We are at one of those moments when Washington seems to forget history and make it up as events move along.
Myth-making becomes a collective ritual, embraced with equal enathusiasm by politicians and press. Headlines count for everything, footnotes for nothing.
Politics moves in cycles, and the Reagan administration seems to end one and begin another. In the late 1960s, any identifiable problems induced a government program, as if wise rulers could mend every hurt or inconvenience. The Reagan rhetoric runs furiously the other way. Virtually every ill stems from too much government.
All this raises the danger of oversell, disappointment and back-lash -- the cycle repeated. If Reagan's policies of less government don't seem to work, the risk is that the next swing will be back toward tighter controls that have even less chance of working.
There's subtle contradiction here. While pledging less government, Reagan has not retreated from the extravagant promises of the early 1960s -- first undertaken with the "new economics" of the Kennedy administration -- that the government could attain precise economic targets.
As soon as his massive program of tax and spending cuts takes hold, he envisions wonderous results: a quick drop in inflation (to 5 percent by 1985); high growth (4 percent to 5 percent annually, beginning in 1982); and much lower unemployment (6 percent by 1985).
Hitting these targets would be mostly happenstance. If the last 20 years hold any lesson, it's that the economy is more mysterious and less manageable than once supposed. You can push it in what you hope is the right direction, but you cannot expect to control it in any mechanical way without becoming the victim of unforeseen circumstances and your own glowing predictions.
What is at stake is the integrity of government and people's faith in their public officials. It's better to promise less, but that isn't often done. Modern politics is the process of making things seem clearer than they are, so "problems" can be isolated and "solutions" proposed. If only temporarily, the simplifications help create consensus and overcome paralysis.
There's a headlong rush toward mass hype. Journalism is a happy partner in this process, because confusion and complexity have never made a good story. When Reagan draws battle lines, the press applauds; battles are fun to write about.
Typically, a recent front-page story in The Washington Post proclaims that Reagan's "breath-taking" budget cuts constitute a "radical crusade" that herald an "epic political struggle."
Here, for the record, are two simplifications.
The first, from the media: The package of budget cuts does not amount to a "revolutionary" retrenchment in government. When you hear that Medicaid is being trimmed, remember that it didn't exist until the late 1960s; the modest cuts still leave the basic program intact.
And many proposed cutbacks hit programs whose origins or expansion are recent: trade adjustment assistance (created in 1974), public service jobs (expanded enormously after the 1975 recession), synthetic fuels (expanded in the late 1970s). Reagan's leap backward goes to 1975, not 1955.
The second simplification comes from the president: Living standards have not, over any meaningful period, declined, as he indicates. Increases have merely slowed. Sandra Shaber of Chase Econometrics Associates Inc. noted recently that "real" median family income grew 1.4 percent annually between 1970 and 1979; the rate in the 1960s was 3.1 percent.
None of this means that everything happening in Washington is charade. People simply exaggerate. Groups that don't want their programs cut must demonstrate their necessity. The administration must establish the evils of oversized government. And journalists need melodrama.
The genuine contest in Washington these days involves ideas -- about how the economy works -- not interests.
Reagan is operating broadly on the notion of "rational expectations." Most simply put, this idea holds that if government clearly indicates that it intends to reduce money supply growth (which is seen as the fundamental cause of inflation), then people will adjust their wage and price behavior to incorporate expectations of lower inflation. Wage increases and interest rates will diminsh; investment and productivity -- stimulated further by "supply-side" tax cuts -- will rise and living standards will follow.
Dave Stockman, director of the Office of Management and Budget, hopes that the initial Reagan package will produce a profound psychological impact that begins to change expectations. He calls it "shock"; others say "big bang."
The rational expectations theory has much plausible appeal. In retrospect, repeated pumping of the economy over the past 20 years clearly has fed inflation. But the odds are still against any single idea -- rational expectations now, the "new economics" in the early 1960s -- leading to Utopia.
A more pessimistic view sees inflation as highly institutionalized and erratic. Workers with career jobs, not fearing prolonged unemployment, insist that current wages keep pace with past inflation. Businesses simply pass along wage increases in higher prices.
Given the size of the sheltered work force, this behavior may be entirely rational. Half of all work is done at jobs lasting 15 years or more, according to Stanford University economist Robert E. Hall. Price increases beyond government control (notably oil and food) simply did add to inflation's staying power. The trouble is that unless inflation subsides rapidly, squeezed money growth leaves interest rates high and squelches renewed expansion.
Maybe that's the only inflation antidote that works. What kept inflationary episodes short before World War II was widespread insecurity -- fear, by any other name. Geoffrey Moore, perhaps the most serious American student of business cycles, reports that before 1929 the economy spend half its time in recession and the other half in expansion.
The evolution of more active government economic management (paralleled by corporate welfare, such as pensions, job protection and severance pay) aimed at squeezing some of this pervasive insecurity out of the system. Today, according to Moore, expansions last three times longer than slumps. If inflation is today's new insecurity, it has sprung largely from our success in conquering yesterday's.
No nation has fully learned how to beat them both. Japan and Germany (cited favorably ny many administration officials) have applied strict policies but not with complete success. Inflation has not completely vanished; in 1980, it ran about 6 percent in both countries. And compared with the 1960s, both countries have experienced lower economic growth and higher long-term unemployment.
The hunch here is that Reagan will get more of his program from Congress than many in Washington expect but that it will do less for the economy than he hopes. An old formula may yet prove the best predictor: that Democrats favor less unemployment at the risk of more inflation, and Republicans do just the opposite.