High Hopes, Hard Choices
By Evan Thomas
For his Inaugural Address on Monday, Ronald Reagan planned to be modestly attired, in a plain blue business suit rather than the black club coat and striped trousers he wore when he first took the oath of office in 1981. Like the President's clothing, the Inaugural celebration was toned down, at least in comparison with the $16 million extravaganza that launched Reagan's first term. The four-day celebration was not exactly subdued; not with eight black- tie balls, two galas, a huge fireworks display and a parade. But the theme of the Inaugural was "We the People," and even if many in attendance wore fur coats and rode around in limousines (more than 1,000 cars were hired for the long weekend), the affair was supposed to have a distinctly populist flavor.
At 11:57 a.m. on Sunday, the 40th President raised his right hand and made the ritual pledge to "preserve, protect and defend the Constitution." The ceremony was private; the Inaugural date required by the Constitution, Jan. 20, fell on a Sunday this year, and Reagan had the political sense not to upstage either the Sabbath or the Super Bowl.* The ceremony was limited to the President and the Vice President and 95 guests: family and friends, the Cabinet, Congressional leaders and the President's closest aides. For the first time ever, news cameras were allowed to record the scene. Later in the day, Reagan arranged to toss the coin before Super Bowl XIX, an officiation beamed from the White House to Stanford Stadium in California and some 120 million sports fans viewing at home.
On Monday, some 140,000 people on the scene and millions in front of television sets were expected to watch Reagan be sworn in for the second time and then deliver his Inaugural Address at a for- mal convocation at the West Front of the Capitol. Drafts of the speech, largely written by the President himself, were long on uplifting themes and short on specific proposals. Reagan called for an "American renewal" that frees up the nation's entrepreneurial spirit by shrinking Big Government. In Reagan's by now familiar
FOOTNOTE: *James Monroe, the first President-elect faced with a Sabbath Inaugural Day, decided to wait until Monday, leaving the nation technically leaderless for a few hours. Woodrow Wilson took the oath of office on a Sunday in 1917 in a private ceremony but staged a formal Inaugural for public consumption the next day. So did Dwight Eisenhower in 1957.
vision of the future, economic opportunity beckons everywhere, the U.S. is again respected abroad, and "traditional values" are honored at home.
Reagan's precise legislative plans will not become clear until his State of the Union message, scheduled for Feb. 6. But the broad outlines of his second-term agenda are already well known. His goals will be far harder to achieve than those pursued in the first term. It is easier to persuade Congress to cut taxes, as he did in 1981, than it is to reform the tax system, as he will try to do this year or next. It is easier to cut back programs for the poor than to whack entitlements for the middle class, which by and large escaped the budget ax last term. It is easier to buy more arms and denounce the Soviets as an "evil empire" than it is to work out meaningful arms- control agreements.
Viewed broadly, Reagan's agenda seems hamstrung by internal contradictions. It is difficult to imagine, for example, how he can spend more for defense, refuse to raise taxes or cut Social Security, and still chop the annual deficit in half. He almost certainly cannot expect the Soviets to reduce their arsenal of heavy land-based missiles while the U.S. plunges ahead with the Strategic Defense Initiative (Star Wars).
Reagan seems so dreamily unconcerned with these realities that even some of his own backers fear he may lose control of future policy struggles. Incredibly, only two months after Reagan won back the White House by a landslide, and before he had even been sworn in for a second term, many in Washington regard him as little more than a lame duck. Critics contend that he has already frittered away his mandate by inaction and staff shake-ups, like the surprise job swap of Treasury Secretary Donald Regan and White House Chief of Staff James Baker.
Reagan skeptics, and even his supporters, may be making the oft-repeated mistake of underestimating the amiable old actor. Measured by public opinion polls, the President has never been in better shape. His approval rating has gone up since the election, from 58% to 65%, according to a New York Times/CBS Poll. Even Reagan's aides are surprised. Says one: "The price of not doing much so far has been nothing."
