Reagan lays it on the line
President Reagan's forcefully presented economic plan is the opening trumpet call for a bipartisan effort to lift the American economy out of its stagnation. We heartily applaud its goal: to put a break on runaway, unreasonable government expansion, to give individuals and private business greater incentive for investment, and thereby to spur economic growth benefiting all segments of society. Controversy is bound to swirl over specific aspects of the program in the weeks ahead. The debate, in Congress and among the public, will be helpful and healthy. But for the moment one can at least welcome this sturdy effort to change the national psychology -- the enervating idea that Americans can live beyond their means and yet expect a constantly rising standard of living. Surely government, the largest spender of all, must set the pace and the standard of budget responsibility.
In broad terms, we are pleased about a number of things. Mr. Reagan has set a proper tone of continued government concern for those poor who cannot find work and are unable yet to see their way out of poverty. Basic social spending in real terms would not be decreased; it would continue to go up, but the rate of increase would be slowed. The President has also followed through on his promise to ask "sacrifice" of everyone, business included; while there is considerable room for argument over just how balanced his program really is, the principle of "evenhandedness" by which he will have to defend his plan in Congress is established.
Also, Mr. Reagan has given strong support to the Federal Reserve System's effort to maintain a stable, moderate growth of money supply -- a factor no less important than fiscal restraint in the fight against inflation. Mr. Carter, it will be recalled, had insufficient interest in monetary policy as an anti-inflationary tool. The Fed allowed too rapid and unstable growth of money, thereby stimulating price hikes and gyrating interest rates.
As for specifics of the Reagan plan, it will take time to digest them. The battle in Congress will be over what program gets cut by how much, whether the proposed tax cuts are unrealistically high, and whether they are in fact equitably distributed. Many questions arise. It is far from clear, for instance, that cuts in marginal tax rates will lead to increases in the savings rate on average. One economist notes that the personal tax cuts proposed would not quite offset the increases in the windfall profits tax, the social security tax, and the "bracket-creep" tax increases, thus still leaving the consumer strapped. Moreover, if Congress cuts taxes but fails to go along with adequate spending reductions the budget deficits could end up bigger than ever. It thus has a responsibility to act wisely.
Bringing federal spending under control will mean stepping on the toes of many special interests. And while we will comment on individual items as occasion arises, the White House can be commended now for taking on a number of "sacred cows": dairy price supports, the Rural electrification Administration, food stamps, the Export-Import Bank, Medicaid. There clearly is fat in the system needing trimming. Whether the President avoided tackling such a blatant misuse of federal help as the tobacco subsidies simply to avoid a political confrontation in Congress is uncertain. But there are also other areas, including water projects, to which Mr. Reagan and the lawmakers could take an ax if they are in earnest about "even-handedness."
Defense deserves a mention. No American would refuse the funds required for a strong, effective military. But whether the proposed increases in defense spending -- even higher than Mr. Carter's -- are truly necessary or even absorbable is debatable. Also, measuring America's defense solely in terms of how many rubles the USSR spends is misleading.
Surely the test must be whether America's defenses are adequate to its security needs and interests -- not merely whether the US outspends the profligate, mismanaged Soviet system. Despite promises of some pruning, Mr. Reagan seemed to absolve the biggest US budget of all from the fine scrutiny of the cost accountants, yet few would deny there is enormous waste and inefficiency in the military. Here is an area for closer examination than Mr. Reagan has yet made.
One other matter concerns us. It would be unfortunate if the rallying cry against "bloated" government became a cry against government itself. It is the inefficient and wasteful programs that have, willy-nilly, taken on a life of their own which must be addressed. Not the many legitimate, constructive, and humane functions of government which serve the public interest. The aim is to make government effective and responsive to genuine need. It would be a mistake to conclude that a vigorous, vital society means no government involvement in the economy or no generous welfare programs. West Germany, it might be mentioned, which today outperforms the US -- with a lower rate of inflation, higher productivity growth, and steadier economic growth -- also provides more government help in such areas as clean environment, welfare, and education. The argument of "getting government off our backs" should not become a facile one.
The ball is now in Congress's court, and the public looks for honest, bipartisan consideration of the Reagan program in a spirit of national urgency. It would be unfortunate if the lawmakers began loading the plan with so many niggling changes and amendments as to virtually snarl it. They should instead confront each part of the package and vote it up or down, substituting their own cuts if they reject Mr. Reagan's. The President rightly laid down the challenge: if the lawmakers do not like his tough recipe for economic recovery, they should come up with somet hing as strong. Americans expect no less.