Treasury Secretary Donald T. Regan complained yesterday that American business is not supporting the government's economic programs, and he ruled out credit controls as a solution to either high interest rates or the sagging stock market.
In a Midwest journey that included stops in three cities, Regan combined an emphatic defense of what he described as the Reagan administration's unwavering spending and tax policies with a sharp offense aimed both at Wall Street traders and business leaders in general.
He suggested that if the business community only would cooperate, that would bring about reduced interest rates. The Treasury chief also implied that business could lose recently enacted tax breaks. "If the American business community is to justify these tax incentives -- indeed, if it is to retain them -- we need a reawakening of American enterprise" beyond a few isolated instances that have been announced to date, he warned in an Indianapolis speech.
Regan, former chairman of securities industry giant Merrill Lynch & Co., who has been designated by President Reagan as the administration's chief economic spokesman, also called for the removal of many federal laws that have prohibited banks and other financial institutions from competing across state lines and with other types of business, such as stock brokers.
Apparently upset by growing questions about the administration's ability to stay within its proclaimed federal budget deficit limits, Regan stated repeatedly that "all necessary steps" will be taken to make sure that existing policies stick, and he urged his audiences to get on with the job of expanding their businesses.
Far from the canyons of Wall Street, Regan chastised his former financial industry colleagues as "the worry-warts in the bond market" and rejected as "too simplistic" the assessments of many market analysts who have said that fear of higher federal budget deficits is responsible for a steady erosion of stock and bond prices.
Speaking to a luncheon of the Economic Club of Indianapolis, for example, Regan recounted the administration's success in achieving campaign promises for steep budget-cutting and reduced taxes, which were supported by the business community.
"We have carried through on our commitments . . . but where is the business response? Where are the new research and development initiatives? Where are the new plants? Where are the expansion plans? It's like dropping a coin down a well -- all I'm hearing is a hollow clink," Regan complained.
Earlier, at a breakfast session with the Chamber of Commerce in Holland, Mich., the secretary dismissed Wall Street analysts, who he said have been using "old information and old cliches to explain the market decline." The main source of investor uncertainty is not concern about budget deficits but about whether the administration will remain wedded to its monetary, budgetary and tax policies, he asserted.
"This is particularly true when much of the market is unfamiliar with the new knowledge and insights on which that policy is based," Regan added in still another dig at the New York financial community.
Last night in Chicago, Regan also sought to pour cold water on the suggestions of some Republican congressional leaders that credit controls could be considered if something isn't done soon to bring down interest rates.
"Credit controls . . . have never worked and would not work in this instance," he stated. "They are an inefficient substitute for the marketplace . . . the end result is more stop-and-go tinkering with the economy, of the kind which resulted in the high inflation levels at the end of 1980," Regan told the Civic Federation of Chicago.
All of Regan's remarks yesterday were included in prepared texts, made available early yesterday by the Treasury Department. The secretary's comments on financial institution regulations were in line with the administration's free-market approach. Although Regan offered no formal outline of legislative and regulatory changes that will be proposed to change banking laws (most written in the 1930s), he said most of the laws don't make sense.