The President Must Act

So far as it goes, President Reagan’s response to the stock market panic is reasonable and proper. Whether it is workable, and has the desired effect of soothing the market, remains to be seen. It may well require greater cooperation on the President’s part with Democratic leaders in Congress than Reagan seemed willing to accept Thursday night.

The President deserves credit for making, grudgingly, an important concession during his press conference in the East Room of the White House Thursday night: his willingness to at least discuss a possible tax increase with Congress in order to reduce the federal budget deficit. “I’m putting everything on the table with the exception of Social Security,” he said in his opening statement. But, as he did the other day in response to questions from reporters, the President seemed to start pulling chips back to his side of the table. He resorted to his old posture of blaming Democrats in Congress for every penny of budget deficits over the past 50 years, and he retreated again to the discredited and illogical beyond-supply-side dictum that tax increases do not raise money for the government.

The President again expressed his confidence in the general health of the economy, but cautioned Americans that further market plunges may occur. It would be a mistake to maintain, as he did late Monday, that nothing is wrong with the economy and that there seemed to be no need for leadership or action from the White House. Clearly, plenty is wrong with the economy, and the psychology of a panic like this requires the proper mix of optimism and determination to act.

The President remains consistently on target in opposing legislation designed to protect American markets against foreign imports. And certainly the events of the past week have indicated the need to reexamine the rules under which the stock market operates. If nothing else, government regulators must consider legal restrictions on the process by which massive blocks of stock are traded automatically and almost mindlessly by computer.

The President addressed the crisis better in his statement than he did in responding to the questions that followed. His answers did not serve to buoy public confidence that the President has a firm grasp on the problem and possible solutions. For instance, his long, tortured explanation of the federal budget process, and how Congress had thwarted his will in that process, defied most rational explanations of how federal budgeting is supposed to work.

He also said that it was “kind of a stupid setup” the way Congress determines how much each federal department should spend each year. However, that is the way the Framers of the Constitution clearly intended it to be.

Reagan rather quickly passed the market panic off as a long-overdue correction and “purely a stock market thing” not connected to the rest of the economy. But most experts agree that the crisis certainly is related to the budget deficit, and believe that firm leadership from Washington is the best short-term solution for market jitters.

If the President is to deliver this sort of leadership, he will have to back his tentative words of Thursday night with quick, cooperative action with congressional leaders--cooperation that goes far beyond any prior Reagan dealings with the Democratic leadership in Capitol Hill.