Reagan attaches price tag to his economic ideas
Chicago — Ronald Reagan has finally but a dollar cost on his controversial tax-cut and spending plans. But will such top Republicans as Gerald Ford fully support them?
In a speech to the International Business Council here, Mr. Reagan gave the much- promised details of how a Reagan economy would differ from Jimmy Carter's course to 1985.
Reagan promised to balance the federal budget in two years, cut personal income taxes 10 percent for three years running, and still produce a budget surplus of $93 billion by fiscal 1985.
Also, he would stunt the growth of federal spending. His economists project a Republican budget of $374 billion for the United States in fiscal 1985 -- $212 billion less than the Carter administration's projected $946 billion. The federal revenue take would be $180 billion less under Reagan than under Carter by fiscal 1985, Reaganites say.
In political terms Reagan sought to counter Carter changes that the Republican list of campaign policies would, when added up, lead the nation to financial ruin. And the wanted to answer John Anderson's taunt that the GOP tax-cut scheme to create a budget surplus was a matter for "mirrors."
But in what could be a GOP campaign snafu, former President Ford -- while announcing his plans to campaign for Reagan -- spoke out against the three-year tax-cut proposal. He favors instead a one-year cut and a wait-and-see position for the next two nyears. Mr. Ford apparently had not caught up with Reagan's recent shift to "supply side" eco nomic thinking and concern about the impact of a huge federal tax take from the gross national product (GNP)
The candidate and his advisers warn that without the Reagan plan the federal government would consume early one-third of the GNP by fiscal 1985, compared with a normal historical proportion of one-fifth. This swelling federal share of the national economy threatens to consume resources needed to expand investment and create jobs, the Reaganites say, presenting an even greater inflationary danger in the future.
The Reagan speech itself did not break new ground. And it resorted to generalities and political hyperbole, some listeners noted. Reagan said his approach to the "unprecedented crisis" would "require the most dedicated and concerted peacetime action ever taken by the American people for their country." A pre-speech briefing that lasted almost three hours, during which Ford talked with newsmen, left many reporters laboring to decipher a Reagan "fact sheet" and explanation.
But the Reaganites felt they had succeeded in drawing their candidate's proposal together into a package whose cost could be measured. The Reagan economists used Senate Budget Committee and Congressional Budget Office date for their projections, promising a revision and new budget should Reagan be elected.
In areas such as military spending the Reaganites forecast little change over the next four years from the congressional budget projections. Military spending would rise only slightly above the $270 billion the Senate already projects for fiscal 1985, for example. Because of the long lead time for fiscal 1985, for example. Because of the long lead time for military programs, the cost for Reagan proposals would not really emerge until later in the decade, his advisers say.
Reagan's proposed personal tax cuts and business depreciation allowances would mean $192 billion less in federal revenues in fiscal 1985, his advisers claim. This is considerably lower than the $251 billion Carter's economists charge would be lost under the Reagan plan.
Offsetting the revenue loss, Reagan would attempt to slow the growth of federal spending by 2 percent a year for two years, and by 1 percent a year for the next three years. This would shave $13 billion off projected federal spending in fiscal 1981 and $64 billion by fiscal 1985. Additional economic growth spurred by the plan would yield another $5 billion in revenues for fiscal 1981 above congressional estimates, rising to $39 billion by fiscal 1985.
How do the Reagan proposals strike business professionals?
As a Philadelphia banker put it on reviewing the Chicago speech:
"It's hard to separate the businessman from the voter. Specifics of a speech like Reagan's don't really matter any more than does the party platform. They are ways to project yourself as a leader who would do something.
"Virtually everything he has said in the speech he has said before.
"The economists I talked with feel in the short run there would not be much difference between a Carter and Reagan economy. But in the long run, we would get farthr under a Reagan administration.
"Carter, early on, had an opportunity to balance the budget and deal with inflation -- and he dismissed it. The Carter people do know what needs to be done. [Federal Reserve Board chairman Paul] Volcker knows he needs to bring monetary growth under control. Volcker has no political ambitions.
"But my associates feel the campaign drift has already gone to Carter. They think the Democratic Congress is more apt to work with a President of its own party. Congress is following the country to the right. Congress knows the country can't go through this kind of thing again -- running rates up so high to precipitiate a recession. Congress in the next four years may be more amenable to the President's direction."