Rhetorically, the economic programs surfaced last week by President Carter and Gov. Reagan stand far apart. In reality, they come close together. While both are far from silly, neither is apt to advance the country decisively toward a solution of basic economic difficulties.
The fundamental trouble arises from a kind of arthritis at critical joints in the economy. Several basic industries -- autos, steel, rubber, chemicals -- have become unresponsive to changing conditions. They have lost their competitive edge in this country and abroad.
A main reason is collusion between management and labor. Those supposed adversaries actually come together in accords that regularly raise wages far above commensurate increases in productive efficiency. The public is made to pay in the form of higher prices. The result is a vicious cycle of economic decline in which inflation mounts, recessions recur and unemployment rises.
Inflation mounts rapidly to higher and higher levels during every period of brisk business. Thus in 1974 the Consumer Price Index reached 12 percent and finally settled at 6 percent. This year, it jumped to 18 percent, and seems likely to settle at 9 percent.
With each inflationary peak, more and more customers stop buying American goods. Recessions follow and the subsequent recoveries tend to end with higher rates of unemployment. Thus the recovery from the 1971 recession ended with the jobless rate at around 4 percent. The recovery from the 1975 recession ended this year with unemployment at 5.7 percent.
The rhetorical Republican answer to the problem is "supply-side" economics. The theory is that genuine shortages -- especially of energy -- stimulate inflationary surges. The arthritic industries transmit the inflation to the whole economy. The shortages can be relieved by productive investment. But to stimulate productive investment, money must be moved steadily from government into the hands of business and the more affluent private citizens. So Gov. Reagan favors a 30 percent tax reduction over the next three years.
The real Republican program, however, does not follow the rhetoric. It calls for a tax cut of about $30 billion next year. Roughly two-thirds of the money would go to private consumers. Only a third would go to business.
That is almost exactly the ratio of the tax cuts enacted in 1964 and 1975 as anti-recession packages. In both cases, there followed recovery and an inflationary surge. There is no reason to believe it would be different this time.
The real Democratic program, as announced by the president at the White House last Thursday, is quite similar. It centers around a tax cut of $27 billion in 1981. About half would go to business and half to private consumers. Individual beneficiaries, however, would be poorer people most likely to consume. So it is not clear there would be a big shift to investment and away from an inflationary surge.
The Democratic rhetoric by contrast stresses "industrial revitalization." Federal funds would be targeted to troubled industries -- notably autos and seel; to down-and-out communities, especially in the industrial Midwest; and to low-income families deficient in working skills.
The president has also established an Economic Revitalization Board, chaired by Irving Shapiro of DuPont and Lane Kirkland of the AFL-CIO, to work out more cooperative relations among labor, business and government. As a first step, Carter asked the board to "develop specific recommendations for an industrial development authority . . . to mobilize both public and private resources . . . to help revitalize American industry."
That sounds like the reindustrialization program some of us have been pushing. But a top union leader and a captain of the chemical industry, however admirable as men, do not exactly commend themselves as the best doctors for an arthritis their colleagues brought about.
Moreover, the president talks of "recommendations," not commitments. He was won over to the Board only last Sunday at a meeting in the Oval Office with Kirkland. His record -- balanced budget in January, austerity program in March, and now a recovery program -- is the essence of stop-go economics.
On balance, the Democratic rhetoric sounds better politically than the Republican rhetoric. For both programs give away early in 1981 the tax bait that can alone ensure in future years restraint on wages and prices.