The Politics of the Budget

On February 1, the President will submit his 1985 budget to Congress, and war will officially be declared. In this election year, the budget is as much a political as an economic document, and it will reappear over the next 11 months in various epiphanies. The GOP platform debates in July, for example, will be based on this February budget. Any fiscal fumble on the President’s part could result in a political scoring drive by the Democrats. The field of battle has been narrowed to two zones—the deficit and taxes—but the goal of the battle is to control the agenda.

As things stand now, Mr. Reagan controls the fiscal agenda, and this dominance marks a sharp difference from the situation two years ago. When he took office in January 1981, the President commanded the budgetary agenda, as Congress enacted his Economic Recovery Tax Act (ERTA), with its 25 per cent income-tax-rate cut over three years, indexation beginning in 1985, and revised depreciation schedules for business. The President stayed in command until September 1981 when, of a sudden, interest rates shot up and Reaganomics came under attack. Through most of 1982 Mr. Reagan was in retreat, his most ignominious concession being his support of the loathsome TEFRA (Tax Equity and Fiscal Responsibility Act), with its $100-billion tax hike over three years. TEFRA was a defensive maneuver designed to lure the Democratic hounds away from the deficit scene.

JM

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John McLaughlin

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Economy

On February 1, the President will submit his 1985 budget to Congress, and war will officially be declared. In this election year, the budget is as much a political as an economic document, and it will reappear over the next 11 months in various epiphanies. The GOP platform debates in July, for example, will be based on this February budget. Any fiscal fumble on the President’s part could result in a political scoring drive by the Democrats. The field of battle has been narrowed to two zones—the deficit and taxes—but the goal of the battle is to control the agenda.

As things stand now, Mr. Reagan controls the fiscal agenda, and this dominance marks a sharp difference from the situation two years ago. When he took office in January 1981, the President commanded the budgetary agenda, as Congress enacted his Economic Recovery Tax Act (ERTA), with its 25 per cent income-tax-rate cut over three years, indexation beginning in 1985, and revised depreciation schedules for business. The President stayed in command until September 1981 when, of a sudden, interest rates shot up and Reaganomics came under attack. Through most of 1982 Mr. Reagan was in retreat, his most ignominious concession being his support of the loathsome TEFRA (Tax Equity and Fiscal Responsibility Act), with its $100-billion tax hike over three years. TEFRA was a defensive maneuver designed to lure the Democratic hounds away from the deficit scene.