Mending and Bending

By WALTER ISAACSON

Reagan delivers a conciliatory message, but hardly an inspiring one

On the surface, the speech sounded accommodating, even statesmanlike. Instead of a partisan pitch to "stay the course," it stressed the need for a "bipartisan spirit" of unity. It offered compassion rather than rigid ideology to those suffering from the recession, and it had soothing words for women, blacks, the elderly and others who have felt slighted by the Administration. There was even what seemed a bold cure for the dozen-digit deficit plaguing the economy: a "freeze" on the overall level of Government spending.

Yet despite its comforting tone, Ronald Reagan's State of the Union address* last week provoked an immediate chorus of grumbles, not the least of which emanated from leaders of his own party. A cadre of conservatives led by Senator Charles Grassley of Iowa and Congressman Newt Gingrich of Georgia argued hat the so-called freeze should be applied more evenly across the board to defense is well as domestic spending. In addition, lamented Senate Budget Committee Chairman Pete Domenici of New Mexico, "even with a freeze, you've still got a big deficit problem out there." Senate Finance Committee Chairman Robert Dole insisted that food stamps and health programs could be cut no further and rejected Reagan's proposal to impose a stand-by tax of about $50 billion a year starting Oct. 1, 1985, if deficits are still more than 2.5% of the G.N.P, or approximately 5100 billion. Majority Leader Howard Baker also denigrated the contingency tax plan as an invitation to unrestrained spending, and added that the proposed increases in the defense budget would cause 'a real donnybrook, a ferocious debate."

With so many Republicans expressing skepticism, it hardly seemed surprising that most Democrats reacted with outright hostility. "He spoke of fairness," said House Speaker Tip O'Neill, "but insisted on retaining the third year of his unfair tax program and insisted on protecting the defense industry from the same level of austerity that he wants to impose on domestic programs." Indeed, if there was any bipartisan spirit, it was one of shared displeasure over the centerpiece of Reagan's State of the Union address: the budget he has submitted for fiscal 1984, which begins next October (see following story).

Even so, the President's pragmatic tone, and the fact that his plan leaves room for bargaining, should ensure that his budget will not be rejected out of hand, as was the dead-on-arrival plan he delivered to Congress last February. "The debate this year is going to be within the framework presented by the President," says his top lobbyist, Kenneth Duberstein. Hill leaders agree. But because Reagan's program includes so many unpalatable specifics, another grueling yearlong struggle over spending and taxes is surely in store. "The budget fight will be bloody and partisan," predicts Republican Congressman Dick Cheney of Wyoming.

Reagan's advisers professed to be unconcerned about the pessimism on Capitol Hill. Said White House Chief of Staff James Baker: "What we've heard is typical of Washington's rush-to-judgmenl habit." Before the speech he telephoned House Budget Committee Chairman James Jones of Oklahoma, who promised to seek a bipartisan budget bill. But Jones also plans to write and line up votes for a Democratic version, just in case. "I'm keeping the options open," he says.

For their part, the Democrats tried to cast the State of the Union speech as an abandonment of the basic gospel that Reagan expressed at his Inauguration. "Government is not the solution to our problems," he said then. "Government is the problem." Following a plan hatched by party leaders while reviewing an advance copy of Reagan's speech, Democrats leaped to their feet and erupted in a mocking ovation when the President proclaimed, "We who are in Government must take the lead in restoring the economy." Reagan, who according to Speechwriter Aram Bakshian had written the line himself, was taken aback. "And here all that time I thought you were reading the paper," he said.

Some of Reagan's specific proposals were a far cry from the undiluted Reaganism of the 1980 election campaign or the early phase of his presidency. But little that he said represented a repudiation of Reaganism. He defended once again his program of tax cuts and higher military outlays, insisting, "Our deficits come from the uncontrolled growth of the budget for domestic spending." He proposed a Reaganesque assault on food stamps and other entitlement programs. His only ideological surrender--and not a small one--was over balancing the budget, which he had pledged during his first year to do by 1984. "The deficit problem is a clear and present danger to the basic health of our Republic," he declared last week, warning that "failure to cope with this problem now could mean as much as $1 trillion more in national debt in the next four years alone." But his plan projects a shocking shortfall for fiscal 1984 similar to the record $208 billion expected for this year.

