THE PRICE OF COMFORT : The Reagan-Bush faith in laissez-faire and in the wisdom of the market has cracked America’s economic foundations.

For 10 years in the United States, economic and political life has been identified with the politics and economics of Ronald Reagan. George Bush has, until these last months, lived much in Reagan’s shadow; Reagan economics and Reagan politics, as though by their own momentum, continued. But no longer.

Reagan was an intellectually dim but nonetheless a politically faithful reflection of his constituency--of the voters who gave him position and authority. This is a matter of the utmost importance, for it largely relieves him of responsibility for the misfortunes and disasters that are his legacy and are now in the making.

The basic fact is that Reagan in his eight years and Bush until last year presided over an electorate with an intensely satisfied voting majority, comfortable with its personal situation. This was something new in the history of democratic government. In the past, such government has had to contend with, and has needed to placate, a large number of people, verging often on a majority, who, with good reason, were far from content with their economic and social position. They were people to whom government had to promise some relief from discontent, some promise of a better life.

Such people are now a minority of those who vote. Many have given up voting, for, since they are a minority, it is not in the interest of political parties or their candidates to appeal to them. It is the vote of the comfortable majority that is sought.

The politics and economics of contentment have both a short-run and a long-run dimension. The first is immediately appealing; the second can ultimately be disastrous. The politics of contentment seeks not to be disturbed in its present mood. Longer-run considerations invariably involve an enhanced role for the state. Such planning is at some public cost; it could mean higher taxes. This invades the mood of contentment; that mood, accordingly, requires that such longer-run concerns be set aside, and this has especially been true in the United States.

Throughout the 1980s, the government ran large deficits in two critical national accounts--in the federal budget and, related to and extensively caused by this, in the balance of payments. In the short run, the results were quite pleasant--high and growing personal income; reduced and, by the standards of the other industrial countries, low taxes, and a rewarding supply of relatively inexpensive foreign consumers’ goods--automobiles, TV sets, other electronic goods, textiles, much else--paid for by an accumulating foreign debt.

Those who raised their voices against this course of action or inaction were not quite ignored. They pointed to the growing share of the budget devoted to interest charges and the support of a largely functionless rentier class. It was evident that, as the government so financed its activities, the money became available for stock-market and real-estate speculation, even on a small scale for art-- and to feed a reckless fever of mergers, acquisitions and leveraged buyouts in the world of corporate finance. There were also the now celebrated junk bonds.

Inflation, meanwhile, was being held in check by the Federal Reserve, through high and historically unparalleled interest rates, and these acted to restrain expenditure for productive investment and housing. These high interest rates also favored the rentier class--generally speaking, the most affluent members.

All the above was said and even accorded quite respectful attention. But having been heard, it led to no perceptible action; that would have invaded the comfortable attitudes of the time.

These attitudes were nurtured and supported by a line of thought essentially theological in character. It held that government intervention in, or regulation of, the economy were not only economically perverse but also morally suspect. God, speaking through the works of Adam Smith, David Ricardo and Herbert Spencer, was essentially a benign and solicitous Republican. Leave matters to him and the market and all would be well.

From the commitment to laissez-faire and the market came a strong support for deregulation and nearly total opposition to any new government regulation. Thus, the speculation in the securities markets, the mergers, acquisitions and leveraged buyouts all went not only untouched but with, in effect, public sanction. So also the real-estate speculation and the villainous looting of savings and loans.

Laissez-faire and the market were not the only justifying faith of the Reagan and early Bush years. There was also the comprehensive commitment to pecuniary incentives. The rich or the would-be rich, were they to be stirred to maximum economic effort, needed the reward of even more money. To this end, they must not be burdened with repressive and discouraging taxes.

So in the early Reagan years, their taxes were sharply reduced, and there was even voiced an imaginative doctrine that held from such tax reduction would come an increase in aggregate tax revenues--more initiative, more production, more private income and thus more taxable revenue from the lower rates on the income so enhanced. Meanwhile, a reduction in various welfare payments to the poor would lead to their greater effort and also greater production and income; as the affluent needed the spur of more income, the poor, it was said, needed the spur of their poverty.

There was a final feature of these years, the one flaw in the general mood of contentment--the fear on the part of the favored that lurking in the world is the force that might spread out one day and assail and destroy their comfort and well-being. That was communism.

From this fear, in turn, came a succession of military interventions and adventures to contain communism. But of far greater consequence was the support this fear gave to the one major exception to the reduced role of government. That was the great arms buildup of this era, including the most determined support for new, always expansive, often exotic and sometimes admittedly rather insane weapons and weapons systems. Among the latter the Strategic Defense Initiative, or “Star Wars,” is the leading example. Belief that an impenetrable defensive umbrella over the American Republic was a practical idea seems to have been confined nearly exclusively to President Reagan.

