AMERICANS' INCOMES and economic output rose strongly in 1984. The government's scorekeepers have just revised the GNP numbers upward once again, and President Reagan celebrated them in the preamble to his press conference Thursday evening. That will set off another round in the interesting debate over the reasons for this powerful and gratifying performance.
Mr. Reagan has no doubts. He attributes the "American miracle" to tax cuts, incentives and the unleashed spirit of free enterprise. Now the country is embarked, in his view, on the sustained growth that he promised four years ago.
That's the Romantic School of economic thought -- optimistic, ebullient and attractive. But perhaps you ought to ask for a second opinion. There's another explanation that's a little less uplifting but tighter in its logic.
Federal budget deficits speed up economic growth, at least for a while. That's basic Keynesian economics. Governments discovered in the late 1930s that it works, and have been using it ever since -- none more vigorously and unapologetically than Mr. Reagan's. He points out that the country's growth rate last year was the highest since 1951. Quite true. But for 21/2 years the country has been running the largest federal deficits since 1946.
The curious thing about the Reagan administration's strategy is the fidelity with which it seems to be following the model of the 1960s, the Kennedy-Johnson years. It was a time not only of extraordinarily high economic growth, at least through 1966, but of unbroken growth. There was no recession from 1961 to 1969, by far the longest cycle of growth in the past generation. In Mr. Reagan's first term, he gave great emphasis to the 1964 tax cut as the precedent for his own cuts. But by 1966 the strongest influence on the economy, prolonging the expansion, was the military buildup for the Vietnam War. The present rise in defense spending may similarly extend Mr. Reagan's expansion.
Defense spending in the mid-1980s is not nearly as high, as either a share of the budget or of the country's total output, as it was in the late 1960s. The Reagan proposals would not raise it to that level even by the end of the decade.
But while President Reagan's defense spending is lower than President Johnson's was, his deficits are much bigger. This year's deficit, the administration says, will be 5.7 percent of GNP. Mr. Johnson's largest deficit was 3 percent of GNP, at the height of the war in 1968. That was the year, incidentally, when inflation got out of control, to the great cost of Mr. Johnson's successors.
Mr. Reagan claims to have put the American economy on an altogether new and higher track. But so far it appears to be following a familiar historical pattern.