ON THE SURFACE, these appear to be days for Democratic rejoicing.
The Reagan economic program, at least for the moment, is not working. The tax bill has produced none of the claimed massive increase in corporate capital investment. Instead, after accounting for inflation, the rate of investment has been negative. Worse, while only token individual rate cuts have reached the average taxpayer, the major beneficiaries of the tax cut, corporations, appear to be using this money not to rebuild the nation but to buy each other, to acquire their own undervalued stock, or to buy and sell their own tax breaks. All this has rekindled the flame of distrust in corporate America.
On the budget side, the cuts have been so swift, deep and lacking in concern for consequences that even conservative Republican senators and governors are calling for a halt. Instead, a rediscovered interest in the tax system to counter deficits approaching $200 billion by 1984 has emerged not only among Democrats but within the GOP.
If this were not enough, the Reagan administration is sending out contradictory signals on gut Republican questions, the most sensitive of which has been the importance of federal deficits. These conflicting messages have prompted a gleeful Sen. Daniel Patrick Moynihan (D-N.Y.) to warn his Republican colleagues that such differing portrayals of reality has been shown to cause catatonia in white rats.
Despite these developments, however, there are forces suggesting that a rebirth of the Democratic Party agenda is not at hand. These forces are present in addition to the outside possibility of a major economic revival and a consequent firm entrenchment of the GOP.
Start on the extremes with the familiar Democratic division between conservative Southerners who, in the main, have lost their ties to populism, and urban liberals representing largely poor districts in Northern cities from San Francisco to Boston.
Then go to the deeper and continuing split between Democratic constituents dependent on Great Society programs -- food stamps, Medicaid, broadened welfare benefits -- and those blue collar workers who were drawn in (or whose parents were drawn in) to the fold during the New Deal. This is the conflict that is repeatedly encapsulated in the story about the steelworker and his wife who wait with mounting anger in the supermarket checkout line as a woman -- in most recountings, black -- pays for six bags of groceries with food stamps.
The depth of this conflict cannot be underestimated -- and Democrats have shown no talent for resolving it. They evidently prefer to participate passively in a new economic debate whose terms have largely been defined by Republicans.
The Republican Party, in contrast, has for the moment found a set of policies benefiting its own basic constituencies. Put aside for now the question of whether the Reagan tax bill is the legitimate expression of a new concept for reviving the economy or simply an extreme recycling of trickle-down policies disguised by the phrase "supply side." The measure unquestionably has benefited the core of the Republican Party.
The wealthy have seen the top rate on unearned income drop from 70 to 50 percent and the capital gains rate fall from 28 to 20 percent. The savings incentives (IRAs and All-Savers certificates) are far more favorable to those in upper brackets because they are deductions from income (a $2,000 deduction means $1,000 to a person in the 50 percent bracket and $400 to someone in a 20 percent bracket) rather than tax credits.
The same is true of the whole subnetwork of less publicized breaks in the Reagan bill, including incentive stock options, the $75,000 exemption on foreign income and the effective elimination of the estate tax so that it will apply only to the top 0.3 percent of estates, which in turn will pay lower rates.
Similarly, the business community received a tax cut which, in some cases, will not only mean the elimination of all federal taxation of income from new investments, but an actual negative income tax allowing corporations to shield income from past investments.
While the tax benefits flowing to lower- middle-class Democrats who defected to the GOP are negligible -- and are likely to be eaten up by inflation, bracket creep and Social Security levies -- the demand of many in this group for a cutback in social welfare spending has been met. Proposed additional cuts for 1983 and 1984, moreover, would further meet this pressure for reductions in benefits for the poor.
In calculating political strategies, the long- range question is whether wavering Democrats -- who generally fall into households earning $15,000 to $35,000 a year -- will continue to identify "welfare" as the key source of economic deterioration. The possible alternative is a return to placing more blame on corporations that escape taxation and on the lessened share the wealthy contribute to the operation of the government.
The potential for this kind of political shift is reflected in the fact that the group that considers the tax system to be most unfair is union workers. The outcome of this delicate balance between anger at welfare and anger at inequitable taxation is perhaps the key to the politics of the current decade. In this context, the second key factor becomes the ability of the extraordinarily well financed Republican Party to maintain control over the terms of the public debate.
While continued failure of the economy would be a major blow to the GOP drive for majority status, the power to define the political agenda cannot be underestimated. It is, for example, quite possible that the GOP will make no real headway in November, even lose seats in the House and Senate, but still have the power to determine the way Congress approaches the economic issues.
This power obviously has been present during the past session of the 97th Congress, but it was also the case in the 1978-1980 period under a Democratic president and Democratic control of both branches of Congress. From this vantage point there are three factors that have stood out, and all continue to be overwhelmingly favorable to the Republican Party.
The first, and simplest, is money. In 1981 alone, the Republican National Committtee, the Republican Senatorial Committee and the Republican Congressional Committee raised a total of about $73.6 million. Their Democratic counterparts, despite a revived fund-raising effort, gathered a total of only $9.9 million.
