Bold Ideas Reduced to Movie Talk : Budget Debate Demands More

Whatever happens to the federal budget this year, whatever the final verdict on Gramm-Rudman, whatever the final fate of the President’s revolutionary fiscal policy, Hollywood has already won. Washington’s great debate is developing a character and language better suited to entertainment than to epochal, watershed policy-making.

“Dead on Arrival” only sounds like a new hospital series; it’s how Congress describes President Reagan’s just-proposed pro-military, anti-social spending 1987 budget.

Of course, that’s more polished than the Clint Eastwood line the President used some months back about reports that Congress would send him a tax increase: “Go ahead. Make my day.” House Budget Committee Chairman William H. Gray III (D-Pa.) has adopted the same Hollywood spirit by saying Congress won’t talk about taxes until the President puts “his Magnum back in his holster.”

Enough is enough. This is incredibly trivializing talk for a debate of national significance. The escalating uncertainly about Gramm-Rudman only adds to the drama. We don’t need any more slogans about games of chicken, Rambonomics or DOA fiscal policy. Bluntly put, the President is proposing to escalate defense spending by $33 billion next year while shrinking domestic and safety-net spending by almost as much. So deep is his commitment to reducing the role of government that he refuses to contemplate a tax increase as an alternative to decimating rural assistance, transportation, Medicaid and the like. That’s an enormously bold blueprint, and here are three insufficiently discussed pivots of the great debate to come.

The Two Economic Americas : For all the President’s rhetoric about soaring national success and prosperity, a large part of the country isn’t participating. I’ll leave the typical litany about unemployed teen-agers, single mothers and impoverished minorities to liberals. Many conservative states and constituencies are in trouble, too. Collapsing commodity prices, land values and incomes have brought heartbreak to the Farm Belt. Substantial parts of Missouri, Iowa, Minnesota and the Dakotas verge on depression. Plummeting petroleum prices have been collapsing confidence in the oil states--Louisiana, Texas, Oklahoma and Wyoming. And because coal is already a disaster area, add West Virginia. Similarly, the mining areas of the Rocky Mountain states. And timber regions of the Pacific Northwest.

Basic industries are also depressed. Large chunks of the Southeast are suffering with the textile industry. Parts of Ohio and Pennsylvania are as gloomy as their closed steel mills. Indeed, Albert Sindlinger reports that his polling shows 28 of the 50 states to be in recession.

Yuppie and even Rotarian America probably cheered the President’s commitment to cut back government so that go-getters and entrepreneurs can make their pile. But in the roughly half of the country where the local economy is slumping, the President’s proposed domestic budget cutbacks raise the gruesome prospect of making hard times worse. The way these regions are being ignored is distressingly reminiscent of how 1920s policy-makers shrugged off similar regional agonies 60 years ago.

Economic Darwinism and the Proper Role of Government : Over the last 15 months or so, it has become clear that Ronald Reagan has a vision of America that he didn’t submit to the electorate in 1984. Take defense. More is involved than strengthening the military after the hand-wringing era of Jimmy Carter and the Democrats. One reason Reagan wants to channel a growing share of government’s resources into the Pentagon is that he regards defense as one of the few legitimate areas of government.

Does the public agree? Clearly not. Moreover, the President has also lost the support of many congressional Republicans who say, yes, we do have to increase defense spending, but we need a tax boost so that we won’t undercut government’s other valid functions. So this year’s budget wrangling must inevitably focus discussion on Reagan’s underlying thesis: Government’s role should be limited to defense, law enforcement and the like, with economics left to the marketplace.

It amounts to a kind of Darwinism--a survival of the fittest. Workers and industries that can’t make it without government assistance shouldn’t make it. Farmers must live or die in the free market. Corporate raiders like T. Boone Pickens and Carl C. Icahn perform a social and economic service by weeding out the weak--like wolves in the forest. Top tax brackets should be slashed to get government out of the way of the productive. Federal economic and social support programs should be stripped away.

At first, this outlook was a corrective to the soppy mentality of the 1970s. But now it is a spirit turned rogue. Reaganomics is becoming the economic version of the Sylvester Stallone and Eastwood movies the President likes so much. No wonder traditionalists like Senate Majority Leader Bob Dole (R-Kan.) and Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) are moving to suppress these trends and reorder the priorities in the President’s budget.

The 21% Solution: Part of the problem lies in White House belief that taxes can’t be allowed to rise above 19% of the gross national product without damaging the economy. Moreover, if taxes can be held at just 19% of GNP, the thinking goes, that will force spending down into the same range. This thinking pivots on a lack of historical awareness. True, small nations can often boost their economies by pushing tax levels down. But as most great powers of modern times have matured, they have had to increase taxes--to expand armies as their earlier power ebbs, to maintain industries and living standards and to rebuild crumbling highways and aging cities. That is the position the United States now finds itself in.

Under the circumstances, for U.S. tax levels to rise over two or three years to 20.5% or 21% of GNP--what they were when Reagan took office--seems a valid way to reduce the deficit without having to either halt the defense buildup or impose ill-advised devastation on educational, urban transportation, agricultural or health programs. After all, in almost every other mature Western economy, conservatives have come to terms with a tax level at 21% of GNP--or higher. That will be necessary in the United States, too, and it may not even be painful. For one thing, many conservatives have been in the vanguard of finding our current tax system deficient--certainly by global standards--in failing to tax consumption (as opposed to overreliance on taxing income), in failing to tax imports and rebate taxes against exports (as do virtually all Western European countries) and in undertaxing oil and gasoline. If this year’s tax reform debate leads to shifting levies from income towards consumption and energy, Congress can--and should--raise enough new revenue to avoid the ridiculous alternative decimations of defense and domestic spending now proposed by leftist and rightist ideologues.

Not that reaching this obvious compromise will be easy. There is a lot of politics to wade through. The dubious legality of Gramm-Rudman only adds to the confusion. Congressional Democrats are more anxious to put Reagan’s budget priorities on display before what they expect to be an offended electorate than to collude in any compromise that lets the GOP off its fiscal hook. Senate Republicans, by contrast, are anxious to put together a compromise budget including a new tax increase, partly out of fear that if there is no such deal, the GOP could lose Senate control in the November elections. As for the President, the hope has to be that he too will accept compromise because of the danger to Republican candidates if he remains adamant. But in the meantime, it would help if all sides moved beyond frivolous rhetoric and sat down to serious discussion of the basic issues involved.