Playing It Cool or Frozen in Ice?

By Ed Magnuson

Reagan urges G.O.P. to "draw sabers and charge"

If the fate of the U.S. economy were not at stake, there might be some macabre enjoyment in watching the cat-and-mouse game being played out in Washington over Ronald Reagan's proposed budget for fiscal 1983. The President's men look at Capitol Hill and argue, in the words of one, "We have to let the process up there cook a while longer. It needs to bake some." Convinced that a projected $96.4 billion federal deficit is unacceptable, Republicans stare back at the White House, hoping for a sign of presidential compromise. Gleefully eyeing the disarray within the G.O.P., the Democrats sit back and wait nervously for the Republicans to try to quell the rebellion in their ranks.

Almost everyone in Washington is trying to figure out what the President will do. Is he playing it cool, trying to preserve as much of his budget as he can before finally compromising, as nearly everyone thinks he must? Or is he frozen in ice, convinced that his program is right for the nation and that Congress must take it or leave it? Not even his closest aides know for sure. Says one adviser: "Either he will spring a compromise at the most appropriate time, or he just doesn't see the nature of the problem and is being obstinate." One longtime Reagan associate bets on the latter. "He's an ideologue. He's saying what he believes, not necessarily what's smart."

Having failed previously to persuade the President that he should reduce the increase in defense spending and impose new taxes to lower the deficits, key advisers are not urging their boss to ease his rigid stance now. But without being disloyal, they are quietly prompting influential Republican and business leaders to make that case. So far, this campaign has had little effect. One problem is Reagan's charm. Observes one Senator about the persuaders: "They go in like tigers, but in the Oval Office they're pussycats."

Gracious and smiling, Reagan applied his blend of amiability and toughness at a lunch on Capitol Hill last week with most of the Senate's 53 Republicans. Any air of confrontation evaporated as he told the Senators: "Together I believe we can hold down taxes, hold down spending and ensure a national defense that is able to preserve the peace." He said that he would be happy to consider any bipartisan plan that meets those standards, adding: "When we have honest differences, you can count on me to be willing to listen." Declared Oregon Republican Mark Hatfield after the meeting: "He brought a reconciliation in place of estrangement." Added Nevada's Paul Laxalt: "It was upbeat. An obvious show of unity."

Still, the President's visit clarified nothing about the budget, since he coupled his willingness to listen with a warning that "we must stand firm on the three basic commitments." Despite his call for a bipartisan approach, he posed the issues in sharply partisan terms when talking privately with a handful of Republican leaders on the Hill. "What are the Democrats going to run on?" he asked. "Raising taxes? Bargain basement defense when our planes won't fly? Where the hell have they been for the last 40 years? They have been in charge and look at the mess they've created. That's why I say draw sabers and charge."

Yet in the November elections, Republicans face the prospect of trying to defend Reagan's budget, with its huge deficits and reduced social spending, at a time when the country may still be suffering from the effects of recession, high unemployment and double-digit interest rates.

The Senate's majority leader, Howard Baker of Tennessee, is keenly aware of the high stakes, for both the economy and his party. He has been meeting almost daily in his back office as a member of a group known as the Big Five to work on alternatives to the President's budget. The five include himself; Mark Hatfield of Oregon, chairman of the Senate Appropriations Committee; Paul Laxalt of Nevada, a Reagan intimate; Robert Dole of Kansas, head of the Finance Committee; and New Mexico's Pete Domenici, chairman of the Budget Committee. "My objective is to find a budget we can pass," says Baker, who is widely seen as the only man with the clout and skill to break the impasse, if the President will not.

Baker intends to have the Big Five lay out a number of options to their Republican colleagues at a lunch this week. If the G.O.P. Senators can reach agreement on a package, the results will be conveyed to the White House. No one knows what Reagan's reaction will be, although he is certain to say no if the Senators recommend any reduction in military spending, which most of them want.

Democrats in both houses, on the other hand, fear that the President would wield his veto power if they pushed an alternative of their own. "I went through that drill last year," recalls Illinois' Dan Rostenkowski, chairman of the House Ways and Means Committee, who had proposed a Democratic substitute for Reagan's tax cuts. "I came away unbowed but a little bloody. I can't move anything in the Congress." Democrats find themselves in an ambiguous political position. Most believe that Reagan's budget makes no economic sense and will severely prolong or even deepen the recession. Lacking the clout to revamp it totally, they are reluctant to block key parts of it, since they might then have to share the political blame for any economic chaos that occurs.

South Carolina's Democratic Senator Ernest Hollings outlined his comprehensive alternative proposals in a letter to the President last week. Hollings later told a news conference: "He ought to understand that this is not a poker game with cards played close to the vest." The implied plea, that Reagan should end the uncertainty by showing all his cards now, ignores an even more worrisome possibility: all his cards may already be on the table.

If so, the continued stalemate in itself could doom hopes for a prompt recovery from the deepening recession. Convinced that those huge deficits will keep interest rates high, businessmen are thus far unwilling to bet their buck on new investments and expanded production. Washington's waiting game, in short, carries risks that are not just political. --By Ed Magnuson. Reported by Laurence I. Barrett and Neil MacNeil/Washington

With reporting by Laurence I. Barrett, Neil MacNeil

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