Cover Stories: The Can't Do Government

By STANLEY W. CLOUD

"Government isn't the solution; it's the problem." As a candidate and a President, Ronald Reagan loved that line. But Reagan seemed simply to be indulging in harmless hyperbole or offering his version of the time-honored aphorism that government is best when it governs least. Surely he did not seriously propose to dismantle an institution that had brought the U.S. through two world wars, restored stability during the Depression and played a major part in developing one of the highest standards of living on earth.

Or did he? If Washington was "the problem" when Reagan took office in 1981, it looks like a costly irrelevancy today. After almost nine years of the Reagan Revolution, Americans may wonder whether the Government -- from Congress to the White House, from the State Department to the Office of Management and Budget -- can govern at all anymore.

Abroad and at home, challenges are going unmet. Under the shadow of a massive federal deficit that neither political party is willing to confront, a kind of neurosis of accepted limits has taken hold from one end of Pennsylvania Avenue to the other. Whatever the situation -- the unprecedented opportunity to promote democracy in Eastern Europe, the spreading plague of drugs, the plight of the underclass, the urgent need for educational reform -- the typical response from Washington consists of encouraging words and token funds. Yet voters, especially the better-organized ones, continue to demand -- and often receive -- more benefits and services while rejecting higher taxes.

Even some Republicans are expressing concern about the paralysis. | Conservative analyst Kevin Phillips described the problem two weeks ago in the Washington Post as "a frightening inability to define and debate America's emerging problems." Last week's 190-point stock market tumble was the immediate result of economic developments, namely UAL's failure to obtain financing for its leveraged buyout. But Washington's glaring inability to control spending hardly inspires the confidence that markets need.

Ironically, the best depiction to date of the nation's gridlock may have come last summer from a ranking member of the Bush Administration: Budget Director Richard Darman. In a speech at the National Press Club, Darman blasted both the Government and the voters for mimicking spoiled children with demands of "now-nowism -- our collective shortsightedness, our obsession with the here and now, our reluctance adequately to address the future . . . Many think of ((the deficit)) as a cause of our problems. But it is also a symptom, a kind of silent now-now scream."

Darman's observation -- oddly reminiscent of Jimmy Carter's much maligned 1979 "malaise" speech on the nation's shrinking horizons -- was acute. But even as he was speaking, Darman and others in Government were obscuring the size of the federal deficit through slick bookkeeping and legislative tricks and promising bold new programs that they knew the federal budget could not sustain.

Such hypocrisy is becoming more and more common in the Administration and Congress as the contradictions, limitations, frustrations and injustices they have created become increasingly apparent. Three key indicators of the degree to which Government has lost its bearings were evident last week:

Budgetary Madness. As the 1990 budget is being crammed into a single 1,376- page package, the White House and Darman's Office of Management and Budget have joined Congress in a staggeringly cynical conspiracy to mask the actual size of the deficit. OMB says it will be $110 billion in the next fiscal year, within the Gramm-Rudman-Hollings target zone. But nobody really believes that. At the same time, several long-term, big-ticket items have been taken "off budget," including at least $30 billion of the $50 billion for bankrupt savings and loans over the next three years. Because Gramm-Rudman-Hollings contains no penalty if estimates of past deficits are wrong, the Pentagon has shifted $2.9 billion from the deficit for fiscal year 1990, which began Oct. 1, to the previous year, simply by moving a payday back two days.

The Administration has proposed almost no specific budget cuts this year, leaving Congress to find whatever savings it can. The Senate late last week passed a budget-reconciliation bill, but hours of negotiations with the House remain before final approval. If the bill does not reach the President early this week, for the first time ever the Gramm-Rudman-Hollings buzz saw will swing into action, requiring across-the-board spending cuts -- in Medicare, education, law enforcement, defense. Congress can vote to restore the money once the deadline is past. Dan Rostenkowski, chairman of the House Ways and Means Committee, wrote in the New York Times last week that Congress should let Gramm-Rudman-Hollings take effect to force a crisis: "Our refusal to attack the deficit would be comic if it were not so irresponsible."

Yet many senior Bush advisers argue that the deficit is no longer a major concern because it is declining as a percentage of the gross national product. But that is true only by virtue of bookkeeping magic. The Congressional Budget Office puts the real fiscal-1990 deficit at $206 billion and says it is increasing relative to the GNP, thereby exerting upward pressure on real interest rates. Even so, says a White House official, "hardly anybody in the White House, or in the financial world, or elsewhere in the real world, believes that the budget deficit matters."

Special-Interest Politics. Congress last week seemed to be moving toward approval of the Administration's plan to cut the tax on capital gains to 15% as well as repeal or drastically curtail the catastrophic-health-care program for the elderly that was passed only last year with the wholehearted approval of the Reagan White House.

