It, Why Can't Reagan?
Hearing the nation's governors talk about budget deficits, as they have been doing here for the past few days, is different from the usual Washington talk. They have been there; they have faced the music in their own states; and there is a striking absence of the dilettantism that characterizes so much of the conversation in this capital.
For example, Gov. George Nigh of Oklahoma, a conservative Democrat, has dealt with budget problems in his state at a time when oil-price declines and farm problems have knocked his revenue estimates for a loop.
So when Nigh asked whether it was not incumbent on President Reagan to submit a federal budget plan that moves toward balance, he was asking no more of the president than he has done himself each year he has been governor.
What is true of Nigh is true of almost all the others around the governors' conference table, as an exasperated Michael S. Dukakis (D-Mass.) exclaimed at one point.
After hearing the House and Senate budget committee chairmen talk about how tough it would be to cut the deficit, Dukakis turned to his fellow governors and said, "It's no tougher than what we have done." Ridiculing the popular Washington notion that the budget must be put on "a glide path" of declining deficits, Dukakis said, "We don't have glide paths in the states. We have to balance the budget each year . . . often within four months [from the start of a legislative session]."
What Dukakis and the others were really saying is that Reagan is ducking out on responsibilities they have had to face as executives in their states.
Senate Majority Leader Bob Dole told the governors, "Our biggest problem is trying to convince the American public we have a problem." Senate Budget Committee Chairman Pete Domenici asked the governors for help in persuading their constituents that "there is no soft landing" possible.
The principal reason that the public is skeptical is that the economy is healthy in most places, and the president, who thrives on good news, keeps saying that economic growth can solve the deficit problem. That was the message of his reelection campaign and it was the twice-reiterated theme of his cursory discussion of deficits in his State of the Union address.
The deficit question got short shrift from Reagan again in last week's press conference. The president once more celebrated the current economic boom and implied that those "who tell us that growth and expansion are not enough" will be proven wrong.
His own budget says otherwise, as House Budget Committee Chairman William Gray reminded the governors.
But the president is insulated, as few governors are, by the quaint public belief that the budget deficit is Congress' responsibility and not the president's. No one seems to know or care about the uncomfortable fact Domenici pointed out: Reagan's spending plans, if enacted unchanged, would leave the budget $160 billion out of balance in 1988, the last year of his presidency.
The distinct impression the governors received in Washington is that Congress cannot come to grips with deficits of this magnitude without much stronger executive leadership. Domenici and Dole both complained that while they are trying to put "everything on the table," in the interest of equity and the hope of enlisting bipartisan support, Reagan has put taxes, Social Security and (of course) interest payments off limits, leaving them, Domenici said, with less than a quarter of the budget on which to practice their surgery.
"This is idiotic," newly elected Gov. George Sinner of North Dakota (D) said. But is it necessarily ruinous?
The responsible conservative answer to that question came from Alan Greenspan, the chairman of the Council of Economic Advisers during the Ford administration. Noting that the record deficits are being financed by a massive inflow of foreign capital, producing unprecedented distortions in the value of the dollar, he said, "This cannot go on much longer."
Greenspan said the government has an opening between now and Labor Day to address the deficit problem, while the economy is still growing. When the dollar turns down, he said, the inflow of capital will dwindle, interest rates will rise, and the Federal Reserve Board will "face a terrible dilemma." It will have to decide whether to pump up the money supply in order to accommodate government and private borrowing needs, thus triggering inflation, or allow interest rates, which are already damaging many industries, to go even higher.
For some of the governors, the problems ahead no longer need explanation by learned economists. They see the warning signs in the present ruin of American agriculture, which is being driven out of its export markets by the distorted strength of the dollar. As Sinner, the freshman from North Dakota remarked, "Unless we say, 'Mr. President, you're wrong,' the whole protive sector of the economy is going to explode the way agriculture has."
If a freshman governor in Bismarck can figure that out, why can't the president? Maybe because the governor has no "glide path" to a mythical "soft landing" available to him.