The ambitious domestic agenda of President Reagan's first two years, the "revolution" that was supposed to reverse a generation of growth in government spending and regulation, is being put on hold as the White House prepares for Reagan's expected reelection campaign.
The Office of Management and Budget has begun work on the election-year tax and spending plan that Reagan is to send to Congress in January, with the assumption that budget cuts will go no deeper than what Reagan has already proposed.
"We may just take the cover from last year's budget and put it on this one," one official said.
At the same time, the across-the-board deregulation effort Reagan began in 1981 has shifted into low gear.
The President's Task Force on Regulatory Relief has closed its doors, and aides say Reagan will not push further controversial deregulation bills in Congress until after the 1984 election.
Trucking deregulation is being held up indefinitely at the White House in deference to opposition from the Teamsters union; nor does the administration plan to take the initiative to revise the Clean Air Act, a focus of regulatory contention in the past.
"The administration's economic policy is to do nothing and pray the recovery continues," said Lawrence Kudlow, an architect of the original Reagan program as chief economist at the OMB and now a private economic consultant. "No one wants to generate any budget restraint that will be unsettling to the reelection. There's a total absence of risk-taking on the fiscal side."
A congressional budget expert, fretful that big budget deficits likely over the next two years will hold up interest rates, said, "The White House is simply gambling that interest rates won't abort the recovery before the election."
Senior administration officials acknowledged in interviews that the Reagan presidency is being set on a path for the next 13 months that will be determined not by budget imperatives, as it was during his first two years, but by election-year political demands.
They said Reagan plans to keep up his anti-spending rhetoric and hopes to prevent a reversal of the hard-fought domestic spending and tax cuts he won from Congress.
But they said the administration's budget-cutting drive, which produced such tumult in the first phase of Reagan's tenure, had lost momentum until after the 1984 election.
It has lost steam partly because of resistance in Congress, partly because of growing foreign policy demands on the White House staff and largely because Reagan's remaining domestic agenda must focus on political remedies: the gender gap, Hispanic voters, the environment.
The shift is most evident in the early work on the fiscal 1985 budget Reagan will submit to Congress early next year, by which time he is widely expected to be a declared candidate for reelection.
With a string of $200 billion deficits likely for the next few years, Reagan's choices are not easy. He remains adamantly opposed to a tax increase in 1984. He also wants to preserve his defense buildup--but his political advisers are determinedly steering him away from further domestic spending cuts that could fuel Democratic charges that he has hurt the poor while benefiting the rich.
So far, the administration has not come up with a way out of this quandary. Treasury Secretary Donald T. Regan and Council of Economic Advisers Chairman Martin Feldstein have disagreed publicly over the extent to which deficits are a threat to recovery.
Feldstein urges a tax increase now to trim the deficit; Regan says there is no certain link between the deficits and higher interest rates that could crimp economic growth.
"It is a nonpolicy," said Kudlow. "The budget is cut adrift. You can't make a new policy, or wage an old one, when you're not paying attention to it."
This year, the OMB is accelerating the internal budget process somewhat, but officials do not expect Reagan to make major decisions until he returns from the Far East in November.
Officials say they anticipate that Reagan will recommend continued defense spending increases, and may revive some of the budget cuts that Congress refused to approve in the 1984 budget.
But one White House official said wryly, "It is very unlikely that cuts which go much deeper than '84 will be the centerpiece of the budget or State of the Union."
This means that it is doubtful Reagan will ask Congress to make further cuts next year in the big automatic spending or entitlement programs that account for the greatest share of non-defense budget growth, even though entitlement "reform" has been discussed as the administration's next big budget goal.
The foreign policy crises of recent months have tended to overshadow the budget at the White House, and left the administration seeking bipartisan cooperation with Congress, not a budget fight.
"At this point, you go for bipartisanship on foreign policy and overarching domestic issues like Social Security," one official said in describing the Reagan approach. "The name of the game next year is not going to be entitlement reform or taxes."
Nor is it likely to be deregulation, another leg of the original Reagan agenda. The President's Task Force on Regulatory Relief closed down this summer, having "done what it was assigned to do," one official said.
Now the regulatory review effort will fall to the OMB, but controversial initiatives are not expected from the administration. "For example, you're not going to see a big Clean Air Act initiative," the official said.
"They've done about as much as they can do to reduce the regulatory burden on business," said Hank Cox, associate manager of regulatory affairs for the U.S. Chamber of Commerce. He said the administration had "grabbed the regulatory branch by the neck and shaken it," but had left this and the major legislative efforts at deregulation in a "holding pattern."
This pattern is "not unusual" in the political cycle, he said, noting, "If they don't get it done right away, they run out their string and lose momentum."