In November and December, Reagan spent almost as much time vacationing in $ California (18 days) as he did working at the White House (21 days). Official Washington huffed at this relaxed approach, but Reagan sensed that the public needed a respite from politics as much as he did. By laying back, he let Congress and the bureaucracy wrestle with the hard choices while he waited for the right moment to swing the power of his office--and his immense popularity --behind one course of action or another.
Before long, though, Reagan must seize the initiative. He must submit a budget to Congress in February. If no cuts are made in current spending, the deficit will grow from $218 billion this year to $235 billion in 1988, and the national debt will rise to $2.5 trillion, about 2 1/2 times what it was when Reagan took office.
Reagan does not appear to be gripped with a sense of urgency. After a brief slowdown last summer, the economy has picked up once more, while inflation remains under control. Interest rates are drifting down again (the prime rate dipped from 10.75% to 10.5% last week). But sooner or later, experts warn, the high deficits will drive up interest rates, causing a spiral of stunted growth, increased unemployment and even more red ink as Government revenues decline.
Reagan's goal is to reduce the annual deficit to 2% of G.N.P. ($100 billion), about what it was when he took office. Since the President has ruled out tax hikes or cuts in defense and Social Security, Budget Director David Stockman has tried to find savings in the budgets of federal agencies and in well-entrenched entitlement programs. The cuts he has so far suggested fall $40 billion short of Reagan's announced goal, even assuming the rosiest economic forecast. Moreover, powerful lobbies are massing against the proposals.
Stockman would like to slash the bankruptcy-bound Medicare system (estimated 1985 cost: $71 billion) by $3 billion next year and $20 billion over three years, principally by freezing hospital and doctors' fees. The medical lobby is determined to stop him. Stockman proposes cutting agricultural subsidies by close to $9 billion over three years, but farmers are up in arms. He has suggested reducing student aid by $5.5 billion during the same period, angering millions of middle-class families with college-age children.
Reagan's budget is considered dead before arrival in Congress. Senate Republican leaders have vowed to write a budget of their own. The centerpiece is a freeze on most federal programs, including defense and Social Security. This would save $38 billion next year by eliminating cost of living increases and halting the natural growth of programs. From the vantage point of special interests, a freeze at least preserves programs instead of letting them become targets for extinction. As for fencing in the sacred cow of Social Security, the G.O.P. Senators think the public is ready for a show of fiscal backbone by their representatives. Says Senate Republican Whip Alan Simpson of Wyoming: "There is a greater risk for a politician in 1986 to say 'I couldn't do anything about the deficit' than to say 'I voted for a freeze.' "
After growing at an average rate of 8.3% over the past four years, the proposed $313 billion defense budget will come under especially close scrutiny. One senior Pentagon official acknowledges, "Defense is the largest discretionary element of the budget. Clearly here if anywhere some cuts must logically be made." Defense Secretary Caspar Weinberger has reduced the Pentagon's proposed budget by $8.7 billion, but most of his cuts, which include no weapons systems, are illusory. For instance, $1 billion in cuts to civilian officials at the Pentagon had already been counted in Stockman's freeze on federal salaries. Weinberger, a cagey operator, warns that deeper trims could wreck arms control by convincing the Soviets that they need not bother to bargain, since Congress will reduce U.S. military strength for them.
But Weinberger may find the going tougher than usual on Capitol Hill, where discontent is growing even in precincts normally friendly to the Pentagon. House Democrats ousted Arms Services Chairman Melvin Price of Illinois, an aging and pliable hawk, and replaced him with Les Aspin of Wisconsin, a maverick who has often crossed the Pentagon. In the Senate, the retirement of Armed Services Committee Chairman John Tower, the Pentagon's chief congressional water carrier in years past, paved the way for the succession of the independent-minded Barry Goldwater. Vows Aspin: "Congress simply isn't going to go along with letting defense off scot-free."
