Politics & Policy

Reagan’s Great Opportunity: The Test of a President-Elect

From the NR archives

EDITOR’S NOTE: The following article first appeared in the November 22, 1980, issue of National Review.

No sooner had the quick-trigger analysts at the National Broadcasting Company early on the evening of November 4, proclaimed Ronald Reagan as the 40th President of the United States than commentators began to extol his “moderation.” Democratic politicians who had been campaigning against him as an “extremist” were reassuring the nation that Reagan, once in the White House, would move toward the center.

Those forecasts were buttressed by the familiar faces gathered around Reagan in the months following his nomination in Detroit. The worthies of the Nixon-Ford administration had moved in as his policy advisors and, to a lesser extent, campaign strategists. Almost exclusively, their names were flashed on the television screens as members of the presumptive Reagan Cabinet. A Nixon-Ford restoration, traditionally conservative, would frighten nobody and threaten no radical departures.

Yet the talk of a Nixon-Ford restoration conflicts with the expectations aroused by the Reagan landslide: a revolutionary change in American politics on the scale of the New Deal 48 years earlier, which would transform the political balance of power, establish a new majority political coalition, and overhaul foreign and domestic policy. It is a role personally congenial to Reagan. When elected governor of California in 1966, he talked of setting a “prairie fire” in the West that would show the way to the rest of the nation. Although he never quite succeeded, Reagan’s revolutionary impulse survived.

The overriding problem for the Reagan presidency is whether to approach the current American crisis, both foreign and domestic, with moderate policies adding up to a Nixon-Ford restoration, or to follow his own more radical impulses. Moreover, the specific problems Reagan faces are so intractable that beyond Reagan’s overriding choice are smaller agonizing decisions to be made. Besides the issues discussed in the campaign (tax reduction, SALT, reduced domestic spending) there are more exotic questions that cannot be ignored: the draft, the MX missile, a gold standard, affirmative action.

No incoming President since Franklin D. Roosevelt has faced such an array of problems too long unconfronted. Like Roosevelt, Reagan must quickly make decisions that will immutably shape his presidency.

Problem Number 1: How can Reagan achieve his principal domestic goal of reducing inflation without triggering unemployment that would be politically lethal?

During the campaign, Reagan charted new political ground for Republicans by avoiding their familiar death-wish call for sacrifice, austerity, and lean times. The landslide that was finally achieved derived partly from his portrayal, exotic indeed for Republicans, of a better economic life for ordinary Americans, whose standard of living declined through the second half of the 1970s.

Reagan’s principal policy instrument for achieving this is the most radical proposal ever put forth as Republican doctrine: the Kemp-Roth tax-reduction bill. More than just a tax cut, it is a radical affirmation of the private sector — not the government — as the source of economic prosperity. In an economy strangled by a graduated tax system that forces entrepreneurs into tax shelters and blue-collar workers into the underground economy, Reagan was delivering the second emancipation proclamation.

In its purest form, the supply-side economic argument for tax reduction assumes that rising revenues resulting from restoration of incentive will quickly recapture lost tax revenues. But in its practical application, Reagan’s tax reduction must be accompanied by a ruthless assault on the federal budget. Whereas Eisenhower in 1953 and Nixon in 1969 never really even tried, Reagan in 1981 must achieve control of the federal budgetary process.

To do this without imposing Republican harder times on top of Democratic hard times will take a scalpel rather than a Republican primitive’s battle axe. It cannot be done by attacking food stamps and transfer payments to the poor, not only because the legislation would take far too long even in the most conservative Congress in a generation, but also because of the social unrest it would bring.

Instead, the route to budgetary control lies in a quick and merciless pruning of the runaway programs of business subsidies, aid to local government units, and bureaucratic growth. While such efforts will be politically popular with mass opinion, Reagan will be assaulting vested interest, with powerful lobbying tentacles into Congress, including some close allies of the Republican party. The therapy of tax reduction would have to be inextricably hound to this shock treatment, both for economic coherence and for political acceptability.

And it must be done quickly. If Reagan persists in his campaign-stump promises to follow his California performance as newly elected governor 14 years ago and set up citizens’ task forces to study the problem, he will have missed the next two federal budgets — and his golden opportunity — by the time the well-meaning businessmen became acquainted with the labyrinthine federal process.

This points the way to the need for a genuine Hundred Days, invariably talked about by each new administration but not duplicated since Roosevelt. Apart from the political impact of a quick start, Reagan can scarcely attempt a radical transformation of the economic scene — massive tax cuts and ruthless budget reform — unless he achieves it as his first priority.

