Nixon-era Treasury secretary George P. Schultz.
But he swears allegiance to the so-called "supply state" school promoted by Rep. Jack Kemp (R-N.Y.) and Southern California economist Arthur Laffer -- a neopopulist theory that still hasn't been accepted by most economists.
Many of Reagan's assertions, although usually sound-enough-seeming outwardly, are regarded even by conservative economists as overly simplistic, often overstating or distorting the facts.
For example, Reagan blames the current inflation surge entirely on government spending, despite the obviious push from rising oil prices, soaring home mortgage interest rates and excessive demand for credit.
"OPEC oil cannot be blamed as the villian in this," the governor tells interviewers. "The government itself is to blame."
When asked how much spending would be cut, Reagan sidesteps his questioner by citing "estimates" of governmental fraud totaling $50 billion. Then would he trim $50 billion? "If there's that much fat," he answers blithely.
Such vagaries may seem surprising, because, to anyone listening to his speeches, there's little question -- at least in broad terms -- where Ronald Reagan stands on the major economic issues.
The Reagan economic prescription now is virtually the same as it was in 1976.
GOVERNMENT: Shrink the size of the government by cutting back on social programs and freezing federal job levels, and keep it small by limiting taxes to a specific percentage of the gross national product.
SPENDING: Slash domestic spending levels, but boost defense outlays sharply.
TAXES: Reagan is backing GOP-endorsed Roth-Kemp tax-cut plan, which would provide a 30 percent across- the-board income tax cut over [TEXT OMITTED] would spur investment.
He is advocating a spate of other tax-cut proposals:
Indexing federal income-tax rates, adjusting them automatically for inflation.
Faster depreciation for business, specifically the now-pending "10-5-3" bill, which would scrap the present complex writeoff system and allow firms to depreciate buildings in 10 years, machinery in five and vehicles in three.
Repealing the estate and gift tax.
Enacting a tuition tax credit.
Exempting savings account interest from taxation, as a device to encourage more savings.
The California governor would not attempt to roll back scheduled Social Security tax increases.
ENERGY: Reagan would lift remainging oil-price controls immediately, rather than gradually , as Carter is doing, would repeal Carter's new windfall profits tax and oil-import fee, and eliminate the Energy Department. w
WAGES AND PRICES: Reagan opposes mandatory controls and the current restraints on credit, and would abolish the current voluntary program. He laments that interest rates are high, but says they reflect inflation.
FARM POLICIES: Reagan also favors the free-market farm policies followed in the early 1970s by Nixon administration Secretary of Agriculture Earl F. Butz, but would phase subsidies out slowly to avoid leaving farmers in a lurch.
MISCELLANEOUS: In one of his more controversial proposals, the governor would repeal the minimum wage, or at least provide a lower minimum wage for teen-agers, and would abolish or reduce federal regulations affecting business.
The former California governor also had added a new wrinkle to his economic program this year: He's considering endorsing a return to the gold standard, which the U.S. left initially in 1934 and abandoned permanently in 1973.
As a package, the Californian's proposals aren't all that frightening, at least in today's context. For one thing, backers point out, at least he has a definite economic framework. Carter often is criticized for not having any. a
For another, except for his views on the minimum wage and on returning to the gold standard, Reagan's stand on individual issues is pretty much in line with standard conservative Republican rhetoric.
Rather, the criticism comes in three areas:
First, in the Californian's unqualified endorsement of the controversial Roth-Kemp tax-cut and spending-cut proposal, which many economists believes goes too far and would fuel inflation.
Second, Reagan seems either unwilling or unable to provide specifics on his most basic proposals and to explain seeming inconsistencies in his plans -- leading some skeptics to charge he hasn't the depth needed for the job.
Third, in part because of his choice of campaign advisors, there is serious concern, even among some Republicans, about the caliber of appointments he might make for key economic policymaker's posts.
Perhaps the most difficult to deal with directly is the Roth-Kemp tax-cut proposal, which is controversial enough in its own right, and considered excessive in some forms even by Republicans.
Essentially, the measure would cut individual income tax rates 30 percent across the board over three years. A companion version also would cut spending by the same amount, in dollar terms.
The difference in the two Roth-Kemp versions is crucial: Although analysts say the plan could work if the tax reductions were offset by equivalent outlay cuts, they almost unanimously warn the other version would spur inflation.
For his part, however, Reagan says in principle he'd endorse some spending cuts to go along with any tax reductions, but insists he isn't yet convinced the spending cuts must equal the tax cuts to avoid intensifying inflation.
"I don't know that that's necessary," he said in an interview earlier this month. "My idea of . . . cutting is the same as it is in California: That you cut spending simply because it's unnecessary or extravagant."
Reagan also refuses to accept the notion -- conceded even by Roth Kemp's sponsors -- that the measure initially wwould bring a higher deficit.
Instead, he insists, the package would yield no net first-year loss -- and even a "possible" surplus.
The Californian also is conspicuously vague on his overall budget policies:
Reagan assets that spending, genrally, must be cut sharply, but dodges any effort to pin him down on how much.
Asked for a ballpark estimate, he launches immediately into a prepared litany contending he's "heard" there is as much as $50 billion in "petty fraud" in government today.
Would a President Reagan then cut $50 billion?
"If there's that much fat."
Well, what do you think is a realistic figure?
"I don't know -- I don't think you can say that."
The governor also is vague on increasing the defense budget. Reagan appears uncompromising in asserting that defense outlays ought to go up, but, again, he dodges any effort to set parameters.