Reagan's refusal to deal firmly with the deficit crisis was the main reason his speech received so little praise. When Republican Domenici left the chamber after Reagan's address, Democrat Leon Panetta of California, a key member of the House Budget Committee, threw a bipartisan arm around his shoulder and agreed on the task ahead: "Cut the deficit, right?"

The President's call for an overall freeze on total domestic spending (mostly by cutting some programs and postponing pay increases for federal workers and cost of living adjustments in entitlement programs) seemed to most Congressmen a feeble bulwark against the sea of red ink. Senate Republicans had suggested a freeze on all federal spending as a "bold" way to control the budget, but when Reagan exempted defense and other programs the plan lost both its simplicity and its moral force. "In order to get a freeze, we have to be fair about it," said G.O.P. Congressman Denny Smith of Oregon. "The President's plan isn't going anywhere." Republicans joined Democrats in insisting that cutting domestic programs in real-dollar terms (after accounting for inflation) was unacceptable. Dole suggested that more, not less, money was needed for child health programs. Republican Senators Rudy Boschwitz of Minnesota and John Danforth of Missouri introduced a resolution to protect food stamps and child nutrition from further cuts.

Underlying the gloom on Capitol Hill was the realization that even if Congress cut the defense budget by a few billion more, and the President won his reductions in entitlement programs, the deficit would still be in the stratosphere. The Administration predicts red ink will reach $300 billion by 1988 if nothing is done. Said Alexander Trowbridge, president of the National Association of Manufacturers: "The most troubling aspect of the President's speech is that in spite of his proposals, projected federal deficits will remain unacceptably high next year and for years to come."

The only way to deal with such deficits, most Congressmen agree, is to raise revenues. Many Democrats, led by O'Neill, argue that the 10% tax cut scheduled for July should be delayed or restricted, but the President regards as sacrosanct this third installment on the $750 billion tax cut passed in 1981. Other lawmakers, including Howard Baker, have suggested scrapping the indexing provision that, starting in 1985, will prevent tax rates from rising with inflation. Finance Committee Chairman Dole, however, defends indexing as "the best idea" of the 1981 Congress, and he could make its repeal very difficult. Nor is there a realistic chance for a tax increase this year if Reagan opposes it. Indeed, the only shred of bipartisan agreement is over Reagan's plan for a stand-by tax increase: almost everyone agrees it will not fly. Said Louisiana Senator Russell Long, ranking Democrat on the Finance Committee: "I don't think we should vote for a tax increase or a tax cut for somebody else's term."

The President paid scant attention to an issue that will figure prominently in the political debate in the next few months: the need to create more jobs. While saying that "no domestic challenge is more crucial," he rejected the palliative of a high-priced jobs bill. O'Neill countered by proposing a $5 billion jobs package, although he provided no suggestion on how it could be financed. Republican Senators Dan Quayle of Indiana and Orrin Hatch of Utah offered their own jobs program, which would cost $2.1 billion.

Reagan's 43-min. speech lacked a central inspirational theme, which had been one of his hallmarks as the Great Communicator. Instead, it read like a laundry list of legislative goals. "It was less a speech in the typical Ronald Reagan style and more of a paper, a document," said Speechwriter Bakshian.

In the interest of statesmanship, the President deleted a few surefire applause lines from the final draft, including a poke at the press that began, "Breadlines may make headlines, but. . ." In order to shore up his sagging support among a wide variety of voting blocs,* he paid homage to the needs of different interest groups. For the restive New Right he asserted his fealty to the school-prayer amendment (but did not mention anti-abortion legislation); for women he pledged a reform of discriminatory federal laws and pension rules; for farmers he promised help with debt financing; for blacks he promised support for preserving the Commission on Civil Rights.