GOP fund-raising has reached a level of sophistication where the party not only can provide seed money to House and Senate candidates but also perform much broader functions. In addition to its own resources, the GOP has gained considerable leverage over the money flowing from corporate and trade association political action committees -- cash that is even more important than party funds to congressional candidates. The knowledge of this party leverage, which works to maintain party discipline, was one of the unstated bases for the exceptional party-line voting by Republicans in the budget and tax fights last year.
Perhaps more significant, however, is the Republican realization that the money it has raised can be used for TV promotion of GOP ideology and legislative positions, separate from specific candidates and elections. The party has already started using commercials to advocate the virtues of the GOP and the weaknesses of the Democrats (the most memorable of which was the caricature of Tip O'Neill running out of gas), and it has tentatively explored the use of commercials to promote specific measures before Congress, including the Reagan tax and budget bills.
The second factor has been the politicization of American corporations. The growth and expanded financing of corporate and trade association PACs -- $6.7 million from 450 committees in 1976 to p$67.7 million from 1,885 committees in 1980 -- has become a cliche of political reporting. This in good measure testifies to the fact that the corporation is an almost ideal fund-raising vehicle.
The chief executive officers define the giving of contributions as formal policy for all management level employes -- while maintaining the appearance of voluntarism. The money can be collected through payroll deduction. Distribution of the funds is done by individuals whose function is to advance the corporation's political and legislative interests (except in the cases of PACs that receive primarily "earmarked" money, specifically designated for a candidate by the individual donor).
These same factors make the corporation an ideal lobbying vehicle. In addition to the power to encourage all management-level personnel to contact their congressmen and senators on specific issues, large corporations or trade associations can (and almost all do) computerize the entire process by correlating all plants and employes with specific members of Congress and providing each with specific information of the importance to every state and district of the company's spending and payroll.
Although there is no disputing the widespread public support Reagan received for his tax and budget bills, there is also no question that corporate-induced lobbying, coordinated by the White House and supportive organizations ranging from the Chamber of Commerce to the Securities Association, contributed enormously to the outpouring of telephone calls and telegrams that inundated Congress.
At a more subtle level, the politicization of corporations has resulted in the massive expansion of financing of such groups as the American Enterprise Institute, the Hoover Institution and the Heritage Foundation, along with the concentrated effort by these groups to influence discussion of issues in the media. Coinciding with this has been the financing of growing numbers of public TV programs that attempt to discuss broad and specific economic questions. Both these efforts function to define the nature of the political debate on economic issues.
The politicization of corporations reflects two other important developments. Business recognized that in the political arena, competitive interests should be submerged in favor of broad, cooperative coalitions. The effect was to give this segment of the American political community far more strength, particularly in contrast to the divided constituencies of the Democratic Party. Secondly, business as a class realized that policies affecting their interests are the result of discretionary decisions on tax, regulatory and budget questions by both Congress and the executive branch.
Democratic politicians and their constituencies, in contrast, failed to take any parallel steps. The lower middle class saw fewer and fewer benefits from Democratic policies, and union workers (rightly or wrongly) felt a steady decline in their economic position. Union leaders, apparently distrustful of the McGovern wing of the party, did little or nothing to draw membership into the political process in the same fashion that middle-level management has been drawn into the fray. Party leaders, in turn, failed in their efforts to broaden the franchise among the most loyal Democratic voters, the poor, by winning approval of some form of Election Day registration.
In addition, it may well be that the creation of "entitlement" programs -- food stamps, Medicaid -- functioned to create the false belief that these benefits are permanent rights and discouraged political participation to protect these programs. It may be that the Reagan administration's demonstration that these programs are subject to discretionary, political decisions will alter this attitude.
The third and most complex force functioning to benefit the GOP is television. The medium, which has come to dominate political campaigning, is in many ways antithetical to traditional Democratic campaign tactics.
In the pre-TV period, strategy amounted to multiple campaigns among often conflicting groups in a delicate process of converting a collection of minorities into an Election Day majority. The essence of Democratic politics was to piece together a diverse collection of minorities -- union members, blacks, Southerners, Jews, city pols -- into a loose majority, through a collection of separate promises and campaign commitments. If these campaign promises were often contradictory and newspapers raised questions, the response would be some version of the argument that America is a pluralistic society and strict logic cannot be applied to the campaign process.
Television, however, precludes this kind of campaigning. The prime-time audience (except on certain marginal channels) has no coherent racial, ethnic, religious or class identity to which an appeal can be made. A commercial making specific promises to blacks or union members, for example, is likely to offend as many or more viewers as it appeals to. The old-style Democratic appeal becomes a zero-sum game, or worse.
Republicans, in contrast, historically have based their campaigns to the Protestant middle and upper class. The interests of this target group are most often the protection of the status quo, and consequently do not involve a direct challenge or threat to other groups.
In addition, the basics of Republican economic thinking as reflected by members of Congress -- balance budgets, eliminate excessive spending and eliminate government impediments to business success -- are simple enough to translate easily to TV.
In effect, television turns the Democratic mix into a cacophony of voices, while Republicans mesh easily into the centrist medium.
