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GOP split on economic policy

By Richard J. CattaniStaff correspondent of The Christian Science Monitor / September 9, 1981



New York

President Reagan may have to boldly trim the sails of his economic program if he is to hold his course toward majority Republican political power. Economic results remain the overriding force in US political tides, conclude political scientists and Washington veterans who met here at the American Political Science Association (APSA) convention this past weekend.

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The Reagan juggernaut in Congress may have carried the administration too far , too fast, the experts say. Worries about federal deficits and future inflation are eroding Wall Street's confidence.

To show flexibility and prudence, a concession in the third year of the tax cut may be one change Reagan could make.

"[President] Nixon would have proposed canceling the third year," says Richard Nathan, a former Republican White House budget official now at Princeton University. "If they're [the Reagan administration] really shrewd, they should come out and say 'We know what's going on in the financial markets. We're not going to back down on our budget cuts and principles. But we'll make this change for the sake of confidence.'

"They have to avoid losing face and momentum."

David Gergen, a Reagan spokesman, said here President Reagan could follow the example of Franklin D. Roosevelt in changing course early if economic results don't occur as expected. FDR went into office promising a Reaganesque assault on the federal budget, but soon began the New Deal escalations of programs to fight the Great Depression.

"If [the current program] doesn't work, let's try something else," Mr. Gergen said.

Reagan could make such a move, says Thomas Mann, congressional expert and executive director of the APSA.

"He can do it," Mr. Mann says. "People have short memories. He's already had his budget and tax victories. He has room to concede. People didn't really trust the third year of the tax cut anyway.

"It would show him flexible, willing to move with new evidence."

"This administration more than any other I can think of has pegged its hopes to the economy," says James McGregor Burns, Williams College presidential scholar.

"But the Hoover [depression] precedent is still very much before the country. If the Republicans come through with prosperity, it looks very good for '84."

"The Democratic-liberal coalition has collapsed, with a fair degree of permanence," argues James Reichley of the Brookings Institution. "Inflation is the real issue: If inflation goes down and the economy is in good shape, the Republicans will be in good shape for a considerable time."

Politically, the Republicans have positioned themselves well for future gains , although most scholars agree the GOP's hoped-for realignment has not yet occurred.

The Republicans have broken the "deadlock" or White House-Congress impasse that has hindered recent presidents.

In the political scientists' jargon, the Republicans have achieved "majoritarian" dominance in Washington, pulling Congress in line with White House wishes.

but mastering the economy, and particularly the "stagflation" of recent years , may not be achieved jut by mastering the Washington scene. Some analysts argue the Reaganites may be faced ironically with too much success.

"The Cheshire Cat in all this may be [House majority leader Thomas P.] "Tip" O'Neill [Jr.]," says Mr. Nathan.

"If you look at the Reagan budget, when you see how they have to cut twice as much -- or three times as much -- in the next two years to give the marketplace the confidence it needs, you see they're in a pickle.

"They've been too successful. They got rolled by getting twice as much as they should have on the tax cut. If they had gotten their budgets cuts and half -- or two years -- of their tax cut, they'd be in fine shape."

The route of the Democrats on Capitol Hill Kept the traditional moderating "corrective mechanism" from coming into play, Nathan says.

Even within GOP ranks, moderate Republicans -- who would have wanted a more gradual inflation-fighting program -- have been quiet.

"The moderates can see the strong tide running with Reagan's group," Nathan says. "They may see themselves in a better bargaining position if the economy falters."

Nathan contends Reagan did win a mandate in the last election, based on "a very deep new skepticism toward the role of government in society."

The Reagan team's success "goes much deeper than TV or theatrical appeal," he says. "They're smart about how they've organized the government, and their use of people."

But the Reagan economic program was "better in its short-range than its long-range calculus," he says before they saw how it would all come together.