Mr. Reagan's way out
WE keep being surprised by Mr. Reagan. In his rhetoric he is always the ideologue, but over and over again in practice he turns out to be a pragmatist -- with two exceptions. Those two exceptions are going to be extremely important in the rest of his administration and in the balance that history will someday draw under his record.
He has never yet, for one second or by a hair, given way on his opposition to raising taxes.
And he has dug in his heels on the idea of using his Strategic Defense Initiative (``star wars'') as a bargaining chip with the Soviets. It is ``nonnegotiable.''
Now, think his problem through as follows:
Gramm-Rudman is law. By law, before the second Reagan presidential term is over Mr. Reagan is either going to have to raise taxes or accept cuts in his military program. Any cuts in military aid would have to be at least in part at the expense of SDI.
If he stands firm to the end of his presidency, both on no bargaining over SDI and on not raising taxes, the probable, probably inevitable, consequences would, to put it mildly, be hair-raising.
There can be no negotiated reduction in offensive weapons in a deal with the Soviets unless Mr. Reagan gives way on restraints about the deployment of ``star wars.'' Without a new arms control agreement, there is little chance of cutting the military budget. Without cuts in the military budget, there can be no approach to a balanced budget, and without a tax increase, no end to skyrocketing deficits.
But there stands that granite rock of Mr. Reagan's refusal to consider raising taxes.
There has to be a way out, and there is one, if only Mr. Reagan can bring himself to recognize it.
The best ``manna from heaven'' that has drifted down on his administration is the decline in oil prices. It is already cushioning the American economy against the inflationary push of the unbalanced budget. Any change in oil prices, plus or minus, translates into inflation, up or down. This is why the stock market has reacted so happily to the decline in oil prices.
The price of oil at its peak hit $37.05 a barrel. That was in 1981. It has been sinking ever since, which is the main reason that the huge deficits have not yet set off another inflationary spiral. Oil is less than $25 a barrel today. It continues to slip down. Experts are sure that it will go down at least to $20 a barrel, and most think it will go lower still.
Remember, oil was less than $3 a barrel only 20 years ago.
Here is a chance for Mr. Reagan to collect a lot of money without causing pain to the American taxpayer or damage to American business. He could put an import duty (he doesn't have to call it a tax) on imported oil. He could rig the rate of the import duty to the price of imported oil on a sliding scale, so that the American economy would continue to benefit from declining oil prices.
One suggestion is to assess the duty at three-quarters of the decline in the price. If oil went down by $4 a barrel, let Uncle Sam take $3 of that and leave $1 to the consumer. One estimate is that a duty of $5 a barrel would raise more than $100 billion, or half the current budget deficit.
Perhaps three-quarters of the windfall to Uncle Sam is too drastic. Well, make it half. Even a $1-a-barrel duty to Uncle Sam for each $2 drop in the oil price would be a bonanza that could take a lot of pressure off the budget and do a lot to trim the deficit.
The only drawback from Mr. Reagan's point of view is that it would also reduce the pressure on Congress to cut back further on federal welfare programs. If his great underlying purpose is to dismantle the New Deal, then he may be reluctant to accept the chance to lighten the debt by the import duty on oil.
But if he could compromise on ``star wars,'' accept a new arms control agreement with the Soviets to limit offensive weapons, reduce his military budget, and levy an import tax on imported oil, then the idea of a balanced budget would no longer be a will-o'-the-wisp, but a realistically reachable goal.
Mr. Reagan has proved that he can be pragmatic about many things. Can he do it on ``star wars'' and oil?