BY NOW IT should be beyond dispute that Reaganomics is a dying proposition and that our creaking political parties are not providing any satisfying alternative. Instead, we seem mired in a tortuous transition, stuck in a prefix politics -- post-industrial, post-Keynesian, neo-conservative, New Right, neo-liberal, post-conservative.
Sooner or later, of course, we will move in a new direction. Political vacuums don't last forever. But what will it be? Where are we heading?
In large part the answer depends on whether our current White House tenants give Reaganomics a decent, credible and swift burial. Whatever that concoction might have seemed in the germ-free laboratories of supply- siders, money-supply-manipulators and budget-balancers, today's reality of megadeficits and high unemployment has turned it into the fiscal equivalent of Vietnam -- a painful and widely recognized miscalculation from which extrication may be tragically slow.
Indeed, if one message has been writ clear by now, it is that many of the restorationist ambitions of the Reagan administration -- to bring back 1920s economics, to reinvent states' rights and free markets, to return federal social responsibility to the private sector, to recreate the Pax Americana of the Eisenhower years -- have been stymied. Reagan advisers now seem to understand as much, and we shall see in his State of the Union and budget messages whether The Boss himself has been paying enough attention.
If Reagan doesn't change course sufficiently, if he doesn't pull off a convincing economic recovery, the evidence is already pointing to the movement we are likely to see -- the inflammatory politics of frustration, a search for scapegoats, an intensified hostility toward Washington, an anti-establishment, anti-elite, middle-class populism.
This force has long been redefining presidential politics, from the days of Richard Nixon and George Wallace in 1968 through those of Jimmy Carter in 1976 and Ronald Reagan in 1980. And it is on the march again, with more and more interests and their political voices spreading populist and crypto-populist themes.
Organized labor, for example, is fighting to reduce foreign imports and curb illegal immigration, joining the New Right in preaching the gospel of simultaneously excluding Japanese autos and Mexican carwash attendants.
Many of the left, right and center are echoing the classic populist theme of blaming the Federal Reserve for squeezing the life out of the economy -- and are ready to pounce on it if interest rates rise again. Attacks are growing on "special interests" in Washington -- especially on political action committees -- with Democratic front-runner Walter Mondale calling for a "war on special interest money in American politics."
Mondale is sharing this theme with others, including former Rep. John B. Anderson, who is gearing up for another presidential run with an argument that both the Democratic and Republican parties are so captivated by political bankrollers and Washington lobbies that they're incapable of advancing serious answers for national problems.
For its part, the New Right -- out to recast itself explicity as the "New Populist Coalition" -- is damning Big Government, Big Business, Big Banks and Big Labor, and criticizing Ronald Reagan as a captive of the power elite. More more and more its attention seems to be on the weapons of populism, particularly on state and local initiatives and referenda. Supply-siders Jack Kemp, Jude Wanniski and Arthur Laffer have even begun calling for a constitutional amendment to establish a federal-level voter initiative.
Beneath their sociological and ideological disparity, the six-pack populists and the brie-and-chablis reformers have kindred objectives: bypassing, disarming or upending the existing political-economic power structure. And both sentiments -- impatient direct democracy and genteel reformism -- are likely to grow in the next few years, as they did during previous political watersheds in 1896- 1900 (during the depression following the panic of 1893) and 1932-36 (during the Great Depression).
This isn't meant to suggest that we're heading into a replay of the early 1930s. Despite a good number of similarities -- the shaky global financial system, the specter of another trade war, joblessness climbing while farm incomes slide, talk of the Midwest "Rust Bowl" that evokes the 1930s Dust Bowl -- there are also important differences between the two eras.
The 1930s, for one, were a deflationary period, the 1980s are inflationary. The five years ending in 1984 are likely to yield a climb in the Consumer Price Index of roughly 40 percent, with inflation remaining over 5 percent throughout.
In 1983, for another example, we do not have anything like the reservoir of public confidence in our institutions that existed in 1933. Late 1982 Louis Harris polls show public confidence in leading institutions -- from the courts and the executive branch to business, labor and the media -- slumping to levels prevalent in the wake of Watergate and at the nadir of the Carter administration. Midyear Los Angeles Times polls found a large minority of our citizenry doubting the effectiveness of our political and economic system.