It has been said by cynics that no good deed ever goes unpunished. More probably, this is true of any major public aberration if continued over a long enough time. But in the United States, the price of past error has reached truly formidable proportions and with, alas, consequences going far beyond our frontiers.

There has been much discussion in these last years of the increasing interdependence of nations--the global economy. One consequence is that all must suffer for the actions and errors of any one government and people, and especially if they are those of a country as large and important on the world scene as the United States. First as to the effects at home.

The long series of budget deficits with inflation constrained by high interest rates has left the United States the world’s largest debtor and with industries where new and needed investment has been sharply curtailed by the cost. For a time, some of the adverse effect was disguised by the way the high interest rates attracted money from abroad. But much of the latter went not into new and productive investment but into the purchase of existing securities or real property, Rockefeller Center in New York being a spectacular case. By buying and thus bidding up dollars to an artificially high level, it also made U.S. exports more expensive, U.S. imports cheaper and it added to the trade deficit and to the foreign debt that must now be serviced. With these consequences--some have called it the Mexicanization of the U.S. economy--we now live.

Meantime, the defense budget also imposed its price. It drew capital and trained manpower--by some calculations, as many as one-third of our scientists and engineers--into the defense industries. Some of our intellectually based industries were sacrificed to the sterile defense production.

The foregoing consequences of the years of the Reagan escape from reality are now upon us. Bush in these last months has abandoned a promise that the comfortable heard with great clarity and has moved to raise taxes a trifle and close the budget deficit somewhat.

This has had an appalling effect on his approval rating and could also stand in history as one of the more ill-timed economic actions of the modern age. It was the central idea of the late John Maynard Keynes that governments should balance the budget in good times and accept deficits in the public accounts when declining production and rising unemployment threatened. Bush and his economists and advisers have put Keynesian doctrine wonderfully in reverse.

The 1980s were also a time of unparalleled speculative excess. In the manner of all speculative episodes since the Tulipmania in Holland in 1636-1637, that of the Reagan-Bush years has now come sharply and painfully to an end. The stock market had its first great correction, as it was called, in October, 1987. The mergers and acquisitions, financed invariably by borrowed funds, including the beautifully denoted “junk bonds,” continued for another couple of years. But these, too, have now ceased.

The speculation and its collapse have brought unemployment in Wall Street and throughout the financial industry. Far more serious, however, is the burden of debt and interest charges of the corporations that suffered or successfully resisted takeover. To avoid bankruptcy, they have been meeting these charges by curtailing employment and further diminishing investment in plant improvement and new facilities. Managerial staff is also being pared down. This unemployment, which extends on to blue-collar workers, and the fear it engenders are having a depressing effect on consumer expenditure and output.

There is a further and grave effect here. In Northeast United States, as earlier in Texas, houses, apartment houses and, above all, office space have been built with abandon. Whole areas of Boston, New York and other cities have been transformed. Those so engaged have rivaled the junk-bond promoters in community and even national fame.

The collapse of the real-estate boom has left not only empty houses, apartments and office buildings but has idled construction companies and workers, and, most important of all, is having a highly adverse effect on the banks.

Large banks of New York, Boston and other Eastern cities are now struggling with a mass of unpaid loans and have reserves far below what both they and the regulatory authorities deem adequate. In consequence, they have had to curtail lending for other purposes--the banking system is contributing sharply to a more general recession.

There is also the S&L; disaster. Housing and other real-estate operations are financed by thrifts, along with the commercial banks. As in the case of the banks, the S&L; depositors are insured by the federal government up to a generous limit of $100,000. In its enthusiasm for deregulating the economy, the Reagan Administration removed virtually all restrictions on what could be done with those government-guaranteed funds. And it greatly reduced the number of people maintaining surveillance on S&L; operations. The result has been by far the greatest public scandal in U.S. economic history--and the government stands liable for the deposits so guaranteed.

There is, however, the further and perhaps more serious consequence from vast housing tracts, great office buildings and much empty land all being dumped on the market as the failed firms are taken over and liquidated. From this comes the further adverse effect on property values and bank loans. On some matters there seems no end.

The United States, in short, faces--is indeed now experiencing--a recession under circumstances that preclude the obvious preventive or remedial action. Lower taxes and increased public spending are ruled out; these would only seem a continuation of the relaxed and now condemned Reagan policy. Saddam Hussein has forced up energy prices and therewith the price indexes as a whole. This has kept alive fears of inflation. Dramatic easing of monetary policy--lower interest rates to encourage investment expenditure--is thus at least partly excluded.

No one knows how serious the recession cum depression will be or how long it will last. Or what its world effect will be. Those who so say divide, as I’ve often said, between those who do not know and those who do not know they do not know. Nonetheless, the American prospect, as we enter the second year of the new decade and end 10 years of free-enterprise rediscovery in Washington, is far from bright. And from the United States the shadow of financial instability, economic recession, unemployment and uncertain government extends out to the world.