With this week's overwhelming vote on the tax bill, Congress has put President Reagan's entire economic program in place. It has also put him on the spot.
Reagan promised that his program would lead to faster growth, more jobs, less inflation and lower interest rates.
The only remaining question is whether he was right.
From the start, experts across the political spectrum have questioned the economic basis for the president's plan. In particular they have doubted his forecast that faster economic growth would be combined with falling inflation.
Huge tax cuts to be assured for at least three years were a key element in Reagan's plan. Their distribution -- with more of the benefit boing to the rich, particularly those with incomes over $100,000, and less to the lower and middle income wage earners -- was also an important break with the past.
But many outsiders doubt whether such tax cuts can work the cure Reagan believes in.They believe that to the extent that the tax cuts spur growth, they will also threaten to worsen inflation; and to the extent that they are balanced by spending reductions, their effect on growth will be limited.
On top of this theoretical objection is an even more pressing practical one: Can Reagan achieve his goal of a balanced budget by 1984, and if his policies do not reduce the deficit, will they conflict with the tight money grip of the Federal Reserve Board?
This week's tax bill cuts an enormous $285 billion from Treasury revenues over the next three years, according to the latest official estimates. So far Congress has agreed to cut about $140 billion from spending in the same years, fiscal 1982 to 1984.
This contrast, coupled with fears that the administration's budget numbers will turn out to be too optimistic, makes many observers skeptical about the administration's chances of balancing the budget by 1984. Some congressional budget experts believe that the deficit may not be reduced significantly from this year's $55 billion level.
These numbers strike horror into the hearts of Federal Reserve officials. As one economist remarked, the tax vote puts an enormous burden on the Fed's money policy, already in the front line of the fight against inflation. And high interest rates would be the inevitable result of a clash between an expansionary fiscal and tight money policy.
Of course, the budget cuts so far enacted are nowhere near the final Reagan target. Budget director David Stockman is working on sizable further cuts for 1983 and 1984.
In addition the program changes sealed in the reconciliation conferece this week -- from which the $140 billion figure comes -- account for three quarters of the total cuts Congress has promised to make in 1982 spending, leaving a significant one-quarter still to be made.
The administration has said that on top of these, and its planned Social Security reform, it intends to find further program cuts of $30 billion in 1983 rising to $44 billion in 1984. If Congress swallows these, then spending will be cut by $240 billion over the next three years and the budget will be balanced in 1984, officials say.
But congressional sources put the needed cuts in 1984 still higher by anything between $25 billion and $40 billion. And they wonder whether even Reagan can persuade Congress to ax so much more spending. If it does not, then fiscal policy in 1983 and 1984 will be expansionary.
Chairman of the president's Council of Economic Advisers Murray Weidenbaum is adamant that fiscal and monetary restraint are both necessary to bring down inflation. He stressed to a congressional committee this week that the thrust of the tax and spending changes in 1981 is toward restraint.
On a high-employment basis, which measures the budgetary stance after correcting for unemployment, there has been a swing of $25 billion toward restraint between fiscal 1980 and 1981, according to figures calculated for the CEA. A further squeeze of about $17.5 billion is due next year, if the further budget cuts go through.
These numbers help to explain the present dip in the economy. However, they begin to move the other way in the middle of next year, when the next slice of the tax cuts comes through. Reagan officials predict that by then the economy will be picking up speed.
Many outside economists agree with them. But whereas the Reagan team expects interest rates to fall fairly steadily from now until then, other analysts predict that the tax-spurred growth in 1982 will run headlong into tight money.
The Federal Reserve, strongly backed by the administration, plans a persistent and quite dramatic slowdown in money and credit growth over the coming months and years. So far this year, this policy has kept interest rates at record heights.
Administration officials say that as markets begin to believe in the Fed's determination, and to anticipate lower inflation, then rates will start to fall. The continued lid on money growth will accelerate already evident signs of an improvement in inflation, bringing rates down still more.
But if private demand for credit is rising as tax cuts give business and individuals more money to spend, then interest rates must stay high to ration out the money. And since neither the administration nor the Fed can determine how much of a given money growth goes to pay for higher prices and continued inflation, and how much goes to real growth, the money policy on its own cannot reduce inflation.
The Democratic-led scramble for votes left the tax bill even larger than Reagan wanted originally. It is also loaded down with special provisions, which few believe will help to produce the noninflationary growth forecast by the president.
But since the president has embraced it, the responsibility for success is now squarely on his shoulders.