Just as important, compared to the conservative establishment of the 1920s, the 1970s were a decade of establishment "liberalism." That context -- and lingering liberal establishment disrepute -- will likely limit public inclination to react against Reagan alone.
In short, the similarities certainly deserve attention but not infatuation. The problems are not the same and -- barring a collapse of the international credit system -- the politics are not likely to be, either.
Remember that this is by no means the first timeeRepublicans have been in the third-year doldrums after bringing on a recession in time for the midterm elections. In fact, including this one, seven of the last eight GOP administrations have done just that. This pattern is so de rigeur that analysts have charted a recurring GOP election-economic cycle: recession and unemployment building in years one and two, recovery underway in years three and four.
The policies adopted for those third and fourth years range from one extreme to the other. Classic political-economic opportunism occurred under Nixon in 1971-72, abetted by wage-and-price controls and a major expansion of the money supply. Conversely, the classic GOP political-economic debacle came in 1931-32 with Hoover, when he eschewed fiscal stimulus while the Fed contracted the money supply.
In the current case, the Reagan administration is already moving toward a more practical position on the budget, jobs, defense spending, trade, natural gas, monetary policy and even the environment. The big question is whether this de-Reaganomics shift is too late -- and whether the administration can manage a further metamorphosis into a calculated economic activism: serious promotion of exports, of high-tech industries and of education for new jobs, and, in the end, creation of some national industrial policy.
James Bere, chief executive officer of Chicago-based Borg-Warner, one of the two dozen chiefs of major corporations to favor a national policy to blueprint where this country is going economically, has called for a National Industrial Policy Authority. Something like that -- some federal mechanism for coordinating trade, industrial, employment and resource-allocation priorities -- may be necessary to get a firm grip on U.S. economic pressures and options.
Some of the Reagan switches, presumably, will coopt populist impulses abroad in the land. The president is no amateur at this politics.
The administration, for example, is almost certain to embrace elements of the trade protectionism that is being adopted by other camps. This is all but ensured by rising unemployment, the depressed status of key U.S. industries and mounting public frustration with the tactics and counter-nationalism of the Japanese, the French and others. It will also be influenced by the fact that the key battleground areas of 1984 -- the Midwest and the Southeast -- are the seats of the leading depressed industries (steel, autos, textiles) and the center of a farm electorate increasingly eager for subsidies and mercantilism. In fact, agri-mercantilism -- dumping subsidized U.S. produce in foreign markets -- could be the 1984 key to the swing states of Iowa, Missouri, Illinois and Wisconsin.
(Here, too, 1930s comparisons may do a disservice. The common characterization of the Smoot-Hawley tariff of 1930 as a major cause of global depression finds little support in foreign economic histories, many of which do not even cite it. If America recovered in the 1930s by moving toward free trade, Britain and many other nations recovered at least as smartly at that time while embracing protectionism or neo-mercantilism.)
Similarly, under prodding from congressional Republicans, Reagan seems to be adopting a tougher posture toward the Fed. Both Senate GOP Leader Howard Baker and House GOP Leader Robert Michel have publicly urged the president to condition any mid-1983 reappointment of Fed Chairman Paul Volcker on a commitment by him to keep interest rates coming down. Sen. Baker has gone further, declining to rule out legislation restraining the Fed should interest rates rise again.
Fed-baiting may even become a strategic GOP imperative. Not only will massive federal deficits require substantial monetization, but the Republicans might profit politically by making an issue out of the fact that Volcker is a Democrat, appointed by Jimmy Carter, under whom high interest rates began.
Even if easier money does bring back 8 percent inflation by 1984, Republicans would be better off with 8.5 percent inflaion and 8.5 percent unemployment than with 6 percent inflation and 11 percent unemployment. The nominal "misery index" may be the same, but the political misery index wouldn't be. Remember: Gerald Ford got little political benefit from 5-6 percent inflation in 1976, and neither did congressional Republicans last November.
If 11/2 to 2 percentage points of joblessness can be eliminated over the next 18 months -- and 1983 policy activism is probably the key -- that's the kind of favorable trend that reelects White House incumbents.
If Reagan fails to accomplish this, nobody should be surprised to see a more inflamed populist politics surge forth, featuring attacks on Washington and special interests, pressing for more direct democracy, zeroing in on immigration and crime, undoing affirmative action agreements and much else.
