A Preview of the Reagan Revolution, Part Two

By Evan Thomas

Arms control and tax reform are likely to share the spotlight

As Ronald Reagan cruised along on his campaign of good feeling this fall, he was vexingly imprecise about his plans for a second term. He extolled peace and prosperity, but he offered few specific proposals for reducing the deficit or controlling the nuclear arms race.

Reagan tried to explain away his vagueness with folksy humility. "I'm kind of superstitious," he shrugged; he did not want to appear complacent by looking beyond Election Day. Given his large and unwavering lead in the polls, few were convinced. Walter Mondale, for one, charged that the President was concealing a "secret plan" to raise taxes.

In truth, Reagan has no specific plan, secret or otherwise. He has yet to discuss his future moves in any detail, even with his advisers. They say he feels no real sense of urgency; Reagan believes Reaganism has worked well and needs few refinements. But there are certain to be major new initiatives, most likely involving arms control and tax reform.

Reagan has always sounded broad themes and relied on his advisers to put them into practice. In his second term the players will probably remain essentially unchanged, at least for the first year. But several key advisers are vying for position.

Reagan's aides are divided into two camps. The True Believers--White House Counsellor Ed Meese, Interior Secretary and former National Security Adviser William Clark, Treasury Secretary Donald Regan and Defense Secretary Caspar Weinberger--want to continue pressing a hard line against Communism and giving free rein to supply-side economics. The Pragmatists--White House Chief of Staff James A. Baker, Deputy Chief Michael Deaver, Presidential Aide Richard Darman, Budget Director David Stockman and Secretary of State George Shultz--see the top priorities as reducing the deficit and reaching an arms-control accord with the Soviets.

With Meese probably heading off to become Attorney General, Baker will make a play to consolidate the Pragmatists' control of the White House. This week he plans to ask Reagan to abolish Meese's old Counsellor job. Baker wants to prevent Reagan from putting a True Believer into the spot. He is particularly eager to stop U.N. Ambassador Jeane Kirkpatrick from moving into a newly created role as counselor for foreign policy. Baker feels so strongly about this that if Reagan does not go along, he may submit his resignation.

The True Believers are already plotting to move Kirkpatrick into the post of National Security Adviser, now held by Robert ("Bud") McFarlane. But Shultz is opposed to such a switch. He regards Kirkpatrick as too hard-line and erratic. He would prefer to retain McFarlane, who is an ally and has a low profile. Shultz may get his wish. A close friend of Reagan's says, "I see the President relying on McFarlane more and more. I don't think Bud is going anywhere."

The key policy decisions of the next four years could turn on such maneuvering for Reagan's ear. As in the past several years, the sharpest domestic debate will be over the federal deficit, and it will begin as soon as the new Congress convenes.

Most mainstream economists see annual deficits soaring over $200 billion before the end of Reagan's term. Earlier this summer the White House Pragmatists thought they had convinced Reagan that a revenue increase was necessary. But then Treasury's Regan, a recent supply-side convert, told Reagan what he wanted to hear: that economic growth and spending restraints would suffice to bring down the deficits--without a tax hike. Reagan might, however, go along with a tax increase in exchange for reform of the tax system, now widely perceived as unfair.

For Washington lobbyists, tax reform means Apocalypse. They will be fighting not just for their clients' loopholes but for their own livelihoods. The deficit debate promises to be an epic struggle, with profound implications for the nation's well-being (see ECONOMY & BUSINESS).

Last term Reagan's top priority was the economy. This term, say his aides, it will be foreign policy, particularly working out an arms-control agreement with the Soviets. A preview of the Reagan Revolution, Act II:

Arms Control. U.S.-Soviet relations remain at their lowest ebb since the Cuban missile crisis in 1962. A year ago, the Soviets walked out of the two major arms-control negotiations in Geneva, one aimed at reducing strategic weapons (START), the other at cutting back intermediate-range forces in Europe (INF). Existing arms-control agreements remain unratified (SALT n), others are gradually losing their teeth (the 1972 limit on antiballistic missiles). Meanwhile, the Soviets continue to build up their arsenal. Over the past several years, they have installed 378 new SS-20 missiles, most of them aimed at Western Europe, and have armed submarines and bombers with cruise missiles; the U.S. spent most of that time persuading its European allies to accept an upgraded force of 108 Pershing II and 464 cruise missiles (only about 102 cruise and Pershing Us have been deployed so far).

Further complicating matters is Reagan's Star Wars proposal to develop a defense against ballistic missiles. He has offered to share the technology with the Soviets, but they are unmollified, fearing an American breakthrough that could nullify their offensive forces. The Soviets have demanded talks on space weapons as a prelude to returning to negotiations on offensive arms; the U.S. has agreed to discuss space weapons, but only in the broader context of nuclear arms control. Thus conditions are not exactly propitious for a meaningful agreement in Reagan's second term.

Yet the President seems genuinely determined to try. "Ronald Reagan wants to be the peace President" is the refrain of the Reaganauts. Having first hit the Soviets with harsh rhetoric and a military buildup, Reagan believes he can now deal from strength. Says a Senior White House aide: "The public will trust him not to roll over for the Russians."

Before he comes to grips with the Soviets, however, Reagan will have to get a handle on his own bureaucracy. In his first term, he failed to settle an intense conflict between hawks skeptical of arms-control agreements, led by Defense Secretary Weinberger and Assistant Secretary Richard Perle, and State Department moderates, led by Shultz and Assistant Secretary of State Richard Burt. To resolve this impasse and signal the Soviets that the U.S. is serious about arms control, Reagan "is going to have to bang some heads," says a top aide. Shultz and McFarlane have a more ambitious plan: they want to create the position of arms-control czar in the White House. In effect, this would cut Weinberger and Perle out of the arms-control loop. Three old pros, former Secretary of State Henry Kissinger, former National Security Adviser Brent Scowcroft and INF Negotiator Paul Nitze, are being mentioned for the post. Reagan is reportedly sympathetic to the idea.

