Back to the Future, Again

By Richard Stengel

It sounded like a "Ronald Reagan's Greatest Hits" album. The words and music were oldies but goodies. Less Government. No new taxes. The Soviet threat. A strong military. The primacy of the family. The President's brief (29 minutes) State of the Union speech last Tuesday, counterpointed the next morning by the jarring numbers in his fiscal 1987 budget, replayed the themes he has stressed throughout his charmed political life. As he turned an enviable 75 last week, Reagan pushed his red-white-and-blue vision with a young man's zeal and showed his unflagging determination to bring his revolution to fulfillment.

Reagan's unwavering insistence that the deficit can be cut and military spending raised merely through more slashes in the domestic budget was unnerving even to the Republican leadership of the Senate. Indeed, the current year's deficit of $203 billion is greater than the combined total of all discretionary domestic appropriations. Yet this time Congress cannot heedlessly dismiss the President's proposals. Looming in the background is the specter of the Gramm-Rudman law, passed last year, which threatens automatic cuts if the deficit is not reduced to $144 billion in 1987 and to zero by 1991. On Friday a three-judge federal panel declared the triggering mechanism of that law unconstitutional. But pending an appeal to the Supreme Court, its provisions remain in force, adding uncertainty to anxiety in the coming confrontation between Reagan and Capitol Hill.

In his State of the Union report, however, Reagan displayed the buoyant optimism that is at the heart of his personal appeal, touting the magic of the free market and the strength of the American people for a revitalization of the nation's economy. "If ever there was an Uncle Sam, it's him," said White House Spokesman Larry Speakes as he watched a replay of the speech. Although he has embodied Uncle Sam for five years now, Reagan still does so by chastising the Government he heads. "A lumbering giant," he called it, "slamming shut the gates of opportunity." His national pep talk affirmed again and again his belief that "family and community are the co-stars of this great American comeback."

His emphasis on the family (19 mentions) was rivaled only by his highlighting of the future (16 mentions). His reference to the movie Back to the Future was fitting: his image of the future, a peaceful era of happy families in tight communities, harks back to his vision of an idealized past. For the President, future indicative is past perfect. There were, however, few forward-looking initiatives in his address, in part because budget restraints prevent anything that amounts to more than walking-around money.

He called mainly for new studies. Saying that welfare created a "spider's web of dependency," Reagan directed that his domestic-policy council, headed by Attorney General Edwin Meese, evaluate all federal welfare programs, with an eye toward restructuring the system. "The success of welfare," the President said, "should be judged by how many of its recipients become independent of welfare."

The President also directed the new Health and Human Services Secretary, Dr. Otis Bowen, to study the prospects for a catastrophic health insurance program, and Treasury Secretary James Baker was told to investigate the possibilities of an international monetary conference. Reagan announced that he was pushing ahead with plans for a suborbital airplane, which he dubbed a "new Orient Express," that could someday fly at 25 times the speed of sound. Though the craft is designed more for Star Wars defense purposes than for helping businessmen make it to Tokyo in time for lunch, it promoted an image of a President riding enthusiastically into the future.

The speech, peppered with platitudes, drew a tepid response from the legislators. One of the louder ovations arose from Reagan's canny tribute to Democratic House Speaker Tip O'Neill, who is retiring this year; there was less response (and notably less from the Democrats) when Reagan turned to O'Neill and proposed that he and Tip find some way out of the budget impasse. Nevertheless, the grandeur of the ritual helped create for a moment the sense of comity that can grace such occasions.

It lasted less than a day. The White House had originally hoped to let the poetry of the speech resonate before the hard prose of the 1987 budget proposals hit Capitol Hill, but the explosion of the space shuttle Challenger forced a delay. "We planned to ride the thing for a week," said Director of Communications Pat Buchanan. Even a stunt by bureaucrats in the Office of Management and Budget did little to soften the discord that came on Wednesday.

Its red lights flashing, an ambulance drew up in front of the Government Printing Office. Paul Olkhovsky, an OMB aide, was carried in on a stretcher by attendants in hospital gowns who performed "emergency surgery," tearing pages out of documents to represent the cancellation of Government programs. Olkhovsky then bounded up to tell waiting reporters "The 1987 budget lives!"

Well, sort of. Unlike Reagan's previous four budgets, this one was not quite dead on arrival. The proposals, however unpalatable, must serve as a starting point for compromise. Even if the Supreme Court agrees that the mechanics of Gramm-Rudman are constitutionally flawed, there will be--and certainly should be--pressure to meet the deficit ceilings it mandates. "Whatever the outcome," said Reagan in his weekly radio address Saturday, "we intend to go forward with our plan to bring the federal budget into balance by 1991." In one respect, Reagan's 1987 blueprint is less draconian than expected. It edges below the $144 billion deficit target with a $38 billion package of spending cuts and revenue proposals, rather than the $60 billion outlay reduction that had been predicted. The reason: the Administration now estimates that the deficit will drop about $20 billion partly through the increase in revenues produced by a growing economy. Critics were dubious, particularly about the 4% growth rate that the budget forecasts over the next three years.