But Reagan's rather perfunctory rendition of these goals did little to reassure the groups involved. Moreover, his dutiful nods in their direction and his menu of proposals only riled up his core conservative constituents. Wrote Columnist William Safire, who in the past has supported Reagan: "The themeless pudding called this year's State of the Union address was a series of banalities intended to ingratiate the President with his political opposition; instead, this worst of Reagan speeches invited the grinning contempt it received."

Immediately following Reagan's address, the networks provided the Democrats with time to reply, but their response was oblique at best. At a cost of $120,000, they put on a 28-min. film, filled with razzle-dazzle graphics and tightly edited statements. The program, narrated by Lawyer Harry McPherson (see box), was prepared days before the President gave his speech and thus reflected little of Reagan's effort to achieve bipartisan unity. It argued, not all that persuasively, that the Democrats are brimming with alternative programs. "It's time we put up or shut up," said Senator Joseph Biden of Delaware, one of a host of officeholders who appeared on the show. On some issues they put up. After McPherson charged that Reagan's tax cut mainly helped those making more than $50,000 a year, for example, New Jersey Senator Bill Bradley outlined his proposal for a simplified "fair tax" that would erase many loopholes. But for the most part, the Democratic suggestions were not particularly innovative.

More disturbing, perhaps, is the way such responses to State of the Union speeches have come to be prepared over the years, by Republicans and Democrats alike. They are now writ ten and filmed before a President be gins speaking and aired only minutes after he finishes, leaving no time for anyone to digest what he actually has to say. Observes Duke University Political Scientist James David Barber: "The form that has evolved here is really intriguing. It's the speech vs. the film, then the speech vs. the film vs. the analysts."

Reagan's conciliatory tone was part of a calculated effort to rein in his ideological fervor. But the restrained Reagan of Tuesday night had flowered right back into vintage Reagan by Wednesday. He traveled to Boston to show his commitment to job-training programs that help the disadvantaged and prepare the nation's labor force for the transition to high-technology industries. After visiting the Eire Pub "men's bar" in the Dorchester section of Boston (he took just one sip of his Ballantine ale) and discussing business problems with a group of executives, he uncorked a jaw-dropper, suggesting that abolishing corporate taxes might be a good idea. "When are we going to have the courage to point out that in our tax structure the corporate tax is very hard to justify?" he asked. Others have suggested before that taxing both business profits and the dividends paid to stockholders may be inefficient and inequitable, but Reagan's shoot-from-the-lip proposal is hardly feasible during the current budget crisis. His aides spent the day denying that any such plan was even under consideration.

Reagan's battle is being waged on three fronts: reviving the economy, dealing with a divided Congress and restoring his deteriorating popularity. These goals are related. For him to prevail in Congress, he must improve his public standing. That, in turn, will require him to convince the nation that the economy, as he said twice in his address, "is on the mend." He carried that theme to Boston, and he will take it this week to Missouri and Maryland. He has reason to be hope ful. Last week it was announced that the index of leading economic indicators rose 1.5% in December, the largest gain in two years. The index, which forecasts trends in the economy, reflected the rise in orders for new equipment and the number of building permits issued.

But in selling the notion of an economy on the rebound, Reagan must be careful not to believe it too blindly himself. The economy is far from cured: it requires a lot more strong medicine. As chief surgeon, Reagan will have to be pragmatic, bipartisan and ready for any contingency. In short, he will have to make good on the reassuring rhetoric of his State of the Union message. --By Walter Isaacson. Reported by Laurence I. Barrett and Evan Thomas/Washington

*"The 196th such message, as Reagan noted, since George Washington delivered his first in 1790. Twice, in 1953 and 1961, both the outgoing and incoming Presidents gave formal State of the Union speeches; normally it is the prerogative of the outgoing Chief Executive to deliver the talk.

*A New York Times/CBS News Poll released last week showed that Reagan's approval rating had dropped to a new low of 41%, and a Washington Post/ABC News Poll indicated that only 35% of the voters think he makes his own decisions. At the same stage in his presidency, Jimmy Carter rated 42% in the Times/'CBS survey.

With reporting by Laurence I. Barrett and Evan Thomas/Washington This file is automatically generated by a robot program, so viewer discretion is required.