Once this has been done, Reagan’s right-wing populist economic thinkers inside and outside Congress want him to restore the integrity of the dollar by moving internationally toward a restoration of the gold standard. Reagan himself is by no means convinced he should take this radical step, but he must achieve monetary stability without the money-tightening and the ruinous high interest rates that helped him bring down Jimmy Carter.

Such a radical economic program is by no means accepted by the veterans of Ford administration days who climbed aboard Reagan’s policymaking machinery after his nomination was assured: George Shultz, Alan Greenspan, Charles Walker. They have never been true advocates of Kemp-Roth or any massive lowering of the tax rates and certainly tend reflexively to the Deep Root-Canal School of economics: If the economic dentistry hurts, it must be good for you. Another Nixon-Ford veteran, William Simon, is a Deep Root-Canal advocate but might he more interested in a radical tax/budget policy.

The right-wing economic populists faded away from Reagan’s side as the campaign progressed. Professor Arthur Laffer, the most effective popularizer of supply-side economics and discoverer of the Laffer Curve (tax-rate reductions = more revenue), was thrown overboard. Representative Jack Kemp, the political advocate of Lafferism, lost contact with the President-to-be.

But Reagan himself, who 50 years ago studied classical economics at Eureka College, is intellectually and intuitively committed to what Laffer and Kemp advocate. Time and again during the campaign, he resisted efforts to dilute or attenuate Kemp-Roth. Whether he maintains the same stubborn insistence during the transition will determine whether a radical or a traditionally cautious Republican approach shall characterize his Administration’s economic policy from the outset.

Problem Number 2: How shall the United States’ defense be restored to a level of at least parity with the Soviet Union’s?

On the surface, there is no doubt of the new president’s intent. Whereas four years ago campaigner Jimmy Carter promised slashes in defense spending, campaigner Ronald Reagan made clear that substantial increases are essential even at the price of deferring a balanced budget.

But a disturbing note was sounded in the final days of the campaign when William Van Cleave, a national security advisor to Reagan, was publicly rebuked by Campaign chairman William Casey for stating that a Reagan administration might have to exceed 7 percent real annual growth in defense spending. The avowed purpose was to prevent any substantiation of President Carter’s attempt to paint Reagan as the mad bomber. But in fact, the putdown of Van Cleave reflected the ambivalence about defense spending among Nixon-Ford advisors that resulted in the sacking of James Schlesinger as Defense Secretary in 1975 when he refused to cut his defense budget by $10 billion.

The budgeteers can be counted on to take another run at the defense budget early in Reagan’s administration. George Shultz, responsible for restrictive defense budgeting in the Nixon administration, has said publicly that defense spending under Reagan can be no more immune from reductions than domestic expenditures can — a formulation making clear that the authors of the policies of the 1970s are alive and well.

Assuming that Reagan can and will stave off this attack on the Pentagon, he faces difficult decisions on how specifically to restore U.S. credibility as both a nuclear and a conventional power:

He will have to contend with a wide array of varying opinions about how to correct the present vulnerability of the U.S. deterrent. His own advisors are badly split, for example, on what to do with the MX missile project proposed by the Carter Administration. Reagan must quickly decide a whole range of issues: Should the MX be pursued in its currently proposed form? Should SALT II constraints be set aside to simplify and improve the system? Should a large or a small missile be developed?

Much more difficult personally for Reagan will be the question of how to go about strengthening our conventional forces. All Reagan’s advisors believe that force levels, particularly for the Army, must be raised dramatically. But salary levels for the Volunteer Armed Forces are grossly inadequate, as Reagan stressed repeatedly during his campaign. The combination of more men for more money sends defense spending through the roof.

This could be partially alleviated, in the opinion of practically all Reagan’s national security advisors, by the reimposition of the draft. But Reagan himself campaigned unequivocally and vigorously against the draft and will not easily be turned around. Nothing will be settled here quickly; the conflict between national security demands and Reagan’s personal inclinations will be a continuing struggle well into his Administration.

Problem Number 3: Shall the quest for detente be de-emphasized, and, if so, how shall this be done?

A major break from Carter in many aspects of foreign policy is certain. Relations with Chile, Argentina, and South Korea will warm up, while a cooler posture is taken toward leftist Third World nations. The pressure against South Africa will ease, while the courtship of black Africa will diminish.

But the broader question of detente with the Soviet Union is by no means a settled one. Although Henry Kissinger is almost surely out of the picture as Secretary of State, a return to the Ford Administration detentism that denied Aleksandr Solzhenitsyn an invitation to the White House is not. Establishment pressure for detente, funneled through Kissinger allies on the transition team, is intense.