The MX missile, which will be put to authorization and appropriation votes in both houses some time in March, is definitely in danger. Aspin, a supporter of the MX last year, has hinted that he will switch his vote. Goldwater has already stated that the controversial missile, which would cost $20 billion to $30 billion, is dead. The bill for Star Wars, now in the earliest stages of research, will not come due for many years, but some Congressmen are threatening to strangle this Reagan-policy brainchild in the crib.
Congress, however, has a history of talking tough about defense spending and backing down at voting time. Contracts to build weapons systems provide jobs back home, and many legislators feel uneasy about second-guessing the Executive Branch on national-security needs. This year the White House will also argue that Star Wars and the MX are key bargaining chips in the arms talks. Concedes Republican Senator Charles Mathias: "It's a hell of a time to pull the plug."
Cutting spending, of course, is not the only way to deal with the deficit. Congress could raise taxes. Reagan has resisted a tax increase except as a "last resort." He wants to reform taxes, not raise them. Last November the Treasury Department announced an ambitious Tax Fairness Proposal that would lower individual rates in return for eliminating many breaks and loopholes. The plan is strongly populist: by 1986 it would reduce the average taxpayer's burden by 5.9% while increasing taxes on business by 25%. But most middle-class tax breaks, including deductions for charitable contributions, mortgage payments on vacation homes, and even the "three- martini lunch," would be wiped away or cut back. Predictably, special interests have sent up a howl.
Some optimists see in the budget and tax wars a chance for a radical solution. The Treasury tax plan is "revenue neutral"; it neither increases nor reduces taxes. But some wonder if it could not be rejiggered as part of a grand compromise. Their goal is to persuade Reagan to give up his opposition to a tax hike (dressed up more benignly as "revenue enhancement") in exchange for significant tax simplification and cuts in entitlement programs. Such a scenario is highly speculative, to put it mildly. The White House is adamant about keeping the budget and tax reform on "separate tracks," with the former necessarily taking precedence, and Reagan seems dead set against any kind of tax hike.
In fact, the White House does not seem to have any overall strategy for accomplishing Reagan's budget and tax goals. One top aide dryly states, "We'll know more about how we get from here to there when we're closer to there." Another senior adviser is exceedingly gloomy. "We are so far into the deficit soup now that there's not going to be any time in the next four years when we will see the big fix," he says. "It's just not going to happen unless there's a crisis."
Reagan seems willing to let others do the hard slogging for now. Still, his easygoing attitude offers some hope for the long term--that is, if detachment connotes flexibility. At a press conference two weeks ago he seemed amenable to letting Congress break his campaign promises not to touch Social Security. Shrugged Reagan: "Maybe they've got some ideas we haven't thought of." If the White House falters, Senate Majority Leader Robert Dole of Kansas may take charge. Dole is more forceful than his predecessor, Howard Baker, who preferred to follow the White House lead and quietly nurture compromise. "If Dole can dodge the bullets, he'll be a real hero," says Congressman Leon Panetta. Curiously, Dole's biggest headaches may come from House Republicans, especially fellow Presidential Aspirant Jack Kemp, an archfoe of tax increases.
In the end, Reagan cannot just stand on the sidelines and watch the budget and tax battles. Historically, Congress lacks the political will to accomplish unpopular tasks, like raising taxes, without the firm backing of the White House. Presidential inaction means stalemate.
Reagan does have one sweeping solution to the federal deficit: economic expansion. He envisions boundless growth that will pour revenue into the pockets of taxpayers, and hence the Treasury. The key to prosperity, he ardently believes, is unfettering free enterprise from Government red tape. In his first term, Reagan appointed a Task Force on Regulatory Relief to attack Big Government. For 30 months, the task force scrutinized federal regulations, weeding out more than 100 burdensome rules. In 1983 the task force declared victory, claiming that it had uncovered enough wasteful regulation to save businesses and consumers $150 billion.
