We are living through a wackly period of economic mumbo-jumbo in which normal political patterns seem reversed. Reagan budget manager David Stockman, the most ardent government advocate of "new right," neo-conservative theories, keeps telling us that the economy needs a "jolt" that will stimulate economic growth. "A plan based on temporizing or gradualism is a certain prescription for failure," Stockman has been saying.
The jolt, of course, would come through a massive tax cut -- a page, he says, right out of John F. Kennedy's book. It was the Democratic president who campaigned in 1960 on the slogan of "getting the economy moving again" -- and the radical right unblushingly seeks to enhance its credibility by drawing parallels with JFK.
On the other hand, in disarray at the end of a failed administration that produced a recession without any diminution of inflation, the Democrats are abandoning their traditional belief in tax cuts for the consumer, warning that they are likely to add to price pressures.
In other words, you can't tell the players with a scorecard. The way we all learned the game, anyone who wanted to push consumer demand was probably a Democrat. Anyone who worried about inflation was a Republican. Gradualism was strictly Republican. Now that's the Democratic approach.
And talk about heresy -- some Democratic liberals not only suggest that huge consumer tax cuts will further unbalance the budget but argue that the much-touted Kennedy tax cuts in the 1960s didn't boost business investment as had been anticipated. And in turn, whatever additional investment may have been generated didn't do much for improving productivity.
Treasury Secretary Donald Regan, fresh from Wall Street's hustling brokerage firm, Merrill Lynch, brushes off this critique by noting that "whatever the reason, the country was more productive throughout the 1960s, and that stopped when tax increases went into effect in 1969."
Donald Regan's role is likely to be critical in the formulation and management of President Reagan's economic policy. Some of the more ardent "supply-siders" -- who have had a longer relationship with Reagan -- have been openly queasy about the former Wall street whiz. They worry that from his powerful platform as Treasury secretary, Regan's more traditional instincts will frustrate the radical departure in economic policy that Ronald Reagan had promised during the campaign.
This reporter asked Reagan whether his present supporting for a three-year tax cut, along Kemp-Roth lines, represented an adjustment of his thinking to the new supply-side influences around Reagan. a
"That's always made good sense to me," Reagan said without a pause, "except that I didn't know it was called supply-side economics.' I've been down here before testifying [as a private citizen] that it makes sense to let individuals and business spend more of their own money." Moreover, in testimony this week before the Senate Appropriations Committee, he abandoned the classic Republican fixation on budget deficits. Instead he adopted a major tenet of the most confirmed supply-siders: "We must not make the mistake of assigning a higher priority to balancing the budget than a revitalization of the economy."
But only time will tell whether Regan's gut commitment goes as deep as that of his own deputies at Treasury -- or, for that matter, as deep as Stockman's. If, contrary to the new administration's prediction, tax cuts worsen inflationary pressures, attitudes could change. Even now, Regan likes to describe the upcoming tax and budget cut program as "a team of horses," and adds: "Tax cuts and budget cuts don't have to be dollar for dollar, but they have to go that way."
What it all boils down to is that supply-side economics is still little more than a theory. The Reagan administration is ready to give it a whirl, but doubts are cast on its validity not only by Democrats but from experts as diverse as Arthur Burns on the traditional right, and Gar Alperovitz on the liberal left.
Alperovitz, director of the National Center for Economic Alternatives (a left-of-center think tank), challenges the underpinning of the Stockman-Kemp rationale: namely, that if the after-tax rewards go up, people will work their tails off. "In an America dedicated to leisure and the good life," Alpherovitz says, "it is just as much common sense [to expect] people to take their rewards in more leisure and less risk."
And yet, where can Reagan policy go, if not in the Stockman-Kemp-Roth direction? Even Alperovitz is willing to concede that the radical right supplyside strategy "is probably the Republicans' best shot." But it may also be a "last" shot for conservatives. That's the belief of Irving Kristol, an articulate neoconservative guru who is an unofficial but influential adviser to the Reagan team. Kristol writes: "If it fails -- well, then conservatives can concentrate on nostalgic poetry forget all about political economy. Someone else will be in charge of that."