"A Line Drawn in the Dirt"

By Ed Magnuson

President Reagan takes a "mind-boggling" deficit to the people

The Great Communicator was back from the nation's heartland, his spirits buoyed by the belief that he had made headway in the most difficult selling job so far in his presidency: convincing Americans, particularly skeptical Republicans, that they should accept his record 1983 budget--and its record $91.5 billion deficit. Relishing the fight and his underdog status, the President told three Republican congressional leaders at the White House that Midwesterners were with him. Said Reagan: "Over and over again, I was told, 'Don't change course, especially on taxes.' " When his trio of guests looked puzzled, the President quipped, "I can see your overwhelming enthusiasm." Then all four men laughed.

That amiable scene obscured some harsh realities. Despite Reagan's optimism, Senate Majority Leader Howard Baker, Senator and Reagan Confidant Paul Laxalt and House Minority Leader Bob Michel had asked for the White House meeting to deliver a message that was grim, no matter how gently they phrased it: Republicans on Capitol Hill will simply not accept a budget involving such unprecedented deficits.

No final budget vote need be taken in Congress until September (fiscal 1983 starts on Oct. 1), but the Administration's long-range strategy has not started well. Whatever Reagan may believe, his closest advisers do not expect Congress to approve the budget in anything like its present form. They hope they can hold the Republican-controlled Senate in line and force the Democrat-dominated House to propose such unpopular alternatives as canceling tax cuts, freezing Social Security benefits or slowing the military-spending buildup. Not only might such positions be risky in an election year, but the President could also blame Democrats for any resulting budget deadlock. The White House also hopes that the economy will revive enough by late summer to give its budget a lift and help prepare the party for the November elections. "The President is in the catbird seat," contends one of his top aides, referring to the budget process. "He has his program, and he has the veto power."

Crucial to that strategy, however, is stemming any potential rebellion in Republican ranks. That will not be easy. Even Baker was leery. "Every fiber in my political body resonates against a $90 billion deficit," he said. He went so far as to mention the unspeakable, for a Republican leader: "The ultimate tragedy would be if this country, teetering now on the brink of national bankruptcy, slipped over the edge." Declared Republican Senator William Armstrong, a key member of the Senate Budget Committee: "There is close to no chance that Reagan's budget will pass. Very few Republicans would vote for it. I know of no one." Fretted Michel: "The overriding consideration is the size of that deficit. It's mind boggling." Added Senate Republican Whip Ted Stevens: "I'm in sort of a state of shock."

Former President Jimmy Carter said the adoption of his successor's budget would be "one of the worst economic mistakes our country has ever made." Other Democrats sounded comparatively mild. Rumbled House Speaker Tip O'Neill: "I don't believe the President appreciates the depth of what is going on. Generally, I like the fella. He tells a good Irish story. But he has forgotten his roots. He associates with the country club-style of people." To which Reagan retorted: "Well, I have only played golf once since I have been President, and he is an inveterate golfer, and I am sure he must go to a country club to play golf." (O'Neill, who shoots in the high 90s, does indeed go to country clubs. On his one golf outing as President, Reagan, who years ago shot in the 80s, played on the more exclusive private course on the Palm Springs, Calif., estate of Multimillionaire Walter Annenberg.)

The President's foray into the Midwest was designed partly to take television time and headlines away from his critics. He had intended to talk only about his New Federalism proposals, which would have the Federal Government assume the full costs of Medicaid and give the states more than 40 programs, including food stamps and welfare. But when Reagan's critics charged that the President had proposed the New Federalism to take attention away from his economic problems, White House aides urged Reagan to confront the spending furor directly. "It's better to face it than to try to run away from it," said one.

Reagan took that advice with zest. At a Minnesota Independent Republican Party fund raiser to help re-elect Senator David Durenberger, the President started slowly but hit his stride by relying on a technique that had served him well in the past. Pointing to young people in the audience, he defended his unparalleled peacetime military spending as a campaign to make America "so strong that no other generation of young Americans will have to bleed their lives into foreign battlefields or beachheads some place out in the oceans." The Republican audience exploded with cheers.

In a Minneapolis TV interview, Reagan was less reassuring about his deficit projections. "We don't know what we're talking about," he said in a remark reminiscent of Budget Director David Stockman's infamous confessions, "nor does anyone else who tells you they're projecting deficits five years in advance."

