President Reagan shifted gears just a little when he delivered his pitch to Congress this week for passage of his budget cuts and his three years' worth of business and personal tax reductions.
He distinctly toned down claims for what the program would produce.
Gone from his speech were the administration's earlier assertions that near-instant changes in "expectations" would quickly produce miracles of lower inflation and interest rates, and thereby spur economic growth.
"Because of the extent of our economy's sickness," Reagan said instead, "we know that the cure will not come quickly, and that even with our package, progress will come in inches and feet, not miles."
Administration officials are in fact puzzled and worried that their rapid progress toward cutting federal spending has had so little impact in financial markets where long-term interest rates are climbing swiftly rather than falling as the president's advisers said they would.
The money markets are not impressed by promises of smaller deficits in the future. "They're worried about 1981," one Reagan economist said.
To calm those markets, which remain skeptical of the Reagan program and the budget deficits it would entail, the Office of Management and Budget yesterday gave the Cabinet a proposal to defer an additional $5 billion of outlays for the current fiscal year that ends Sept. 30.
However, no specific spending cuts were outlined, and more than half that amount will be needed just to offset higher-than-anticipated costs of existing programs, sources said.
As part of his Tuesday night sales speech, the president also stressed the bad economic news of the six months since the election. In that half-year, he said, the nation has experienced continued double-digit inflation, mortgage interest rates averaging almost 15 percent, unemployment of almost 8 million people, a drop in the average worker's hourly earnings (after adjusting for inflation), and more than 6,000 business failures.
He cited these figures to increase the pressure on Congress to act. He told Congress that, to turn the economy around, it had to start with the budget. But here, too, the real world does not appear to be behaving quite as predicted; the federal budget is only one of many factors affecting the economy, and not necessarily the most important.
Reagan, ticking off statistics, chose to ignore some very real signs that the short-term outlook for both unemployment and inflation has already improved.
While the economy apparently has been on a plateau since January, there is little evidence of declines, except in housing construction and auto sales. And even in autos, the manufacturers were able to wipe out their overhang of unsold cars with their extensive program of rebates during the first quarter of the year.
Unemployment, at 7.3 percent of the work force in March, was as much as one-half a pecentage point lower than many forecasters thought it would be at that point. Moreover, there are indications from weekly claims for unemployment benefits that it did not rise significantly in April.
In short, the recession predicted for this spring and summer by economists both in and out of government has not arrived on schedule, and a growing number are doubtful it will come at all.
The news is even better on the inflation front.
Consumer prices rose at a 9.6 percent annual rate in the first three months of this year at a time energy prices were shooting upward because of the latest round of price hikes by the Organization of Petroleum Exporting Countries and the final decontrol of domestic crude oil and gasoline prices. Now, with a worldwide oil glut, crude oil prices are dropping slightly and so are prices at the pump for gasoline.
In the same three months, food prices rose at an annual rate of 2.9 percent, a far lower rate than agricultural experts expected.
This good news on the price front is likely to continue, at least if the oil glut remains and the spring and summer rains come on schedule in the nation's grain-growing heartland.
For instance, Otto Eckstein of Data Resources Inc., the economic consulting and forecasting firm, believes the consumer price index will rise at an 8.2 percent annual rate during the remainder of 1981. The CPI rose 10.6 percent in the 12 months ended in March, and was up 12.4 percent during 1980.
Such a drop in inflation, if it does continue for several months, could encourage consumers to spend more even before they get a tax cut. Financial markets could also be persuaded by the lower inflation figures that lower long-term interest rates are in order.
With wage increases still running close to a 10 percent annual rate, however, inflation will not quickly drop further. Food prices could easily begin rising much more sharply late this year even if there is a good grain crop. And with the Middle East situation highly unstable, predicting oil prices is a hazardous business.