Middle East. This volatile region remains a tinderbox. The Syrians (and by proxy, the Soviets) grow in power, dominating Beirut and northern Lebanon. Israel still occupies southern Lebanon. The Iran-Iraq war has taken 150,000 lives, and peace remains as elusive as ever. Terrorists strike with abandon and impunity.

The Administration has no new Middle East initiative in the works. It has hopes, though, of reviving an old one. In September 1982 Reagan outlined a plan that would-allow Palestinians in the West Bank and Gaza Strip to form a loose federation with Jordan, in return for firm guarantees of Israel's security. The proposal was quickly rejected by Israel's Prime Minister Menachem Begin and ignored by Jordan. But the new coalition government in Israel is less hardline, and Jordan has re-established diplomatic ties with Egypt, possibly a sign of renewed Arab interest in working toward an agreement.

Often burned over the past four years, however, the U.S. remains wary of involvement in the region. Shultz has proposed a crackdown on terrorism in the Middle East and around the world. But many experts regard terrorism as an intractable problem and fear that U.S. retaliation would only touch off a new round of attacks and reprisals.

Central America. In his first term Reagan allowed two distinct policies to coexist. The stated objective, pursued by White House and State Department moderates, has been to use diplomatic and military pressure on the Sandinista government as leverage to encourage pluralism in Nicaragua and stop it from exporting arms to the rebels in El Salvador. The apparent goal of hardliners, including Kirkpatrick and CIA Director William Casey, has been the overthrow of the Sandinista regime. Recent evidence--including the expose of a CIA manual to train the Nicaragua contras in guerrilla tactics, even assassination--suggests the hard-liners are prevailing. Moderates, seeing a potential for political disaster, would prefer to keep the CIA on a shorter leash. Moreover, they realize Congress is in no mood to finance CIA-directed coups against foreign governments, even Communist ones. Last month Congress voted a five-month moratorium on aid to the contras, and only flagrant aggression on the part of the Sandinistas would prompt both houses to reinstate such aid after February.

Reagan will have an easier time getting funding to bolster the regime of Jose Napoleon Duarte in El Salvador. The challenge is to keep Duarte alive, literally as well as politically, while he tries to negotiate with the leftist rebels without losing support of the military or provoking Salvador's violent right wing.

Defense. Congress gave Reagan most of the military buildup he asked for in his first term, but it will be less accommodating in his second. Scandals over vastly overpriced parts and weapons that do not work have drained the Pentagon's goodwill on Capitol Hill: even Congressmen willing to spend more for defense fear that money is being squandered.

Fierce struggles are expected over controversial weapons systems. Early in the year, both chambers will vote twice on whether to produce 21 MX missiles. Although Congress has funded a first batch of 21 missiles, foes of the weapon believe that the MX program can be shut down before 1986 deployment if Congress balks this time. Congress may also refuse to build more B-l bombers beyond the 100 already paid for. Reagan's request for $1.7 billion in research funds for his Star Wars plan will encounter determined opposition on Capitol Hill. Congress has allowed testing of an antisatellite weapon, but it may refuse to pay for all-out development of the program.

Social Issues. The Reagan recovery has not been universal. According to several studies the gap between rich and poor, black and white, is growing. This societal wound could create a dangerous polarization betwen classes and races. Reagan has talked vaguely about helping the poor catch up, but he has cut back on antipoverty programs and affirmative action. Congress has so far rejected his plan to create "enterprise zones" to draw business into depressed areas with tax breaks and other incentives. Reagan is not likely to suggest much else to help the left-behind in a second term unless Congress makes him.

During the campaign, Reagan promised to fight for the social agenda of the religious right: permitting prayer in schools, outlawing abortion, and allowing tuition tax credits for private schools. But with the deficit and arms control occupying his attention, he may do what he did in the first term: pay lip service to the Moral Majority and its allies while keeping its legislative proposals on the back burner. Reagan could have a larger and more lasting impact on social issues if there are vacancies on the Supreme Court. With two or three Reagan appointees, court conservatives might have the votes to overturn landmark decisions legalizing abortion and banning school prayer.

No American President, no matter how popular, can totally control his agenda. At the outset of Reagan's first term, he dazzled friend and foe alike with his mastery of Congress. Willing to try Reagan's supply-side economics, Congress approved his $750 billion, five-year tax cut, which included $150 billion in cuts requested by special-interest groups.

This time around Reagan is saddled with stratospheric deficits. He will ask Congress to do what it hates to do: cut entitlement programs, particularly those, like Medicare and farm price supports, that benefit the politically powerful middle class. Unless economic growth miraculously reduces the red ink, Congress will be forced to consider an even less palatable option: raising taxes. Reagan may not like to talk about the deficit or even think about it, but his aides are not fooled. Says one: "It will be more serious than in the first term. The problem is larger, the options fewer and the hour later."

Whatever Reagan chooses to do about the deficit, he will not have much time to do it. Conventional political wisdom gives him about six months to ram an economic package through Congress. By the end of 1985, Reagan will have used up most of his political capital, at least for domestic programs. Figures in both parties will be jockeying for a run at the White House in 1988. Reagan can cajole and exhort all he wants, but he will not be able to avoid the fate of every second-term President since Franklin Roosevelt. He will be a lame duck. --By Evan Thomas. Reported by Laurence I. Barrett and Douglas Brew/Washington

With reporting by Laurence I. Barrett, Douglas Brew