Reagan turned feisty while addressing the Iowa state legislature. Eyes narrowing, he declared, "The budget we propose is a line drawn in the dirt. Those who are serious about reducing the deficit will cross it and work with us on our proposal or their alternatives. Those who are not sincere . . . will stay on the other side and simply continue their theatrics." He assailed "the knee-jerk reactions and the instant analyses" for being "as hasty as they were incorrect." Contended the President: "We must hold firm to our tax cuts and reduce the budget even more . . . We are at last and at least approaching the bend in the tunnel." Although Republicans control both legislative chambers in Iowa, those lines drew no applause from an audience that was, at best, polite.

In Indiana, where Republicans also dominate the legislature, Reagan's jokes and stories went over big. "If the Federal Government had been around when the Creator was putting his hand to this state, Indiana wouldn't be here," he said. "It would still be waiting for an environmental impact statement." Challenging critics, Reagan added, "To the paid political complainers, let me say as politely as I can, 'Put up or shut up.' " The ultimatum was applauded.

But Reagan ran into significant groups of protesters on the road. Shivering in the 10DEG cold, some 2,000 demonstrators, including students, auto workers, Indians and blacks, waved placards outside of Reagan's Bloomington, Minn., rally. Some signs tagged him as PRESIDENT HOOVER. In Iowa, Reagan critics held up antibudget slogans Like NANCY GETS RED DRESSES, WE GET PINK SLIPS. In Indiana, Democratic legislators wore buttons reading "12.4%"--the state's unadjusted December unemployment rate.

While the President succeeded in grabbing headlines, the drumfire of criticism did not abate. The United States Conference of Mayors warned that the 1983 budget would "seriously undermine the economic and social health of cities." The criticism from Governors was also widespread, but it was sharpest in the Northeast, where populous states already face severe budget problems. New Jersey's Republican Governor Thomas Kean, in office barely a month, charged that Reagan's budget "will have a severe human impact." Anticipating a $130 million state deficit even if there were no new Reagan slashes, Kean said New Jersey cannot replace funds taken away by Washington. An aide to Pennsylvania's Republican Governor Dick Thornburgh warned that the Reagan reductions would unbalance the state's budget. "We're not sinking yet," he said, "but it sure as hell looks as though a hole has been shot through our bow and a lot of water is rushing in."

Pressure groups began assailing specific budget rollbacks. The American Public Health Association protested a $5 billion cut in federal health programs. The consequence: increases in malnutrition, infant mortality and heart disease. Dr. George E. Pickett, one of the association's past presidents, warned that eliminating up to 5 million children from immunization programs could lead to outbreaks of measles and poliomyelitis. He termed the Reagan policy a "return to the world of Charles Dickens."

New York University President John Brademas, a former Indiana Democratic Congressman, deplored the decreases in federal loans to college students, noting that half the nation's 1.2 million graduate students might be forced to quit. That, he said, would "undermine the national effort to build our defense capabilities and improve our economic productivity."

The greatest worry of economists, however, was not the reduction of social programs but that the huge deficits would force interest rates still higher and choke off the general economic recovery Reagan's advisers are predicting for later this year (see ECONOMY & BUSINESS).

Amid all of the assaults on his budget, Reagan remained at least outwardly confident that he had chosen the wisest course, and he planned to make more forays into the countryside, convinced that he could win over the American people. He told his trio of Republican congressional leaders that he would not yield on his tax cuts or his military buildup. That seemed to rule out any possible acceptance of the main alternative suggested so far: a plan by South Carolina's Democratic Senator Ernest Hollings, the top minority member of the Senate Budget Committee, to place a freeze on most federal spending programs in 1983 and cancel the 1983 tax cuts (see following story).

While the President said he had given the Republican leadership some "running room" to bargain on the Hill, the maneuvering space was narrow indeed. One senior Administration official explained that it is "too early" for any Reagan retreat from his budget since that would make him "look weaker than Jimmy Carter." The implication was that the President might compromise later. If not, Ronald Reagan could wind up risking the judgment that he places his personal determination to be consistent above the economic well-being of the nation. --By EdMagnuson. Reported by Laurence I. Barrett/Washington and Douglas Brew with Reagan

With reporting by Laurence I. Barrett/Washington, Douglas Brew

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