The capital-gains cut, which would fulfill one of Bush's few specific 1988 campaign promises, is aimed at the well-to-do executives and wealthy investors in the Republican electoral coalition. The Democratic leadership on Capitol Hill mounted a confused, last-minute campaign to stymie the cut as unfair to working people. But the leaders' hearts, let alone those of rank-and-file members, did not seem to be in the fight. A two-year cut easily passed the House, while a bipartisan group of Senate leaders negotiated ways to make the reduction permanent.

Although the White House argues that lowering the capital-gains rate would spur economic growth, many economists predict that it would add billions to the deficit over the long term. That was the least of considerations, however, in the White House and Congress. Says Speaker of the House Tom Foley: "I see little or no evidence that the Administration is pursuing serious deficit reduction."

The catastrophic-health-care program, which lobbying groups for the elderly hailed at its passage, imposed an annual surtax of up to $800 on well-heeled Medicare beneficiaries, who balked at having to pay for benefits that were often duplicated by their private insurance. Last summer they began an intense, well-organized campaign for repeal, even though it could mean eliminating the entire program and leaving millions of needy seniors uncovered. The House voted overwhelmingly to do just that on Oct. 4, but the Senate, while inclined to eliminate the surtax, is trying to keep some parts of the program.

Government by Symbolism. Reagan was a master at this, and Bush has proved a very quick study. When the Supreme Court last July ruled that the burning of the U.S. flag qualified as protected free speech under the First Amendment, Bush and his advisers organized a media event before the Iwo Jima memorial in Washington so the President could call for a constitutional amendment to ban flag desecration. Congress shied away from an amendment, but last week it passed a simple criminal law that would impose a jail term of up to one year on anyone who burned the flag. The White House indicated that Bush would let the law go on the books without his signature, because he thought it was probably unconstitutional.

Such high jinks are symptomatic of much broader problems that have both caused and accelerated the emasculation of Government. Washington has been at a political impasse since Reagan's first term, when Congress -- Republicans as well as Democrats -- refused to let him gut popular domestic programs to pay for his huge tax cuts. Instead, the Government decided to have it both ways: tax reduction as well as big boosts in defense spending and increasing middle- class entitlements (notably Social Security and farm supports), offset to a small degree by cuts in programs for the poor. The resulting deficit spending has spurred economic growth, but not sufficiently to cover the gap.

Acknowledging as much, the Democrats have repeatedly ducked or skirted major issues and problems and have been all but powerless to offer effective opposition to the Republican program. Part of their difficulty stems from the weakness, egotism, venality and sheer political cowardice rampant on Capitol Hill today. Much of the current session, in fact, has been devoted to investigating either former members of Congress like John Tower, Bush's first choice as Defense Secretary, or prominent members such as Speaker Jim Wright, who was forced to resign because of his ethical lapses.

Discipline is not what Congress is best at. It prefers being a dispenser of largesse to being a moral policeman or stern taskmaster. Leadership is generally left to the President. Yet George Bush seems to have as much trouble as ever with "the vision thing." Handcuffed by his simplistic "read my lips" campaign rhetoric against a tax increase as well as by his cautious personality, Bush too often appears self-satisfied and reactive.

His long-term goals, beyond hoping for a "kinder, gentler" nation, have been lost in a miasma of public relations stunts. The President's recent "education summit" with the nation's Governors produced some interesting ideas about national standards but little about how to pay the costs of helping public schools meet them. His much trumpeted war against drugs was more an underfinanced skirmish. Bush told voters last year that he is an environmentalist, but the most significant clean-air proposals put forth this year -- stringent new standards on automobile emissions -- were adapted from California's strict limits for the 1990s.

Abroad, Bush tends to turn Teddy Roosevelt's famous dictum on its head by speaking loudly and carrying a small stick. He did offer important new proposals on conventional-force reductions in Europe. Otherwise, he has allowed the Kremlin to trump him with a variety of strategic-arms offers, while he nonchalantly dusted off Dwight Eisenhower's "Open Skies" plan (to allow each superpower overflight inspections of the other's territory) and suggested a reduction in chemical weapons that Congress had long since ordered him to make. His offer of economic assistance to Poland and Hungary, as they attempt to loosen the shackles of the Communist economic system, seemed to be just another example of big talk and small deeds -- an impression offset only slightly when Congress pressured him to increase a proposed grant to Poland from a measly $115 million to a ho-hum $315 million.

In its day-to-day conduct of affairs, meanwhile, the Federal Government is suffering from malnutrition. The Administration still has not nominated anyone for 77 senior Cabinet department positions. The Departments of Interior, Education, Labor and Health and Human Services have become nearly invisible.The Federal Aviation Administration's staff is still well below the level that existed before Reagan fired striking air controllers in 1981 and is using outmoded equipment to track near gridlock in the skies.

