So thick has been the marijuana smoke, and so myopic is Washington about Reagan's recent misadventures, that people have not noticed the extent to which the lame duck is limping across a political landscape he has shaped to his liking. Furthermore, proof that Reagan's reservoir of luck has not run dry is this: Oct. 19, ''Black Monday,'' may help economic expansion continue past the 1988 election.
Republicans may remember it as Glittering Monday. The stock market plunge was caused, in part, by a surge in interest rates. The surge was driven, in part, by inflationary expectations. They were washed away, at least for the moment, on Oct. 19, and the washing made possible a freshet of money creation by the Fed.
Capitalism -- and therefore civilization as we know it -- depends on the annual Christmas shopping binge, now beginning. The stock market has not yet had a significant depressing effect on consumer spending, on which two-thirds of economic activity depends. In the automotive sector, anxieties produced by Wall Street, combined with the decline of the dollar and interest rates, have primarily hurt expensive foreign imports. Puppies (previously upwardly mobile persons) are thinking about the unthinkable -- driving a domestic car.
The sobriety induced by the stock market shock will help Reagan resist a protection-ist trade bill and has put even Social Secur-ity on the agenda, at least for a while, in deficit-reduction negotiations. Here is a measure of the rightward ratchet of the Reagan years: on the eve of an election, Congress has at least considered two difficult choices.
One is ''CPI minus two'' -- limiting cost-of-living increases to two percentage points less than the increase in the consumer price index. An even better idea is ''two years, two percent.'' The policy regarding COLAs for Social Security and military and other pensions, and all federal pay increases, would be: for two years everyone gets two percent, but only that. Everyone's ''sacrifice'' would be a slightly smaller increase. Assuming economic growth of 2.5 to 2.8 percent -- an optimistic but not unreasonable assumption -- Reagan could leave office with a budget deficit below $100 billion.
Although he supposedly has ''surrendered'' to demands for a tax increase and supposedly has been reduced to a spectator's role, things seem to be going essentially Reagan's way. For seven years, it has been important to his agenda to demonstrate that this democracy has the capacity to curtail the growth of entitlements. It is now at least possible to believe that America's representative institutions can put enough fingerprints on the pruning shears to spread the political risk, thereby diminishing it.
Everyone knows (two words usually followed, as in this case, by a falsehood) that Reagan so hates taxes that no tax increases can occur on his watch. But we are now watching the fourth Congress of this dec-ade do what the first three did -- enacttax increases. This may seem to be a signof Reagan's weakness, a retreat from Reaganism, but not when considered in context.
On the eve of his eighth year in office, he and Congress are dickering about marginal differences in proposals that are mixtures of tax increases, user fees, spending cuts and sale of federal assets. The outcome is uncertain, but the tone, structure and substance of the negotiations reflect the rightward tilt of Washington's playing field.
The negotiations take place beneath the Gramm-Rudman-Hollings sword, which can inflict an automatic $23 billion slice from spending. (Forget, for the moment, that the cuts would be calculated from a bogus baseline -- $23 billion off, but only after adding 4.2 percent to everything.) The outcome of the negotiations -- Gramm-Rudman or some agreement on Gramm-Rudman avoidance -- probably will be Reaganite, in this limited but real sense: government outlays will be reduced more than tax revenues will be increased.
Congress may flinch from a bold package. Reagan should not. His reluctance to strike a deal suggests that he does not recognize how much he has already won in the decade's domestic debate. He has lost much of his ability to direct the flow of events, but for the moment, the river of history is running in a channel he did much to dig.