Juggler, juggler, everyone watch the juggler; tossing programs in the air, tax bills and spending cuts everywhere, David Stockman must be in there somewhere--
Phew, what a year! And for David Stockman, it is far from over. There are many more battles still to win and lose. Yes, lose. Stockman now loses battles more often than he did in the beginning, back when the new Reagan administration took shape around the bold proposals of this 34-year-old antiwar activist turned avant-garde conservative.
Juggler, juggler, keep those forecasts jumping, keep that optimism coming--whoops, that's a problem now. Stockman tossed phony numbers into the air last winter, numbers predicting better economic developments than were possible. He knew he was doing it, but felt he had to, according to people around him. Now the numbers have to be revised. In fact, Stockman is being pressed to publish an economic forecast in January that is much gloomier than anything the administration has fessed up to yet.
Candor seems to be Stockman's latest gambit. On Thursday he came clean with the House Budget Committee: no nondefense program, not even the basic Social Security retirement benefit, will be exempt from the administration's efforts to cut budget deficits, he acknowledged. And he indicated that the budget-cutting so far was painless compared with what still must be done to accomplish the Reagan program. Federal deficits will be $60 billion a year each year for the rest of the Reagan presidency if Congress doesn't get busy with its fiscal hatchets and cut, cut, cut.
After nine months it seems apt to do an accounting of the doings of the Reagan administration's chief accountant. Not that any bottom line is yet in sight. But the Washington world has been turned upside down over these nine months, in no small measure because of David A. Stockman, who has been juggling not only numbers, ideas and programs, but a whole way of life in this capital.
September was Stockman's worst month as director of the Office of Management and Budget. For about 10 days in the middle of the month, according to his associates, the Wunderkind of Reaganomics was really depressed for the first time all year.
In fact, September's troubles represented the cumulative impact of a few juggler's errors earlier in the year. The show has continued at such a dazzling pace that the slips aren't always easy to remember.
September's troubles began on Wednesday the 9th, when President Reagan met with his budget director and his secretary of defense to decide how much--if any--to cut from the large increases planned for defense spending over the next three years.
Since the first days of the Reagan administration, Stockman had wanted to make substantial cuts in the Pentagon's ambitious plans. He considered it a tactical move not to go after defense spending at the outset. During the summer he pleaded his case carefully with the president's closest aides. He had persuaded James A. Baker III, the chief of staff, and for a time he thought he had convinced Edwin Meese III, the counselor to the president, too. But on Sept. 9, Stockman must have realized that his arguments had never really moved Ronald Reagan. The president showed no stomach for a big retreat on the defense budget. In effect, he told Stockman and Caspar W. Weinberger to split their differences.
Stockman came back to his office in the Old Executive Office building visibly upset, according to aides. "He really thought he was a winner on the defense thing," one recalled later. Some associates in OMB were impressed that Stockman had won "half a loaf" in the contest with Weinberger, but not the director. He has not gotten this far in 34 years by accepting half-loaves.
But then the next day, in circumstances never fully explained, Reagan took away most of Stockman's half; the final decision was a $2 billion cut in the 1982 defense budget, not enough to make any difference in the deteriorating budget picture that had been worrying Stockman all summer.
That deteriorating balance sheet was the first sign to Stockman and his staff that the Reagan "economic recovery program" was not working out as initially hoped. The huge and competent staff at the Office of Management and Budget had made the first ominous calculations sometime in July based on economic trends and the full impact of the tax cut Congress had just passed.
Stockman had long known that the tax cut was a potential problem for him. He had argued inside the administration that its implementation should be delayed, an argument he largely won. Then Stockman hoped that the Democratic-controlled House of Representatives would moderate the size of the tax cut--and thus the size of future deficits. "Don't worry, the House will bail us out"--this was a slogan at OMB and in the Senate Budget Committee, where many of Stockman's original tactics were first developed.
But the House didn't cooperate. The tax cut passed by Congress called for huge reductions in federal revenue beginning modestly in the fiscal year that started Thursday, and expanding briskly in the next two years. That was why Stockman had decided to go after the defense budget if he could.
With defense savings lost, Stockman had to produce a new plan for additional savings. He returned to an area of spending that had long appealed to him as a potential source of savings: the giant entitlement programs, beginning with Social Security, that seem to grow with a life of their own.
But this was treacherous ground, not least because of the mistakes Stockman and Martin Anderson, Reagan's chief domestic adviser, had made in their first run at the Social Security issue. In May the White House proposed substantial changes in Social Security, including sharply reduced benefits for people retiring at age 62, and a three-month deferral of the cost-of-living adjustment for all recipients. That proposal--Anderson's and Stockman's handiwork--set off a political storm; eight days later, the Senate voted, 96 to 0, for a resolution denouncing the White House suggestions.
In September Stockman wanted to go back to part of that plan, reviving the idea of deferring the cost-of-living adjustment for three months. This proposal was put to Republican leaders in Congress, and they rejected it flatly. So Stockman and his staff again had to scramble to produce new savings ideas.
In the end the White House had to settle for a package of new moves to cut spending and raise revenue that was both more vague and politically more risky than any they had suggested earlier. Now the Republican leaders in Congress are saying, with bluntness uncharacteristic of the politics of 1981, that the new package will never be approved. Just some of its parts may be adopted, they say.
Here again Stockman was hobbled by earlier failure. The dramatic fight last spring over budgetary "reconciliation"--the legislative procedure required to harmonize congressional spending plans with newly-lowered overall spending targets--had only been won by the White House after a good deal of compromising. Though the president publicly declared almost total victory, and Stockman took much of the credit for making the deals that led to success, he was never really pleased with the outcome.
