Reagan's first year; Economy: a mix of gains, setbacks; President Reagan at one-year mark: still popular, but growing doubts about his ability to deliver
Washington — ''How you look on the first year of the Reagan program,'' says economist Barry P. Bosworth of the Brookings Institution, ''depends very much on your income level.''
''If you have an upper income, you applaud the progress on inflation. If you are a low-income person, you either have lost your job or worry about losing it.''
Progress on inflation indeed has been the brightest spot over the past year, with consumer prices increasing at roughly a 9 percent level and wholesale prices even lower.
This progress, however, results not so much from the President's economic program, as from the deepening recession. High interest rates are the chief cause of the economic downturn.
The President hammered through Congress more than $35 billion in spending cuts, mostly in social programs. To some extent, however, these gains are offset by higher government outlays, including interest on the expanding debt.
''Between 1981 and 1983,'' says Rudolph G. Penner, director of fiscal policy studies at the American Enterprise Institute, ''interest on the budget debt will rise by at least $30 billion,'' washing out the benefit of most of the spending cuts which Mr. Reagan worked so hard to achieve.
Apart from a few increasingly lonely supply-side voices, experts in both political parties - plus the President's top aides - now urge him to correct his course or face potential disaster.
''What I can't figure out,'' says Mr. Penner, ''is this refusal to change.''
Until November, Penner says, he had been ''one of the real optimists'' that Mr. Reagan's economic policies would work. Now he is confronted by a sign that troubles him - the upward thrust of interest rates over the past few weeks.
Wall Street, in his view, had been waiting for a signal from President Reagan that his administration would do something dramatic to curb the huge budget deficits that loom ahead.
What should Reagan do? ''Rescind the third year of his income tax cut,'' says Penner, thereby saving $30 billion to $40 billion and sending a positive signal to investors that deficits will not be allowed to run wild.
So far the President refuses to countenance such a move, forcing his advisers to talk in terms of a package of excise tax boosts - on tobacco, alcoholic beverages, and gasoline - plus the closing of some tax loopholes.
Penner says such a package could be nickeled and dimed to death in Congress, as lobbyists for affected industries line up to oppose higher taxes.
As matters now stand, the Treasury may have to finance a $100 billion deficit this fiscal year, plus larger shortfalls in 1983 and 1984.
The pool of savings in the United States, from which investment capital comes , is limited. When the US Treasury, businessmen, and consumers all demand more money, there may not be enough to go around. Interest rates, in such a case, shoot up.
Monetarists in the Reagan administration applaud the determination of the Federal Reserve Board to fight inflation by sharply restricting the growth of the money supply.
This means, however, that President Reagan is trying to ride two policy horses that are steadily drawing apart. His fiscal policy, based on tax cuts, will stimulate the economy, while the Fed's tight money policy - which he supports - threatens to starve the recovery and generate a new recession.
''Every time we fail to coordinate fiscal and monetary policy,'' says economist Bosworth, ''we have soaring interest rates and recession.''
In the past, he notes, ''government has always done something to end the recession,'' by pumping more money into the economy to create jobs. This fans inflation.
This time around, says Bosworth, both the White House and the Federal Reserve ''are following a demand restraint policy and we will accept unemployment.''
Rather than lose the gains made against inflation, in other words, the Fed intends to stick with its tight money policy.
The first cost is growing unemployment. The second cost may be soaring interest rates, if the White House and Congress fail to limit budget deficits.
There is yet another reality, and that is the limits of the power which either the Soviets or Americans can exert among the increasingly assertive developing nations.
Reagan's perception of the presidency went from ''expectations to reality,'' he told the editors of the Reader's Digest in a recent review of his first year in office.
Despite this sense of realism, at times during the past year the Reagan foreign policy team was, in the eyes of many observers, amateurish. Loose talk from top officials, including the President himself, about how the US might fight a nuclear war added fuel to the West European neutralist and antinuclear movements.
The administration's initial handling of the AWACS radar plane sale to Saudi Arabia seemed equally amateurish. It took a maximum effort by Reagan himself to secure sale approval by a skeptical US Congress.
Most of the President's dealings with Congress on foreign policy went smoothly, however. The administration succeeded in lifting restrictions on aid and arms sales to traditional allies in South Asia and in Latin America who had been placed off limits by the Carter administration. The administration helped put together a compromise over foreign aid bills that required ''give'' from liberals and conservatives. But it put its own stamp on those bills by managing to place a greater emphasis on military aid than the previous administration had.
When it came to foreign policy crises, however, there was considerable continuity with the past. The President so far has relied for the most part on professional diplomats. When the Lebanon crisis last May threatened to explode into a war involving Syria and Israel, Reagan turned to career Foreign Service officer Philip Habib to help defuse that particular Mideast bomb. The cease-fire that Mr. Habib arranged, though fragile, has lasted for six months - a good deal longer than many observers thought it would. That cease-fire and the creation of an international peace-keeping force for Sinai have been the administration's main Middle East achievements.
The current major administration test is over Poland. Here again, State Department professionals, led by Secretary of State Alexander M. Haig Jr., have had much to do both with formulating and implementing policy. What they have produced so far is considerably more moderate than some Republican ideologues would have liked.
Conservative political activists complain, meanwhile, that State Department bureaucrats have not only prevented President Reagan from making a more forceful response to the crisis in Poland but also have led him to ''abandon'' Taiwan by refusing to sell it advanced fighter planes.
Other critics complain that the administration has reacted too much to events rather than anticipating them.
At the same time, the administration's pragmatism is being applauded by many foreign policy specialists in Washington. In the view of some of them, Reagan has moved from the right to the center of foreign policy thinking. Thus, while Reagan may have alienated some former supporters on the right, he may have gained some new supporters from the mainstream.
Looking ahead, the administration faces major challenges on at least four fronts in the coming year. Its tasks are these:
* In Europe, to keep the Western alliance together so that it can exert maximum influence on the Soviet Union and Poland as the Polish crisis continues.
* In the Middle East, to help secure Israel's withdrawal from Sinai and progress on the Palestinian autonomy talks while preventing a new flare-up in Lebanon.
* In Central America, to work through quiet diplomacy and economic and military aid to secure the survival of the hard-pressed civilian-military junta of El Salvador.
* In Namibia (South West Africa), to work through quiet pressures on all sides to reach a settlement that would guarantee a place for minority whites.
A diplomatic ''victory'' in Namibia - now within reach - might make the administration's foreign policy look much more successful later in 1982 than it now does.