There is more than meets the eye in the messy Republican Party split over President Reagan's $99 billion tax increase bill. It is not just resistance from the Republican right wing to the president's effort to reduce the deficit: it is a struggle for Ronald Reagan's heart and mind.
The news is that the right wing fears it may have already lost the battle. The way that Rep. Jack Kemp and his followers see it, Reagan has now abandoned a major tenet of Reaganomics by turning away from pure supply-side economics. The same conservatives have been further agitated by the willingness of Reagan the president to cut back arms sales to Taiwan, something Reagan the candidate couldn't swallow.
Although the effect of the 1981 and 1982 tax bills taken together still leaves the nation with a huge net tax cut heavily weighted in favor of upper-income groups and business, the right-wing Republican think tanks are in full voice.
For example, David Boaz, of the Cato Institute, says: "There is no Reaganomics. There is a new style of rhetoric in Washington, a lot of talk about tax cuts, getting the government off our backs, reducing the size of government. But it is all talk. Taxes and spending are going to be higher every year. The rhetoric is different. The politics is the same."
This is bitter stuff. It is echoed in a tasteless Wall Street Journal editorial Aug. 13, addressed directly to the president, which reads:
"Viscerally, your friends recognize that what is involved here is not one issue, but your capacity to govern. If Ronald Reagan can be led to go back on tax cuts and to praise Congress for cosmetic budget cuts, on what other issues can you be rolled? . . . The question . . . already is becoming -- what happened to the old Reagan? The age issue will re-emerge."
Whether it is called "reform" or "tax equity," the tax bill courageously guided by Sen. Bob Dole (R-Kan.) would take back a substantial chunk of the reductions Reagan provided last year as an incentive for business and industry, when his theme was -- let the private sector decide how to spend its money.
Today, Reagan sounds a different note: the government needs more revenue to reduce the deficit. This must be done to assure the financial markets that government borrowing won't soak up the entire pot of private savings. A year too late, the president is correct, and deserves to be supported.
But as he did last year, he is overpromising: this tax bill will not ensure recovery. Not only will continuing huge budget deficits remain that must -- as budget director David Stockman said this week -- "be addressed next year,' but the economy faces painful years of slow recovery and high unemployment.
Corporations are falling like flies, and the banking system is facing a crisis of public confidence.
The financial markets were trying to warn the Reagan administration about all these things last year before the 1981 tax reduction was passed -- but at that point, Reagan wasn't listening. Instead, the markets -- and some businessmen -- were accused of being unpatriotic. The president at long last appears to have gotten the right message.
It is not surprising that Reagan and his aides are responding in kind to the right-wing blasts. The White House put out the word that Kemp is motivated only by his presidential ambition. Treasury Secretary Donald T. Regan, at a breakfast for reporters, almost bit off Kemp's head: "It's great to have a good theory," he said, "but when that theory comes up against (the) perception (of financial markets), something has to be done."
In an interview with The Washington Times, Reagan himself belted Kemp: "He is almost, you might say, a purist to the extent that he just can't see the difference between (tax) reform and increase."
What a difference a year makes!
"It is interesting," former president Ford told ABC's David Brinkley over the weekend, "to see President Reagan moving away in a number of instances from the positions he took in 1980. The president is recognizing that the political power of the United States is more in the center and therefore he has to be less and less dependent on support from the far right."
That's why the Barry Goldwaters, the Richard Vigueries, the Jack Kemps and the Paul Craig Robertses are upset. Near mid-point of his presidency, Reagan is emerging as a fairly conventional, conservative Republican, worried more about deficits and the financial markets, and less responsive to supply-side and other ideologues.