Even while it concedes the obvious -- that the results of last Tuesday's election will require a somewhat more conciliatory attitude in its dealings with Congress -- the Reagan administration continues to suggest that that moderation will not be in evidence in the 1984 budget it will present in January. That intransigence strikes fear in the hearts of Senate leaders, who last year found themselves in the uncomfortable position of rejecting their own president's budget in favor of a more balanced tax and budget strategy of their own devising. Still less congenial this year is the prospect of mediating between a president with a habit of painting himself into uncomfortable corners and a House with a newly strengthened Democratic majority.
By any measure of good government, a repeat of last year's budget performance seems reckless. Last February, the administration sent up a budget that pleased no one. It called for cuts in domestic programs that were not only indifferent to the needs of the poor but also politically indifferent to the interests of the middle class. Despite those cuts, it left the prospect of steadily mounting budget deficits. While congressional leaders took on the dirty job of raising taxes and trimming both domestic and defense spending, the president encouraged the troops by accusing them of fiscal irresponsibility, on the one hand, and doctrinal deviationism, on the other.
However irritating to Congress, this strategy apparently retains its political appeal for the White House. Last year's strategy, after all, allowed the president to have it both ways to no small extent. In playing to his far-right constituency, he could point to his requested cuts in social programs and label Congress as big spenders for refusing to go along. In the end, the president had to go along with the Senate's tax-raising package, thereby antagonizing his right-wing followers, but when election time neared, he could appeal to the broader electorate by pointing out that, in fact, the actual cuts in popular education, health, housing and nutrition programs weren't really all that severe-- never mind that he had asked for much deeper cuts. If Congress can be counted on to make the tough decisions, the White House may find it tempting to preserve this two-front strategy.
Much in the economic and political landscape has changed, however, since the White House decided on that course a year ago. As a result of last week's elections, House Democrats will now have a solid working majority on most issues. The election offered no comfort to the far right. Even within the administration, proponents of extreme economic views have been replaced by economists of more traditional bent. Several Republican senators and congressmen will also return with the heightened appreciation of the virtue of compromise that comes from having escaped defeat by the skin of the teeth. Nor can leaders on either side of the aisle be unaware that if any national message emerged from the election, it is that the public is wary of extremists on either end of the political spectrum.
On the economic scene, unemployment and business bankruptcies are way up and corporate profits are way down. Wall Street is betting that some sort of recovery is on the way, but rose-colored glasses are no longer in vogue among economic forecasters. Concern over deficits hasn't vanished -- no one is happy at the current prospect of an ever-widening discrepancy between expenditures and revenues -- and everyone is painfully aware that any inkling of rekindled inflation could provoke the Federal Reserve Board into another dampening crackdown on the money supply. Nonetheless, interest in a cautious measure of economic stimulation has moved to center stage. Any sign that the administration and Congress are likely to bog down again in a fight over budget principles is likely to rekindle the fears that swept through the financial markets last spring.
There is also much better general understanding about the real choices involved in controlling the budget. People have discovered that welfare fraud and abuse is a round-off item in the federal budget and that most of the social goods that government buys are things that almost everyone wants -- old-age and health insurance, environmental protection, highways, housing, job training and education. Now that most states and localities are in dire financial straits, there is also a good deal less enthusiasm for shifting federal burdens in their direction.
That means that budget planners will have to concern themselves with a few politically sensitive and conceptually intricate matters -- putting Social Security on a sound financial basis, shoring up the tax base and developing a defense strategy that is not only strategically sound, but economically and politically sustainable. Two of these items--Social Security and the defense budget--are slated for action before Christmas.
Next week, the bipartisan commission of Social Security is scheduled to decide on its recommendations. Last Thursday, however, Senate Finance Committee Chairman Robert Dole, a key member of the commission, warned that he will recommend that the commission delay its decisions until House Speaker Tip O'Neill indicates that he is willing to sign on to some reforms. The Democrats, however, are unlikely to relinquish their best political issue without some assurance of compromise on other tax and spending issues -- assurance that would best come from some White House indication of give on the 1984 budget.
The defense budget will come up for additional scrutiny when the lame-duck Congress takes up its unfinished business on this year's defense appropriation. Several controversial weapons systems will be at issue, including the B1 bomber, MX missile, two additional aircraft carriers and the M1 tank. Appropriation committees in both houses are already painfully aware that incautious approval of new weapons starts over the last two years has locked them into enormous outlays for years to come. That limits not only budget options but also the ability to adapt future forces to changes in technology and military strategy that already cast doubt on some of the big-ticket items currently planned. The continued appearance of White House intransigence with respect to future budget targets and procurement plans will greatly increase the already substantial potential for deadlock over the defense budget.
If the White House wants to play a constructive role in resolving these matters, the time to get started is now. Last year's laid-back strategy didn't, after all, work out in the best interests of the country. While the Senate leadership managed to avoid the gridlock that many observers had feared, the months wasted in haggling between the White House and Congress not only terrified Wall Street, but resulted in a situation where now, a month into the fiscal year, major decisions on current government spending still have not been made. Because of the lame-duck session, congressional leaders will be in town while the administration is making final decisions on the 1984 budget. The administration would do well to consult them before it sends its budget documents to the printer.