Stockman Proposes and Reagan Disposes: The President's Program

With all the compromises, defense, and the forecast, Stockman knew and could tell his colleagues by February 7 that the package was coming up "short" by at least $30 or $40 billion. The budget director told himself that the shortfall was not so great a problem. Some more "cats and dogs" cuts could be found after February 18 (planned for release March 10). Beyond that point—well, the children's allowance theory might work: "I knew that the remaining $44 billion gap was huge. I remembered it was probably going to end up even larger, due to our cockeyed economic forecast. But I saw in this only the potential leverage it provided

to … force Congress to shrink the welfare state."^[51] For the moment he needed some way to downplay the gap. Stockman resorted to what Howard Baker was to call "the magic asterisk"^[52] —"additional savings to be proposed later" of $29.8 billion in FY83 and about $44 billion in each following year.^[53]

Anderson raised a red flag; he argued that, if the future-savings numbers were too big, they could "undermine the whole credibility of the program from day one."^[54] His objections were not enough to cause much internal hesitation. The president expected his cabinet to find more "waste, fraud, and abuse." Stockman writes that no one asked the "essential political feasibility question: How many congressional horses do you need to cut $40 billion more—on top of the black book full of cuts already proposed? How many horses do we actually have?"^[55] Feasibility, however, is not a radical's question. Reagan considered the status quo a full-fledged disaster. Not to try to enact his full package was, to Reagan, the same as abandoning the country to a terrible fate. If he didn't get it all, he would try again later. The less radical advisers suspected they would not get the whole tax cut anyway, so they did not believe the deficits would come true. Both the revolutionaries and the pragmatists therefore were willing to push the president's program as far as possible, seeing where they would came out.

Reagan announced his Economic Recovery Program on February 18. The administration was ready to announce savings of $34.8 billion. A further $6.7 billion was promised.^[56] Foreign policy and defense were barely mentioned; the point was to rally support for solving the nation's economic problems.

Reagan tried to minimize the pain. Referring to "exaggerated and inaccurate stories" that social security was threatened, he declared:

Those who through no fault of their own must depend on the rest of us, the poverty-stricken, the disabled, the elderly, all those with true need, can rest assured that the social safety net of programs they depend on are exempt from any cuts.

The full retirement benefits of the more than 31 million social security Recipients will be continued along with an annual cost of living increase…. All in all, nearly $216 billion worth of programs providing help for tens of millions of Americans will be fully funded.

Here was the commitment to social security that would come back to haunt the administration. "But Government," Reagan went on, "will not continue to subsidize individuals or particular business interests where real need cannot be demonstrated."

He proceeded to announce what would be cut. His list, from food stamps to NASA to the post office, must have impressed listeners with

its scope. The documents released at the time of his speech listed eighty-three "major" program reductions. Some programs would be consolidated into block grants, with reduced funding; the added flexibility and reduced administrative costs to state and local governments would supposedly make up for the funding losses. Subsidies to business, justified as aids to development, would be reduced because business would develop better if it followed market incentives. Synfuels would be axed $3.2 billion, the Economic Development Administration would be shut down, and subsidized lending would be slimmed down in many agencies from the Export-Import Bank to the Farmers' Home Administration. Reagan highlighted the cuts to "profitable corporations" funded by the Export-Import Bank. Nutrition programs would be better targeted, he said, removing from eligibility "those who are not in real need or are abusing the program." Medicaid federal contributions would be "capped," and states encouraged to save costs in the program's management and provisions.

Having described his spending proposals, the president moved on to his tax program. He called for Kemp-Roth, with an effective starting date ("I had hoped we could be retroactive on this") of July 1. While it would "leave the taxpayers with $500 billion more in their pockets over the next five years," it was "actually only a reduction in the tax increases already built into the system." These increases included social security, bracket creep from inflation, and "windfall" taxes on oil.

The other part of the tax-cutting program would directly stimulate productivity through increasing depreciation allowances. Many other desirable and needed tax changes—indexing, the marriage penalty, tuition tax credits, estate taxes—would be requested at "the earliest date possible" after enacting the Kemp-Roth "10-10-10" of 10 percent individual cuts and the Jones-Conable "10-5-3" accelerated depreciation plan. That Reagan later matched Rostenkowski bid for bid should not have been a surprise.

In the balance of the speech, Reagan announced regulatory policy initiatives and the administration's full support for the Federal Reserve policy of monetary restraint. He concluded by invoking once more the urgency of the situation and the bankruptcy of the opposition: "Have they an alternative which offers a greater chance of balancing the budget, reducing and eliminating inflation, stimulating the creation of jobs and reducing the tax burden? And if they haven't, are they suggesting that we can continue on the present course without coming to a day of reckoning?" If the Democrats had such a plan, they would have a hard time articulating it without the "bully pulpit" of the presidency. In fact, they had no plan as yet; they had been waiting to see what the president would propose.