"That I can't answer," Reagan said in an interview recently. ". . . I've always believed that defense is something in which you do not make the determination -- it's made for you by your possible opponent."
But if Reagan were president, it would be he, not the Soviets, who would have to submit the defense budget. What would it be -- $5 billion more? Or $20 billion? His answer, in essence: He'd need more information before deciding.
The Californian also is reluctant to provide specifics on his now-famous back-to-the-states program-transfer plan.
In 1976, Reagan advocated "returning" a spate of major social programs to the states, on grounds that they were better-equipped to handle them. His aides provided a list of 22 separate programs involving $81.9 billion in spending.
Reagan still is calling for a transfer, but this year he's more circumspect.
There's no overall price-tag, and he won't name all the programs he'd like to shift -- only welfare, aid to education and Medicaid.
Reagan's positions on farm subsidies also can be confusing.
In a Witchita, Kans., speech last month, the Californian got caught in a snit after he tried to dodge the issue of farm parity -- by asserting he didn't understand it -- and later conceded he just didn't want to take a stand.
In a campaign-plane interview earlier this month, Reagan clarified that point, saying he would achieve "more parity" only "through the marketplace," and wants to eliminate farm subsidies and set-aside programs.
At the same time, however, he almost immediately backed away from that stand, warning: "Now, that . . . may not be an instant thing. You can't suddenly pull the rug out from . . . the milk program.
Similar questions surround Reagan's massive tax-cut proposal package:
Accodring to government estimates, Kemp-Roth alone would cost $32 billion the first full year after its enactment, with the drain on federal revenues rising to $175 billion a year by fiscal 1985.
The same estimates show the 10-5-3 proposal he's backing, to provide for faster business depreciation writeoffs, would cost $47 billion a year by fiscal 1985. Repealing estate and gift taxes would cost $8 billion by then.
Adding in $40 billion from eliminating Carter's oil-import fee and newly enacted crude-oil tax, $22 billion from exempting interest on savings accounts and $1 billion for a tuition tax credit , the 1985 tab is $293 billion.
Reagan shrugs off any eyebrow-raising over his costly list by noting that "these are all things that you do as you can do, and approach, and maybe do by peicemeal." But the tax-cut program is still expensive by any measure.
Reagan's flirtation with a return to the gold standard also troubles many economist. Most say it would be almost impossible to make that shift without going back to fixed exchange rates -- a dubious, and expensive proposition.
Such vagueness -- and a seeming inability to explain his proposals -- has concerned even the governor's backers during the past few months, and resulted in a series of changes that the Californian is, in a word, shallow.
Although almost all sides concede that Reagan is a smooth, effective campaigner on the stump, critics complain the governor can't seem to go much beyond that. His answers tend to sound much like a playback of the same tape.
Also contributing to this image is the long string of well-documented errors contained in the candidate's rhetoric over the past few months -- much of which he continues to use even after the mistakes are pointed out.
For their part, Regan's advisers see no harm in his failure to provide details. "A lot of those questions are on issues that you can't possibly decide until you're actually in a position to plan them out," one says.
"There's also the fact that we have a very uncertain economic aide. We might have a dramatically different situation by fall. We'll be getting more specific as the campaign goes on."
Staffers also concede some difficulty with Reagan's tendency to pick up bits and pieces of information from various sources and then incorporate them into his speeches without first checking on their accuracy.
The candidate has been made painfully aware of this problem in newspaper articles and television reports recently.
Reagan sometimes sidesteps questions on specifics of his economic proposals by saying he would need more information on the problems involved and would most likely appoint a commission to study them.
Nevertheless, it may come as a surprise to some critics that Reagan's record as governor was a good one -- at least in the eyes of many knowledgeabel observers.
Although he fell short of achieving some of his budget-paring and buraucracy-cutback goals, Reagan successfully bailed the state out of a fiscal mess and engineered an overhaul of the welfare system now widely copied. f
Perhaps the most unnerving question about Reagan even to many Republicans is the issue of who will be his key economic policymakers -- an uncertainty that only has been heightened by the latest flap over his economic advisers.
Although Reagan has relied on Martin Anderson, a respected conservative economist, to be his principal issues man, he's also repeatedly professed allegience to the "supply-side" group headed by Kemp and Laffer.
To economists, the difference involves more than mere personalities. The supply-siders claim hugh benefits for massive tax-cutting schemes that traditionalists say would be inflationary. The others say cut spending first. t
But Reagan still appears reluctant to choose between the two. Asked about the schism in an interview last week, Reagan asserted he believed in "supply-side economics" and in cutting taxes before trimming spending.
At the same time, however, he also indicated he still is convinced he can live with both sides, imcompatible as they may seem. As governor, he said, "we encouraged debate. . . .When I heard enough debate from both sides that I felt that I could make a decision, I made the decision."
To Reagan, the pocketbook issue clearly is the most important -- and potentially most effective -- of the campaign. Carter took office "with two minor crises -- inflation and energy," he says. "Today, they are . . . . major disasters."
Although Reagan himself favors cutting spending, as Carter has, he calls the president's new anti-inflation plan "a dishonest plan" because it would balance the budget "by raising taxes."
He also is skeptical of the president's new budget-balancing stance. "I worry about how much of what we're seeing is an election-year conversion."
Ironically, Anderson, for one, believes the major problem Reagan will face if he's nominated will be not how to sell conservative policies but how to differentiate himself -- in voters' minds -- from President Carter.
Reagan aides say with this factor in mind, their candidate probably will become more specific about details of his proposals as the campaign progresses. b