While Democrats are crowing these days over Ronald Reagan's problems with the economy, some influential voices are warning them to watch out: it's entirely possible that Republican fortunes will be rosy again in time for the 1982 congressional elections.
The political warnings are coming from economic forecasters, some of them long identified with the Democratic Party. The nation, they agree, is in economic recession right now, but they predict a strong recovery in the second half of next year, perhaps vibrant enough to make voters feel good again about the Reagan economic recovery program.
Like most economic forecasting in recent years, these predictions may or may not prove out. The Democrats, so starved for good news that they can feast on a rise in business failures, have trouble heeding the cautions. But this question of the long-term post-recession outlook is the central political factor that will determine whether the president gains or loses Republican representation in Congress, particularly the House. News Analysis News Analysis
For Republicans, the reassuring news is coming from strange quarters. Three months ago, Alice Rivlin, the Democratic director of the Congressional Budget Office, forecast inflation and unemployment both dropping to around 7 percent in 1982, while the economy grew a healthy 4 percent.
In October, Walter W. Heller, chairman of the Council of Economic Advisers under President Kennedy, warned the Democratic Strategy Council in Baltimore that by election time the Reagan economic program "could be made to look pretty good." Democrats, he said, should "not delude ourselves into thinking Reaganomics will self-destruct politically."
The consensus of the major private economic forecasts is also that growth will resume by midyear and perhaps be strong enough by Election Day to reverse the present mood.
But those forecasts have paled besides the daily dosages of economic gloom--unemployment rising to 8.4 percent, factory orders "falling off the cliff," plants shutting down and local officials in hard-hit communities begging for federal help that is not coming.
"The best case you can see now," Democratic National Chairman Charles T. Manatt said this week, "is a deep, rather long recession, followed by a weak recovery, higher inflation and higher interest rates--and then the whole cycle repeating."
Manatt added that, "on the present facts," 1982 looks "like another 1958," a recession year in which the ruling Republicans lost 47 House seats, 13 Senate seats and seven governorships.
The Democratic chairman speaks with the credentials of a successful Los Angeles banker, but his views are disputed by some of the leading economists in his party.
Charles L. Schultze, chairman of the Council of Economic Advisers under President Carter, said in an interview there is "a low probability" of the recession lingering beyond midyear. "Everyone now sees a worse recession than we saw a month or six weeks ago," the Brookings Institution economist said, but the odds favor "a noticeable recovery around midyear, enough to halt the rise in unemployment and start pulling it down again."
Schultze added that such a timetable was "cutting it awful close" politically, because unemployment generally does not start to decline until a few months after a recession has hit bottom and recovery has begun.
Heller and Rivlin, in separate telephone interviews, echoed Schultze's view that the greater-than-anticipated severity of the recession so far had not caused them to change their previous predictions of what Heller called "a brisk upturn in the second half of the year."
They based their view, they said, on the belief that interest rates will continue to fall, easing a major barrier to new investment and to the purchase of houses and autos, and on the belief that what Rivlin called "the big slug of tax cuts" scheduled for July 1 will spur consumption.
Those same factors are cited in a variety of private economic forecasts, which agree on a roughly 4 percent real growth rate in the second half of 1982. Business Week magazine last week noted such a consensus in the forecasts of Townsend-Greenspan, Chase Econometrics, Harris Trust & Savings Bank and Data Resources Inc. Moreover, all except Townsend-Greenspan are predicting a positive turn in the economy in the second quarter of 1982, the magazine said.
Alan Greenspan, who headed the Council of Economic Advisers under President Ford, said that, even though his firm's prognosis was gloomier than that of the other private economists and of the Reagan administration, he expected next fall's economic climate to "surely be politically tolerable and it could turn out to be favorable."
All of these forecasters suggested that inflation--the economic malady which probably had more to do with the Republican victory in 1980 than any other--will likely continue to abate through 1982. "If anything," Heller said, "inflation is going to be more subdued than we thought a few months ago."
Heller and Schultze insisted that what the former called "the inherent contradictions in the Reagan program" will eventually become political liabilities for the Republicans. But Schultze said and Heller agreed that "the real test of the sustainability of all this will probably come well after the 1982 election is out of the way."
If these forecasts prove to be correct--and Secretary of the Treasury Donald T. Regan's comment this week that "1981 proved that economic forecasters can't forecast" needs to be borne in mind--then Democrats would seem to be on risky ground in pinning their election hopes to a failure of Reaganomics.
They don't think so.
They point out that the 1958 recession officially ended in April, nine months after it began, but unemployment did not peak until July and then started downward. The November election was a disaster for the Republicans.
In 1954, the Republicans were hurt by a recession that ended officially in May.
In 1976, President Ford was still on the defensive for a recession that officially ended in March, 1975.
Talking to Democratic officials and campaign consultants uncovers no doubts that the economic issues will be cutting their way in 1982.
The polls are ambivalent, giving Republicans the edge on cutting government spending and taxes and inflation, but Democrats the advantage on unemployment, aid to the needy and Social Security.
But in the minds of those Democratic consultants, the Republicans face almost insuperable problems.
Pollster Patrick Caddell said in an interview that he thinks "the election agenda for 1982 will be set out in January," when Reagan has to present a budget with a big deficit and, at the same time, ask for deep cuts in some popular domestic programs, defend a big rise in defense spending and ask for some tax hikes to go into place in later years.
"At that point," he said, "it will be clear that things have not worked out as expected on the Reagan economic plan. The battles that start in January will shape people's minds for the fall campaign."
Even if economic conditions look better by fall, Caddell said, "the positions that have been taken in the debates this winter can bring the Democrats through."
In a separate interview, pollster Peter D. Hart argued that even if the Reagan policies revive the national economy by next summer, the pace of recovery will be uneven from state to state. Citing a number of hard-hit eastern and midwestern states, Hart said, "I'm very optimistic about our chances in those gubernatorial campaigns. I don't see how they can be turned around in time."
A Democratic House campaign strategist, who requested anonymity, expressed skepticism that unemployment can be brought down to what he called "acceptable" levels by Election Day. "We're not so foolish we're counting on 10 percent unemployment," he said. "That's why we keep talking about Social Security and other issues that cut our way."
But, he added, the Democrats are working so hard with their limited resources on exploiting the current economic difficulties that they have little leisure or inclination to plan a campaign strategy for the eventuality of an economic boom. "We're still trying to get this labeled the Reagan recession," he said. "We are not worrying about recovery contingencies.
"Besides," he said, "we've known all along that if 'voodoo economics' worked, we were in big trouble."