Initially, Stockman had set out to make severe cuts in the federal spending programs he had once called "the social pork barrel." He wanted to break out of the reflexive pattern of granting federal assistance to cure every new social ill. As he acknowledged before taking office last January, he was deeply offended by programs that provided federal funds to help citizens pay for the cost of heating oil, or subsidies that kept afloat uneconomic enterprises like Amtrak, or federal aid programs to localities like the Economic Development Administration and Urban Development Action Grants. Yet those were the programs that liberal Republicans in the House--the group known as "Gypsy Moths"--insisted on preserving as the price of their support for the Reagan program.
It was part of Stockman's original strategy to simply wipe out some of those programs--not just trim them back, but obliterate them, and in some cases the bureaucracies that run them as well. That strategy had to be compromised away.
Stockman has tried to return to his initial instincts in the latest package of new cuts. He persuaded the president to ask for 12 percent cuts in most government spending programs, and to base those cuts not on what Congress has already done, but on the administration's original wish-list of last March. In other words, Stockman has proposed renouncing all the deals that were made in the fight over reconciliation in an effort to return to his original course.
By all indications, this gambit will not work. It has provoked some stern comment on Capitol Hill, some from Stockman's friends and admirers. Speaking of the deals cut during the reconciliation debate, the House Republican whip, Rep. Trent Lott (R-Miss.), said simply: "We must honor those, and we will."
Rep. Barber B. Conable Jr. (R-N.Y.), ranking Republican on the House Ways and Means Committee, said he thought the attempt to hit some arbitrary target for the 1982 budget deficit was ill-advised. "It seems to me," Conable said after the president's last speech to the nation outlining the new cuts, "that knowledgable people could have advised him better" on legislative tactics.
David Stockman ran an extraordinary campaign last November and December to win the job of director of OMB. There had been nothing like it in Washington in years--brazen, bold and, ultimately, triumphant.
A key element in that campaign was a 23-page memorandum called "Avoiding a GOP Economic Dunkirk." In it Stockman laid out the economic dangers he foresaw, and a bold program for dealing with them. It is interesting to look back, not quite a year later, at what he then saw.
Here are some excerpts:
"President Reagan will inherit thoroughly disordered credit and capital markets, punishingly high interest rates and a hair-trigger market psychology poised to respond strongly to early economic policy signals in either favorable or unfavorable ways."
"Thatcherization i.e., repetition of the disastrous economic performance under Margaret Thatcher's conservative government in Britain can only be avoided if the initial economic policy package simultaneously spurs the output side of the economy and also elicits a swift downward revision of inflationary expectations in the financial markets."
" . . . Things could go very badly during the first year of the Reagan administration , resulting in incalculable erosion of GOP momentum, unity and public confidence. If bold policies are not swiftly, deftly and courageously implemented in the first six months, Washington will quickly become engulfed in political disorder . . . "
Other prognoses in the Dunkirk memorandum proved faulty. For one, Stockman predicted a likely world oil supply shortage early in 1981. He also said a tight grain market might well force up grain prices. In both cases virtual gluts have developed--gluts that have been a boon to the Reagan administration by holding down inflation.
Juggler, juggler, everyone is still watching the juggler. "He's got so many knives and bottles and whatnot in the air now, I'm not sure he can finish his act," said James M. Cannon, chief aide to Senate Majority Leader Howard H. Baker Jr. (R-Tenn.).
Stockman has won good marks on Capitol Hill this year, even with skeptical former colleagues from the House who thought of him as an upstart kid in the beginning. Lott, the minority whip, said in an interview that "for a lot of conservative Democrats, he's still the Messiah. And without his brilliance there would be nothing under way at all."
But Lott acknowledged that all the attention Stockman gets has caused jealousy and some bad feeling. "And people are tired of him," Lott said with a grin. "He keeps coming back!"
Others speak similarly. Some conservative Republicans are angry at Stockman for "reopening the tax bill," as one put it. Conable of Ways and Means, for example, thinks it could be dangerous to send up proposals for modifying the tax code, because this could invite Democratic mischief--for example, attempts to repeal some of the sweeteners added to last spring's tax proposal to win votes for it. More doctrinaire supply-siders think any talk of raising taxes should be dismissed as heresy.
"We're coming to a very tough time," said one source in the Senate leadership. "This is the state where most presidential programs fail," agreed Stephen Bell, staff director of the Senate Budget Committee, referring to the passage of appropriations bills, where early intentions can easily be undone.
Key Republicans on the Hill seem to welcome the idea of presidential vetoes of appropriations bills that go too high. They expect a fall of political struggle.
"And if this goes wrong," Bell observed, "David Stockman will get the blame." Stockman, Bell said, is generally brighter, harder working and more accomplished than most members of Congress, "and he gets more press than they do. What better scapegoat could there be?"
At the old Executive Office Building, colleagues say Stockman has snapped out of the September blues. He showed as much Thursday in his feisty testimony to the House Budget Committee. "He's ready for trench warfare," one colleague said of the competitive boss at OMB. And trench warfare seems to be in the offing.
Juggler, juggler, keep a careful eye on the juggler. Even the best juggler drops something from time to time, but the good ones pick up and carry on with such speed and panache that it's easy to forget that they ever made a mistake.
And while watching, consider this from a senior Republican in the Senate leadership: "If we don't get interest rates down by spring we can kiss goodbye to Republican control of the Senate."