In this respect, the rightward shift of the GOP has become an elective benefit, rather than the liability it proved to be in the 1964 Goldwater campaign. Historically, the major conflict within the Republican Party has been between the moderate Eisenhower- Rockefeller wing and the conservative faction that emerged in full strength in 1964. The effective takeover of the party by the right has, however, functioned to almost eliminate this conflict.
As a result, the party can present on television what amounts to a single voice, even when multiple leaders are speaking. That voice may be significantly further to the right than the general public, but it speaks in the soothing tones of a Walter Cronkite. And the image of internal harmony may well be more important than position and substance in the politics of television campaigning.
There are developments that could cut across these trends and significantly alter the course of politics. U.S. involvement in El Salvador is the most obvious in the area of foreign affairs, but the internal potential of the Reagan administration for creating an external conflict on almost any continent cannot be underestimated. Similarly, no one really anticipated in the early Eisenhower years the emergence of the civil rights movement that both changed the face of society and, over a decade, gave the Democrats an issue of pervasive moral consequence.
But without this kind of wild card, Democrats face extremely difficult problems in regaining control of the political agenda. The perceived inequities of the Reagan economic program may do more for the Democrats than they can do for themselves, particularly in the tax arena.
The key group of swing voters -- the 34.6 percent of the population from households making $11,500 to $22,900 -- will realize a tax cut of $4.7 billion this year, most of which will be eaten up by bracket-creep Social Security increases. The 6.8 percent of the population making more than $47,800, however, will realize a tax break of $12 billion.
Union members, who gave nearly half their votes to Reagan in 1980, are going to see their tax rates remain effectively the same and their incomes remain stagnant or decline with the growing "givebacks" in current negotiations. In contrast, the tax rates of their employers, both the chief executive officers and the corporations themselves, will drop radically, and these workers will continue to be regaled with stories of corporations buying and selling their tax breaks. This may well function to shift the focus of anger away from the food stamp recipient to the Fortune 500.
Even if such a shift in mood develops, the Democratic Party retains the substantial, and perhaps irreconcilable, problem of the South. Democrats in the South are under little or no pressure to remain loyal to the national and congressional leaders of their party. The threat to their futures is a highly conservative GOP.
The gut populism of many Southern Democrats, which gave them at least rough areas for agreement with Northern colleagues on some economic issues in the past, has been replaced by a deep anxiety. Not only does the GOP have a strong foothold in all the confederate states, but the last election saw the defeat of such senators as Herman Talmadge (D-Ga.) and Robert Morgan (D-N.C.) by well financed nonentities, Mack Mattingly and John East, respectively.
In the face of this kind of threat, there is little the Democratic leadership can do to bring Southern dissenters back into the fold. The attempt by Tip O'Neill to buy off this wing of the party by giving them key seats on major policy and standing committees only resulted in placing Rep. Phil Gramm (D- Tex.) on the Budget Committee, where he became the principal sponsor of the Reagan budget cuts, and in putting Rep. Kent Hance (D-Tex.) on the Ways and Means Committee, where he became the Democratic sponsor of the Reagan tax cut.
Despite protestations of renewed intellectual vigor, Democrats have not demonstrated a capacity to regain the status of politicians equipped to direct the course of events. Incapacitated by internal splits, they have become increasingly like Republicans of the past generation: passive actors on the periphery of the main event. And the main event has become a debate between proponents of supply-side economists and traditional Republicans who consider elimination of the deficit to be the first priority.
While the Republican shift to the right has, to date, not proved a fatal liability, an attempt by the Democrats to develop more coherence, left, right or center, does not appear to be an option the party is institutionally prepared to take. Instead, the party continues, in a strangely second-hand way, to try to be everything to everybody. Its current appeals to such diverse groups as the poor, the union movement and environmentalists are not based on positive programs; they are simply attempts to capitalize on the damage to these groups by the Reagan administration.
Faced with a growing shift of corporate and trade association money to the GOP, Democratic fund-raisers are pleading with PAC officials for a return to the policy of giving to both parties. Two key steps that were available to the Democrats in the late 1970s to counter the politicization of corporations -- labor law reform designed to permit organized labor to make gains in the South and West, and Election Day registration designed to sharply increase turnout among the poor -- failed, in part because of the lukewarm backing of President Carter.
Instead of major initiatives by the Democrats, the coming years are likely to be dominated by the Republican agenda, even if the GOP does not gain a plurality of voters. The vitality of the debate will probably remain within the GOP, just as Democrats were the focal point of fundamental political choices over the past 50 years on a sequence of issues including government intervention in the economy, the postwar rebuilding of Europe, the civil rights movement and the Vietnam war.
Republicans are now engaged in a national debate between proponents of radical tax cuts and those who advocate the elimination of government red ink; between those who see government intervening to define sexual, and to a lesser extent religious, behavior, and those who consider this a violation of the constitutional role of the state; betnd the cween those who see communism as an unrelenting threat and those who see the world as one large marketplace where political disagreement is to be submerged to economic gain. In these debates, Democrats have relegated themselves to the sidelines, dependent either on convincing economic collapse or an unforeseen external development to restore them to center stage.