On immigration, twice before -- in the late 1840s and early 1850s, and again prior to and just after World War I -- American public opinion has reacted against a major wave of ethnically unfamiliar immigrants. This time a similar new wave is represented by the huge emigration from Mexico and the Caribbean, much of it illegal.
It's hard to imagine the issue staying unpoliticized if we remain stuck in hard times. In most other major industrial nations of the West -- Britain, France, Germany, Benelux, Canada -- recession-spurred sentiment for a crackdown on legal and illegal immigration has mushroomed into politics, to the point where last year Holland elected its first fascist to parliament since World War II.
On minority affirmative action programs, Gallup polls have shown lopsided public opposition to job programs that involve racial "quotas," and the Reagan administration is moving toward a more combative position here. In December, the Justice Department joined white Boston police, firefighters and public employe unions in asserting that job seniority should protect white employes from being fired to maintain, in the face of layoffs, the minority hiring percentages imposed by a federal court.
Similarly, this month the conservative Heritage Foundation urged the White House to redefine discrimination to apply to individuals -- not groups -- and to "mount a vigorous campaign to represent the unrepresented by seeking to reopen quotas imposed by consent decrees over the last 10 to 15 years."
As for tougher anti-crime steps, it should be remembered that 1982 saw growing support for the death penalty, citizen gun ownership, mandatory sentencing, public recall and confirmation of judges. Other issues to watch in this area include proposals for national identity cards and for the use of the National Guard in high-crime areas (advanced by the bare loser in New York's 1982 GOP gubernatorial race, Lewis Lehrman).
Who would benefit from all these trends in 1984?
Some of the policies -- notably political control of the Federal Reserve, trade protectionism, support of seniority rights versus affirmative action, a strong stand against illegal immigration -- have broad sponsorship among labor-connected Democrats, causing some observers to think of them as "liberal." But the overall denominator is a kind of anti-elitism or populism. If anything, the principal reemblance is to the agenda of the New Right, whose leaders seem to be embracing these themes in lieu of their obsolescing 1978-80 panoply of tax cut, anti-abortion, pro- prayer and Panama Canal stances.
Indeed, the Democrats face a great potential problem in keeping their "neo-liberal" wing -- with its high-tech, high-education origins and upper-middle-class culture -- in harness with the protectiionist, nationalist, low-education, low-culture electorate. It's not hard to imagine that divisive 1984 Democratic primaries and a national convention brokered by the AFL-CIO and other interest groups could offend a major chunck of the Democratic electorate and send it drifting to Anderson.
But the fact is that various populist themes are being adopted so widely these days, across so many camps, that it's difficult at this point to get a sense of just who might really gain the most. What can be said with confidence, though, is that the themes are just waiting to explode on the political scene.
The real key, then, remains whether Reagan cements his recent policy flexibility in his State of the Union and budget, and whether current leading economic indicators are correct in signaling a 1983 upturn. If so he may be in better shape by summer than he now appears. "Disarray" may only be a temporary stage, not necessarily away from the entirety of Reaganism but only away from the neo- Coolidge, neo-Adam Smith parts.
Of course, if the 1981-82 disintegration continues and if the president announces his retirement, it's Katy-bar-the- door. The fragmentation that almost overtook the GOP in the dark post-Watergate days could recur.
Politicians from Howard Baker in the establishmentarian middle to Sen. Jesse Helms on the right are watching for such a development, and there could be a series of bitter 1984 primaries. Helms, facing probable reelection defeat in North Carolina, could opt to launch a 1984 splinter party voicing the already high decibel themes of populist- conservative and conservative anger.
If the president isn't successful enough to run again, the fault lines in what is an increasingly exhausted party system could deepen. We could even see the first major four- way presidential race -- Republicans, Democrats, Anderson, Helms (or some such) -- since 1860.
Nevertheless, from a historical standpoint our national circumstances are not entirely without reassurance. The United States is probably two-thirds to three-quarters of the way through a massive upheaval of ideas, economic methodologies, price levels, production modes, party systems and global relationships. Economic recovery of the sort that characerized post-1933 years almost everywhere in the West is probably underway or about to be underway. Populist politics -- for all that the contemporary version bears some resemblance to the "center extremism" troublesome in 1930s Europe -- is also a lubricant of progress that will displace failed elites. And our party system and interest group system to indo need a shake-up if creativity is to be restored.
After all, nobody ever said political-economic watersheds were a rose garden.