That is why the fate of Richard Allen is so important. The question of alleged conflict-of-interest violations as a minor official in Nixon Administration days conceals the basic controversy surrounding Allen as a symbol of anti-Kissinger, anti-detente sentiment. His failure to be named National Security Advisor would signal victory for the detentists.

Problem Number 4: How much of the elaborate program of government regulation shall be dismantled immediately?

There is no debate on whether the power of the most flagrant anti-growth regulators and environmentalists in the government should be curtailed immediately. Hard days are ahead for the Environmental Protection Agency, the Federal Trade Commission, and the Interior Department. Their powers can be reduced by executive order, without congressional approval. On these points, everybody on the Reagan team marches in lock step. Environmentalists were a big loser on November 4.

But on other aspects of dismantling the bloated Federal Government, there is disagreement. There is a reluctance, for example, to defy the Establishment by trying to abolish the Department of Education less than a year after it was established. There is similar reluctance to cut back sharply on the powers of the Occupational Safety and Health Administration (OSHA). Nor is there an inclination to speed decontrol of oil prices, much less to alter substantially the oil windfall profits tax.

Some of this caution is calculated. Not tampering much with OSHA could be the basis for a deal with Big Labor over budget reductions. Quick oil decontrol, coupled with trouble in the Persian Gulf, could saddle the new Administration with blame for feeding the inflationary cycle. Tampering with the windfall profits tax would be sheer political folly.

Problem Number 5: How can special advantages for minority groups be amended without roiling the racial waters?

Reagan has not disguised his own opposition to either forced school busing or the affirmative action program’s imposition of racial quotas. The political net gain in such opposition is substantial. The unpopularity of busing and quotas is manifest, and in fact is a hidden cause of the Democratic defections to Reagan on election day.

But the response by blacks to what would be demagogically interpreted as a racist assault on them worries Reagan’s advisors. What he needs least as he seeks a new majority coalition is a revival of inner-city rioting.

The answer to how to provide some compensatory benefits to the black community is not easily found. Anti-busing, anti-quota statements by pro-Reagan blacks such as econo­mist Thomas Sowell will not be sufficient. The Kemp-Garcia program for tax-free zones in inner cities, eagerly embraced by Reagan, can only provide demonstration programs with no immediate visible benefits.

Reagan can attempt to soften the impact of anti-busing and anti-quota actions by public appearances in black areas. Ultimately, however, he must depend on his economic program to raise the condition of blacks as well as whites

Problem Number 6: How can the victory of November 4 be transformed into a long-term political coalition?

One obvious answer is to bring some prominent Democrats into the Cabinet. The well-known availability of Senator Henry M. Jackson for Secretary of State provides Reagan with a breathtaking opportunity. While simultaneously sending a clear anti-detentist signal, Jackson would show defense-oriented Democrats they are welcome in the Reagan Administration. Given the strong inclination of many Democratic politicians to illogically turn left in the wake of defeat, the co-opting of Jackson would be a spectacular blow. It is, therefore, curious that Jackson in the Cabinet has been vigorously resisted by such Reagan insiders as William Simon and Caspar Weinberger.

But more important than enlisting Democratic names is whether Reagan’s economic policies work. Roosevelt’s New Deal could be a political success without achieving full economic success by instilling hope where none existed, but Reagan must do more. He must end the economic stagnation and do it soon.

So, all of the questions to be answered by Reagan in his first days turn on his willingness, ability, and determination to launch a major new economic program based on radical tax reduction and early control of the budget. The alternative is a false start for Reagan, a deterioration of international economic markets, and continued stagflation. Instead of a new era of Republican dominance, Reagan would echo the futility of his two Republican predecessors.

That futility resulted under Nixon and Ford in galloping federal spending, massive surrender to environmentalists and regulators, decline of the defense establishment, resort to economic novelties such as wage-price controls and a floating dollar, and the onset of stagflation. The overwhelmingly liberal Congress must share the blame, but the Nixon-Ford policies are by no means exempt.

The voters who broke traditional loyalties to support Republicans on November 4, while rejecting Carter, were not asking for a return to Nixon and Ford. While not knowing exactly what they want that is new, they are unmistakably saying no to what is old, whether Republican or Democratic. It is their voices that Ronald Reagan must balance against the advice and approbation of the Establishment as he makes his historic decisions in the weeks to come.

— Robert D. Novak was a syndicated columnist and journalist. This article first appeared in the November 22, 1980, issue of National Review.


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