Mr. Reagan's strategy

May 14, 1981

The soundness of President Reagan's political strategy comes out now in the fact that he has won the battle he could not afford to lose while ahead are two battles he can afford to lose, at least in part, and which, indeed, he may find it desirable to lose -- in part.

The battle he could not afford to lose was the battle over curbing the rise in federal spending.

Many differ about priorities in the curbing process, but no one who thinks seriously about getting the United States back onto a sound economic basis questions the importance of pulling back on the pace of federal spending. Right now is probably the last best chance to restrain federal spending short of a financial disaster such as befell Germany with the inflation of 1922-23.

That is now done, in substance. The big question was whether the House of Representatives, which the Democrats still control, would accept the Reagan curbs on spending. It did. Since the Republicans control the Senate there is little more than a mopping-up operation to complete action on the spending curbs.

The new business before Congress and the American people is whether to give Mr. Reagan and the battalions which marched behind him during the campaign those tax cuts which to many of them were the main goal of the Reagan crusade.

This battle is going to be different from the battle over the curb on spending, because support for the tax cuts is not as broad. On curbing spending many a Democrat agreed with almost all Republicans. On tax cutting a good many Republicans with conventional or conservative financial backgrounds find it difficult to believe with the "supply-side" enthusiasts that a cut in taxes would help to curb inflation.

Would tax cuts so stimulate the economy that the effect would be to reduce inflation? Or would tax cuts add fuel to the inflation on one side of the fire while cuts in government spending were damping it down on the other?

The chances are that when Democrats challenge the tax-cutting part of the Reagan package they will find as many allies from among the more conservative Republicans as the Republicans found among conservative Democrats on budget slicing. After all, Republicans do not have a monopoly on conservatism in Washington. I can remember two political campaigns when Democratic candidates were more conservative than Republican candidates (James M. Cox in 1920 and John W. Davis in 1924).

It is not going to be surprising if the tax-cut part of the package is whittled down as successfully by Democrats as the budget was whittled down by Republicans.

If so, will it be damaging to the American economy? Economists disagree. My hunch is that budget slicing with only modest tax cutting would do more to check inflation than would the full Reagan program of tax cuts.

And doesn't the same go for military spending? If Congress actually put up the money for all the military hardware which Mr. Reagan has proposed there would be little if anything left from the savings from cutting back on human services.

After the tax-cut battle there will be a series of battles over military spending. Not all of the demand for restraint will come from Democrats. No prominent Republican challenged the Reagan doctrine of "the Soviet menace" during the campaign. And none has questioned it publicly since, but there is a lot of questioning just below the surface among Republicans in both Congress and the administration.

The idea that the US must try to outbuild the Soviets in all branches of military power belonged to the campaign season. Democrats will find allies in surprising places when they turn their attention to the details of military spending.

Mr. Reagan will certainly go through the motions of trying to fulfill his campaign promises on both tax cutting and military spending. But does he care as much about those two goals as he did about checking federal spending? And are they as important to the fight against inflation? Certainly military spending is inflationary in its overall effect.

If the first task of Mr. Reagan is to harness the inflation (which it surely is) then he was absolutely correct to fight and win his budget-curbing battle first. Now he can afford to take his next battles c omfortably. He does not have to win them in full.