While the Reagan administration's economic initiatives hang like a dark cloud over Wall Street, some industries view them with a great deal more enthusiasm -- especially the changes in the tax code.
The administration feels the "bears" in New York's financial district are miscalculating the results at the same time that others closer to day-to-day business operations are reacting positively, says a top US Treasury official.
"We've been getting groups coming in saying, 'Why didn't you do this for us, why didn't you do that?' and we say, 'We did, just look on Page 112.' And they read it and say, 'Oh, so you did it that way.' then they scratch their heads, and then little glints begin to appear in the corners of their eyes, and they rush out of the building with paper trailing after them."
In particular, the steel industry has pleased the Reagan administration by taking "the longterm view" and comitting itself to a $5 billion capital spending program. This commitment clearly is not based on the current picture of high interest rates and a slump in steel sales. Instead, steel officials appear to be agreeing with the administration that interest rates will stand at more reasonable levels in 1982 and that Reagan's promised economic recovery is on track.
Other major industries such as oil and autos seem prepared to bank on the Reagan recovery working over the years ahead. But at least one group -- the real estate industry -- seems to have read all the small print and concluded that it is well placed to cash in immediately on the new economic policies.
David Raboy, research director for the Institute for Research on the Economics of Taxation, says, "Over the long run we are going to see a considerable generation of new personal savings and that is going to help the whole economy in general but specifically real estate will benefit greatly."
Prof. Roman L. Weil, director of the Institute of Professional Accounting at the University of Chicago, says that "the new tax law makes investment in real estate more attractive than before." For example, he calculates that new depreciation schedules for a $1 million apartment building "all of a sudden make this investment $90,000 more attractive." The result, he says, will be more wealth generated from real estate -- and therefore more investment attracted to real estate. He cautions, however, that the ultimate gainer may be the current owners of property rather than new investors who can expect to pay higher prices because of higher expected returns.
For Lary Smith, chairman of the Commercial Investment Council of the Realtors National Market institute and a chicago realtor, the new tax policy is "directed toward stimulating economic growth by freeing capital for investment." The result, he feels, will be that investment in real estate will become more attractive than ever before.
Mr. Smith says that Reagan's decision to "create additional incentives for capital formation" will release pent-up demand for new housing and new commerciaL development.
Wall Steet lobbied heavily for Reagan's Economic Recovery Tax Act just six weeks ago. But the market has changed position radically. Wall Street has lost confidence in the Reagan administration's ability to cut high interest rates and curb inflation.
Underlying Wall Street's response is the view that Reagan's tax cuts are outpacing his spending cuts. Wall Street analysts are concerned that this will result in a sharphy mounting federal deficit rather than the balanced budget Reagan has promised for 1984. These analysts reason that government borrowing spurred by the deficit will crowd the private sector out of the credit market and send interest rates soaring higher.
The administration maintains the combination of personal and corporate tax cuts and incentive creates "$27 billion in personal cash flow" and "hands business $10 billion on a silver platter." Wall Street, it says, simply has not taken account of this additional cash which will offset the highly publicized 1982 federal deficit of between $42 billion and $60 billion.
For Wall Street, however, such administration thinking fails to recognize that overall budget cuts will not prove large enough to offset the revenue losses from the tax cuts.
Yet Reagan asks the country not to judge policies that don't take effect until October.