That saving was undoubtedly exaggerated. In fact, Reagan discovered that deregulation was easier to preach than to practice, especially in the area of health, safety and the environment. Reagan had to back off his vow to dismantle the Occupational Safety and Health Administration. Attempts to weaken the Clean Air and Clean Water Acts were abandoned because of a public outcry. After officials at the Environmental Protection Agency were accused of making sweetheart deals with industry, environmental deregulation "stopped in its tracks," in the words of William Ruckelshaus, the EPA administrator whom Reagan appointed to straighten out the agency. Indeed, the Administration has now dedicated itself to reviving the Superfund to clean up toxic-waste sites.
Reagan is more determined than ever to press on with economic deregulation. He would like to decontrol natural-gas prices completely but faces consumer opposition. The White House wants to ease banking regulation, but many Congressmen are uneasy about the large number of recent bank failures. The Administration finds itself fighting off attempts to reregulate freight railroads that were deregulated under the Carter Administration. (Because of the Teamsters' support for Reagan, the White House has been noticeably unenthusiastic about extending trucking deregulation.)
When Reagan first took office, he set about cutting the federal bureaucracy by trying to abolish the Departments of Energy and Education. Four years later, he is still trying, but congressional opposition remains strong (Congress is leery, for example, of transferring the job of building nuclear weapons from Energy to the Pentagon). To satisfy Reagan's enthusiasm for promoting high technology and space exploration, Administration officials have talked vaguely about creating a Department of Science and Technology. Reagan is captivated by the notion of commercializing outer space. He is willing to spend $150 million this year, and a total of $8 billion, to build a manned space station, seeing it as an important step toward a space program that pays for itself.
In general, the President's economic initiatives are aimed at dismantling Government programs, not creating new ones. One exception is "enterprise zones," designed to encourage development in poor urban areas by giving businesses tax breaks and other preferences. Enterprise zones have backing from both sides of the aisle in Congress and may be approved this year.
The Administration feels compelled to do something to right the foreign trade imbalance ($130 billion in 1984) and stem the drain of dollars moving to buy foreign products. Just what it will do, however, remains highly uncertain. While declaring itself firmly against protectionism, the Administration is trying to jawbone the Japanese into slowing the flood of products into U.S. markets.
Reagan will come under renewed pressure from the New Right to push for organized prayer in public schools and a ban on abortion. The President is likely to do just what he did in his first term: pay lip service to these goals and do little to further them in Congress, which is unlikely to tackle them until the gut economic issues are resolved. Reagan may, however, be able to further the New Right's agenda in another arena by picking conservative Justices for the U.S. Supreme Court. With five of the Justices 75 years old or older, the President will almost surely have the chance to fill one or more vacancies. With just a couple of changes, the court could reverse or back away from its landmark decisions legalizing abortion and banning school prayer.
Law-and-order will get new emphasis in the President's second term. The Justice Department may become far more visible under Reagan's old Counsellor, Attorney General-designate Edwin Meese, than it was under the gray and quiet William French Smith. Meese, who once called the American Civil Liberties Union a "criminals' lobby," would like to cut back rights for the criminally accused, establish a federal death penalty and crack down on Government leakers.
What Reagan truly wants is to be a "Peace President." After allowing relations with the Soviets to reach a 20-year low in his first term, he has lately tried to ease tensions. The resumption of arms talks with the Soviets earlier this month was greeted with enormous relief around the world. Reagan has made it clear, however, that he wants his arms-control negotiators to come home from Geneva with "more than a piece of paper." Last week he told them that he will not settle for less than a verifiable agreement guaranteeing deep cuts in nuclear arsenals.
Whether he realizes this goal may depend on what he decides to do about his proposed Star Wars defense against ballistic missiles. Reagan sees the Strategic Defense Initiative as a way ultimately to render nuclear missiles obsolete. But most experts insist that a protective shield over the U.S. is both exorbitantly expensive (as much as $1 trillion) and impossible to perfect. Weinberger acknowledged last week that it would have to be supplemented by an air-defense system against bombers and cruise missiles, which could cost $50 billion annually in its first years of operation--with no guarantee of its effectiveness.