Long-standing neglect at the Energy Department led to the dangerous deterioration of Government-run nuclear-weapons plants, and the department is currently dragging its heels on an estimated $150 billion effort to get the program back into shape. At the Department of Housing and Urban Development, new Secretary Jack Kemp is busy mopping up after eight years of Reagan-era mismanagement and scandal. The losses are running beyond $4 billion.

Many in the Administration believe they are in office to shrink Government. "You liberal writers are just like the Democrats in Congress," White House Press Secretary Marlin Fitzwater recently lectured a reporter. "You think Government isn't doing anything unless it's taxing and spending and creating new bureaucracies." Yet the Government does still spend mightily where it has a mind to. The Pentagon has done some tactical trimming but remains the biggest Government consumer of all. Defense Secretary Dick Cheney is determined to retain as much as possible of the $2.4 trillion Reagan-era buildup -- including a scaled-down Star Wars program, at about $4 billion; the B-2 bomber, at $535 million each; and the Advanced Tactical Fighter, projected at $65 million each.

With defense spending unlikely to increase significantly over the next half- decade, both troop strength and some of those weapons will have to be sacrificed. Neither the Administration nor Congress has suggested what to do. In the meantime, Cheney is proceeding with his own priorities. Because of his belief that there has been only a temporary thaw in relations with the Soviet Union, the Pentagon has barely even begun to assess the U.S.'s real defense needs should the change turn out to be permanent.

Various support programs for the middle and upper classes are also humming along nicely. Large-scale farmers and well-to-do retirees still enjoy federal largesse, as do oil companies and people earning more than $200,000 (whose income is taxed at a 28% marginal rate, while a working couple with a taxable income of $71,900 pays 33%). Those who gain from such Government generosity vote -- and contribute money -- in disproportionately high numbers and are the heart of the Republican electoral coalition. As long as the middle class has remained relatively unaffected by Washington's retreat, the Republican strategy has paid off handsomely, most recently in Bush's 1988 election and his extraordinary 75% current approval rating in the polls. Making sure the Republican coalition stays intact seems to be the Administration's major priority. Secretary of State James Baker, asked to comment on Senate Majority Leader George Mitchell's criticism of Bush's tepid handling of the situation in the Soviet Union and Eastern Europe, replied, "The President is rocking along with a 70% approval rating."

But a TIME poll last week indicated increasing, if still rather vague, doubts about the future. Moreover, signs of strain are beginning to show at the state and local levels. State officials generally find their constituents as opposed to new local taxes as they are to the federal kind, except, in several states, when a tax is earmarked for a specific need: schools, say, or roads.

In De Kalb County, Ga., however, voters last month overwhelmingly rejected a 1% hike in the local sales tax, even though it was intended to offset part of the property tax. De Kalb's chief executive officer, Manuel Maloof, bemoans the deterioration of the federal highways and Washington's unwillingness to provide adequate funds for the national highway system and toxic-waste removal. But Maloof, a Democrat, is even more upset at his own inability to repair his county's sewers and pipelines. "It's all a residue of Ronald Reagan," Maloof says."He did more than most by telling us you don't have to pay taxes even though you still have needs."

The consequences of such government paralysis are most apparent in California, where the 1978 Proposition 13 ballot initiative sparked the antitax revolt that swept the country. Now, with the state government hobbled by tax restrictions and unable to respond to public pressure, citizen initiatives have mushroomed. California had 29 propositions on its ballot last year on matters ranging from limits on auto insurance to new tobacco taxes. William Zimmerman, who helps organize such voter initiatives, admits that they are not the best way to handle complex issues. But, he says, "if the alternative is no action, I'll take the flawed solution."

Citizen initiatives can be an example of democracy at work. But in this case they are symptomatic of governmental decay at all levels. Once a great engine of social and economic improvement, the Federal Government began to lose its bearings in the '60s and '70s in the midst of wars, both cold and hot, domestic upheavals and a worldwide economic revolution. As the nation's economic base began to contract, some basic elements of the American Dream -- homeownership, a college education -- began slowly to recede. The Government responded fitfully to these developments and eventually took on the form of a bloated, inefficient, helpless giant.

Jimmy Carter in 1976 and, far more stridently, Ronald Reagan in 1980 performed a valuable service by calling attention to the giant's weaknesses. But Reagan's approach, once he was elected, was fundamentally flawed. So is George Bush's. Government was not the problem. The problem was, and still is, that the country was being governed badly. The conservative complaint that only liberal elitists think Washington must actually do something is self- evidently silly. Of course, the Government must do something. That is why it exists: to act in ways that improve the lives of its citizens and their security in the world. The list of missed opportunities and ignored challenges is already much too long. The sooner Government sets about doing its job again, the better.

With reporting by Dan Goodgame and Richard Hornik/Washington, with other bureaus