Just about every other figure was even more hotly disputed. Reagan wants to hold Congress to an agreement to increase the military budget annually 3% in excess of inflation. But for 1987, he is asking for Pentagon authority to make $311.6 billion in spending commitments, up 8.2% from this year on top of inflation. Spending for Star Wars would rise 75%, to $4.8 billion, making it by far the most expensive U.S. military program. A number of analysts claim that the President's budget understates defense spending by between $10 billion and $15 billion, a contention that is sure to create a running battle.

Foreign aid would also go up, by $1.3 billion, or 9%. Otherwise, the budget proposes only a handful of minor spending increases: an additional $16.9 million for drug-law enforcement, for example.

The cutbacks in domestic spending are anything but minor. The President proposes to wipe out completely a wide range of federal programs. The Interstate Commerce Commission, the Small Business Administration and subsidies to Amtrak form just a small part of the hit list. Reagan would also sell to private investors a clutch of federal assets, including Government petroleum reserves and five federal electric-power facilities.

Aside from Social Security and some other entitlements, nearly all domestic programs would be cut to some extent. Among the hardest hit:

WELFARE. Reagan is proposing reductions of $238 million in Aid to Families with Dependent Children and $313 million in food-stamp outlays by enforcing stricter eligibility requirements and demanding that employable recipients work in order to continue receiving benefits.

AGRICULTURE. Farm subsidies would drop by $4.1 billion, to $16.2 billion. A major reason is that the farm bill enacted by Congress in December permits a sharp reduction in price supports.

HEALTH. Medicare outlays would rise $4.7 billion less than scheduled under present law, in part because Reagan proposes to make recipients pay higher * insurance premiums. Medicaid reimbursements to states for care of the poor would be capped, saving $1.3 billion. Veterans Administration hospital care would be free only to those who passed a "means test." Savings: $579 million.

EDUCATION. Grants and loan guarantees for college students would be lopped $1.3 billion. Only 4.3 million students would get any federal aid, down from 5.6 million in 1985.

HOUSING. Reagan wants to end federal subsidies for construction of low-cost housing and substitute a system of vouchers that would help poor families rent privately built quarters. Saving in fiscal 1987: $3.8 billion.

Legislators of both parties began protesting these proposals even as they were being presented. At Senate hearings, Georgia Democrat Sam Nunn told Secretary of Defense Caspar Weinberger that the Pentagon would be lucky to escape with a budget increase barely offsetting inflation. Foreign Relations Committee Chairman Richard Lugar warned that "the Administration is inviting catastrophe" by proposing to increase foreign aid while slashing domestic spending.

Many legislators feel that new taxes are the only hope for true deficit reduction. Says New Mexico Republican Pete Domenici, head of the Senate Budget Committee: "Taxes can be the glue that puts that package together." The leading candidate is an oil import fee, which if combined with taxes on energy consumption could raise as much as $30 billion a year. There would be minimum pain to consumers, since the new taxes would only offset the recent plunge in oil prices.

Reagan indicated last week that he might consider an oil import fee, but only as part of a "revenue-neutral" tax-reform package; he remains adamantly opposed to raising taxes for reducing deficits. But he might be persuaded to change. Senior White House staff members were secretly polled a month ago by their boss, Donald Regan, as to whether Reagan eventually would accept a tax increase in order to get a budget deal. They voted 11 to 3 that he should not, but would.

Hopes for avoiding a stalemate rest on the possibility of a grand "summit" between the White House and Congress, which could achieve a mix of spending cuts and new revenues. "We can sit down and go to work if he'll give at all," said Speaker O'Neill of the President. But Majority Leader Jim Wright asserted: "The President has no give. None. He is rigid and inflexible."

Setting up a summit, especially one that could lead to higher taxes, ! seemed the thing furthest from the President's mind, and he said so to Senate Republicans who came by the White House on Wednesday. He also emphasized his opposition to taxes as he made the rounds of Washington the next day, accepting cakes and congratulations on his 75th birthday. When presented with a cake at a gathering of political appointees, he joked about the wish he had made when Nancy had given him a cake earlier. "I blew out every candle, so there will be no tax increase this year."

Reagan, the nation's oldest President (Dwight Eisenhower was a less than sprightly 70 when he left office), has become virtually a symbol of eternal youth. Unlike many who reach his age and peer back into the past, Reagan is still taking a bead on what lies ahead. Just as Lyndon Johnson and the Democratic Congresses of the 1960s and '70s sought to stretch the upper limits of America's willingness to pay for an expanded Government role in the nation's domestic life, Reagan seeks to test the lower limits of that willingness. By tilting gain at the ramparts of Big Government as he has done so often in the past, he hopes to make his mark indelibly on the future.

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With reporting by Christopher Redman and Barrett Seaman/Washington