Critics of Star Wars would like to use it for leverage in arms-control bargaining: to promise not to deploy it in return for reductions in Soviet heavy land-based missiles. But the Administration wants to keep the discussion of Star Wars separate from proposals for missile reductions. The next round of ; arms talks will be three-pronged, with separate negotiations on medium-range and long-range missiles and defense systems like Star Wars. The Administration announced last week that Washington Lawyer Max Kampelman, who successfully negotiated the Madrid agreement on European security and human rights in 1983, will be in overall charge of the U.S. delegation and also handle the talks on space weapons. Former Senator John Tower will be the U.S. negotiator on strategic weapons, and career Diplomat Maynard Glitman will be the point man on the intermediate-range missile discussions. Soviet Foreign Minister Andrei Gromyko declared last week that unless the U.S. was willing to bargain seriously on space weapons, arms-control negotiations would be "blown up." Weinberger said that he flatly "ruled out" giving up Star Wars. Yet Secretary of State George Shultz was more flexible, agreeing that it "makes sense" to look at the "interrelationship" of offensive and defensive weapons.
Reagan must resolve these policy differences between his advisers or lose control of the arms talks. He will also be consumed with the delicate task of achieving and preserving regional stability in various hotspots around the world, most notably Central America and the Middle East (see following story).
Unless unforeseen international crises erupt, the success of Reagan's second term will probably be decided at home. His "window of opportunity," to use a favorite Washington phrase, is variously estimated at somewhere between 60 days and eleven months. After that, it is widely assumed that Congress will become distracted by the 1986 elections. Reagan's ability to tackle the deficit, says one senior adviser, "is going to be determined by how successful he is coming out of the box."
But Reagan may prove to have surprising staying power. "Don't underestimate the President's ability to go to the country," warns Vice President George Bush. Reagan is not an insider like Lyndon Johnson, who would deal and wheedle, reward and punish. Reagan's way of disciplining Congressmen is simpler: he just goes on TV and turns their constituents against them. Indeed, the term lame duck loses much of its meaning with a President who knows how to use television as a bully pulpit.
Reagan has always been extraordinarily adept at talking over the heads of Congressmen and the federal bureaucracy to the public at large. The Inaugural theme of "We the People . . . An American Celebration," taken from the ^ preamble to the Constitution (which, as Reagan's luck would have it, will be 200 years old in 1987), is not just a pleasantly corny celebration of democracy. To many citizens, the implicit foe of We the People is They the Government. There has never been much question about whose side Ronald Reagan is on, even after he became Chief Executive of the Government.
Reagan sincerely identifies with the ordinary citizen. He enjoys confounding the experts, or using his common sense to upset the predictions of trained professionals. It must make Reagan chuckle to realize that he, armed with his B.A. in economics and sociology from little Eureka College, more accurately forecast the rebounding economy than his Council of Economic Advisers, with their Harvard Ph.D.s.
In his first term, Reagan showed that a President with a few strongly held beliefs and a well-honed ability to express them could dominate Congress and a bureaucracy that was supposedly spinning out of control. He could even enjoy running the Government and get eight hours of sleep at night.
Reagan remains buoyantly confident that he can continue to have it his way. His aides say he fairly floats around the Oval Office these days, unperturbed by the naysayers. His electoral mandate tells him that the people want him to "stay the course." Critics carp that he is too complacent, too set in his ways. Yet Reagan's simple, straight-ahead optimism can be deceiving. In the past, he has shown a shrewd sense of political timing, a knack for changing course at just the right moment. The hard choices of Ronald Reagan's second term will test his instinct for compromise, again and again.
With reporting by Laurence I. Barrett, Christopher Redman and Barrett Seaman/Washington