NOW THAT Inauguration Day is over, what comes next? There are going to be symbolic gestures of high intentions, like the freeze on regulations. But the Reagan administration, by its own reckoning as well as everyone else's, is going to have to move quickly to the central questions of substance.
David Stockman, the budget director, made it pretty clear yesterday that the president will shortly end the price controls on oil and gasoline. That's necessary, important and one of the few things Mr. Reagan can do without waiting for Congress to act. After that, however, things will get harder.
Having made tax policy the pivot of his program, Mr. Reagan is going to have to move rapidly to get his bill to Congress. Within the administration, the first issue to whether spending cuts will have to march up to Congress at the same time as the tax cuts. The more radical advocates of the supply-side strategy argue that tying the two together is neither needed nor desirable. A big tax cut, they believe, will set off such a powerful expansion of business, generating so much employment and income, that the budget will move toward balance without further intervention. Should you believe that?
Unfortunately, no. It would be very pleasant to believe it, but there is little evidence to support the theory. At this point, the supply strategy rests less on proven experience than on faith. Stripped of its decorative rhetoric, the supply-side mechanism strongly resembles that of the great Keynesian tax bill of 1964, which reduced taxes to stimulate demand. Any substantial tax cut will, of course, sitmulate both supply and demand, which tends to blur the ideological precision of this agrument. The 1964 bill was notably successful in accelerating a powerful business expansion but, with the arrival of the Vietnam War, the expansion rapidly became highly inflationary. That was the beginning of the inflation that has continued ever since. Although all tax cuts since then were supposed to move the budget toward balance, by lifting the level of the country's prosperity, the process hasn't been working well in recent years. That's why the supply-siders are having trouble making converts.
If the Reagan administration launches its tax bill without simultaneously addressing spending and the budget deficit, it will risk setting off another destructive wave of panic over future inflation. That is a reality with which it must come to terms. If there is a tax bill without an accompany attempt to restrain spending, most people will regard it as a signal of larger deficits to come.
Where should the cutting begin? Nobody much likes the idea, but the job properly begins with the largest and most controversial targets. That means the entitlements -- the federal benefits to which the law entitlements -- the federal benefits to which the law automatically entitles anyone who qualifies. It's time, for example, to go after the formulas that over-compensate some of the pension benefits for inflation. It's time to question the very generous, not to say loose, qualifications for unemployment insurance. These are very sensitive matters, and a president can expect to get legislation enacted only when he is riding on the full momentum of an incoming administration. If Mr. Reagan does not get to these badly needed restraints on entitlements early in his administration, he will never get to them at all.