OVER THE NEXT two months, before it publishes its next budget, the Reagan administration is going to have to make a series of painful choices. The imbroglio over David Stockman has not created those choices, but it certainly sharpens them. In that famous magazine article, Mr. Stockman, who runs the Office of Management and Budget, is quoted as saying that the Reagan economic program hasn't worked. The fundamental cause of the administration's discomfort is not that he said it, but that it's obviously true.
It is disingenuous to argue, as do some of the dwindling band of supply-siders, that their program only went into effect at the beginning of the fiscal year on Oct. 1. The whole idea was that the very announcement of a coming tax cut last winter would set off a gigantic burst of business expansion in anticipation of it. Not so incidentally, most of the business tax cuts are in fact retroactive to last January. But, as you have probably noticed, the present economic situation cannot be described as a boom.
A president can carry Congress with him, as Mr. Reagan did earlier this year, only when he is following a plan that promises to work. If Mr. Reagan stubbornly sticks with the original supply-side theory, and seals it into the 1983 budget next January, Congress will take it as something other than a reasonable regard for consistency. Congress will take it as a refusal to accept realities that are all too visible from the Capitol.
With that, Mr. Reagan would lose all initiative in the budget and economic policy. Perhaps it's happening already. Last week Sen. Slade Gorton of Washington, a Republican member of the Budget Committee, said, "The flag of leadership is passing from the White House to this committee."
To recapture the initiative, Mr. Reagan will have to drop the more mystical, and incredible, aspects of the original program. He will have to base his budget on economic forecasts that people in Congress, and around the country, can accept as reasonable. He will have to lower the revenue forecasts, and raise the deficit forecasts, to levels consistent with present experience. He will have to resolve the basic and damaging inconsistency between his goals for higher growth and for lower inflation next year. He will have to present a coherent strategy for dealing with a recession of unexpected severity.
If Mr. Reagan can't bring himself to construct a budget that the rest of the country considers realistic, actual authority over the budget will rapidly migrate in the general direction that Sen. Gorton suggests. In that case, it wouldn't make much difference who's director of the Office of Management and Budget.