Reaganomics With A Human Face

By WALTER SHAPIRO

A joint session of Congress is the most august forum available to a President. The setting alone -- the entire Government of the United States solemnly assembled in one vast chamber -- imparts a majesty and a grandeur to the occasion. The maiden address to Congress by a new President adds a further element of anticipation and drama. For George Bush, in particular, last Thursday's performance was the long awaited moment of self-definition, the chance to put to rest forever the stale gibes about his difficulties with "the vision thing."

Those certainly were the expectations. Bush and his advisers had portrayed the three pleasant but slightly enervating weeks since the Inauguration as merely the interlude before the drum rolls heralding the formal presentation of his legislative program. White House aides talked confidently of the President's "action agenda." Bush had been predicting publicly that Congress would not like his courageous proposals, even as he artfully wooed legislators to ensure a warm reception. By the time the new President made his triumphal entrance into the House chamber, beaming and backslapping like a joyful alum at a Yale reunion, the stage was set for the programmatic speech that would boldly launch the Bush Administration.

By those inflated standards, Bush fell far short -- and for want of a coherent message, an important opportunity was lost. Unlike the Inaugural Address, the speech contained no inspirational phrases, no soaring metaphors, just commonplace sentiments about how "we must take a strong America and make it even better." This failure of rhetoric can be excused, for as the President said, now "it's time to govern." But governance requires agonizing choices, and Bush, like his mentor Ronald Reagan, stoutly declined to confront them publicly. The President's program, as he defined it, is all gain and no pain, with scant need to explain the inherent contradictions.

In sharp contrast to Reagan's stiff-necked philosophic rigidity, Bush was eager to touch every point on the ideological spectrum. He honored, with lip service at least, most of his kinder and gentler campaign promises, ranging from a pledge to halt offshore drilling in California to advocacy of extended health care for pregnant women and children. Bush courted environmentalists (by pledging an end to acid rain and toxic dumping) and borrowed lines from Jesse Jackson ("Keep hope alive"), while still echoing themes from the Reagan years ("growth and opportunity" and "family and faith") and bowing at the shrine of a balanced-budget amendment.

But instead of clear priorities, the President offered a clutter of programs, almost all marginal adjustments in the status quo. By awkwardly trying to match the concerns of a liberal Democrat with the means of a parsimonious Republican, Bush ended up with an incoherent philosophy that might be dubbed Reaganomics with a human face.

The President's a-little-something-for-everyone approach to Government, lurching from new national parklands to a statehood referendum for Puerto Rico, at times sounded as if it had been borrowed from Lyndon Johnson. But . often the mismatch between promises and price tags bordered on the comic. Bush took pains to recall that he had promised to be "the Education President," and invited his audience to join the crusade by enlisting as "the Education Congress." Yet the up-front cost of the President's innovative proposals comes to a paltry $58 million, less than $1.50 for every child in the nation's public schools. Cynics, however, could envision the gleam of delight in the eyes of Congress when the President proposed precisely 570 new science scholarships -- one for each member of the Senate and House (including nonvoting delegates) and 30 more that the White House will control.

The three most important words in Bush's address remained the familiar cry of "no new taxes." That read-my-lips pledge from the campaign presented the President with what may prove an insoluble problem: how to meet the Gramm- Rudman target of a $100 billion deficit on his $1.16 trillion budget for fiscal year 1990. The commitment to comity with Congress ruled out the Reagan- era approach of proposing draconian, and politically unrealistic, cuts in domestic spending that would be immediately declared "dead on arrival." The familiar device of using overly optimistic economic assumptions to gild the budget was, of course, part of the Administration arsenal. The President's Office of Management and Budget predicts that economic growth alone will reduce the deficit to $127 billion in 1990, yet Congress pegs the number at a more realistic $146 billion. But even pie-in-the-sky scenarios cannot trim the deficit nearly enough to satisfy the requirements of Gramm-Rudman.

With a certain amount of brio, Bush actually claims that his budget will produce a $92 billion deficit, $8 billion lower than the target. Were these numbers not so conspicuously off base, some economists would fear that slashing the current $170 billion deficit by $78 billion might send the economy into a tailspin.

How then did the Bush team pull off such a miraculous deficit disappearing act? Budget Director Richard Darman came up with a solution so Machiavellian that it had eluded even that past master of cooked books, David Stockman. The Darman doctrine: If the numbers are inconvenient, let someone else add them up. It was a refined version of the same strategy that Bush himself promoted during his campaign with his numbers-fudging talk of a "flexible freeze."

As a result, the Bush budget documents are as cryptic as an Etruscan * inscription. The heart of the strategy is a $136 billion pool of popular programs like Amtrak, environmental protection and nutritional assistance that Congress can deal with as it wishes. Off limits for Bush is the defense budget, frozen at $291 billion after allowing for inflation, and the near sacrosanct $247 billion for Social Security. Unfortunately, those huge budgetary no-trespassing signs mean that only meat-cleaver slashes in the jumble of discretionary programs could possibly make the Bush proposal meet the Gramm-Rudman targets. But the President's team is not going to squander political capital on such a fool's errand; that messy job is left to Congress.

Capitol Hill Democrats quickly estimated that the Bush budget calls for $20 billion in spending reductions but identifies just $10 billion in specific cuts -- such as the slash envisioned for federal workers' cost of living increases. The remaining $10 billion in reductions disappear into what Senate Budget Committee chairman James Sasser called the "black box" of the budget. Asked about this timorous lack of specific recommendations, a senior White House aide said with a chuckle, "We're too smart for that. There's no law that says you have to define cuts and throw out red flags too."

Congressional Democrats remain slightly puzzled about how to react to Bush's strategy of proffering a velvet glove clutching a closed wallet. After years of bitter deadlock with Reagan, they tended to mute their criticism of a President so palpably eager to negotiate. Some, like Maryland Senator Barbara Mikulski, were amused by the incongruities of the President's new compassionate language. "Bush sounded a lot like Michael Dukakis," she joked. "I hate to use that L word, but it sounded liberal, liberal, liberal to me."

Only one specific proposal in the Bush speech inspired a fusillade of partisan attacks: the President's efforts to redeem his campaign pledge to slash the tax rate on capital gains from 33% to 15%. Like Dukakis in last year's campaign, congressional Democrats lambaste the idea as an affront to fairness. "I'm not going to tell the wage earners in Chicago that they should pay a higher tax rate than stockbrokers," thunders House Ways and Means Committee Chairman Dan Rostenkowski. There is evidence to support this equity argument: currently, 70% of all capital gains are claimed by taxpayers with household incomes over $100,000 a year.

To Bush, cutting capital gains is another miracle-grow elixir for the economy: "This will increase revenue, help savings and create new jobs." In a reprise of the dubious less-is-more assumptions that once undergirded Reaganomics, Darman argues that such a tax reduction would yield $4.8 billion in additional revenue in 1990. The logic: grateful investors would churn their portfolios in a frenzy to take advantage of the more generous tax rate. Although there is no consensus, most respected economic models challenge these assumptions. A study by the Congressional Budget Office, for example, puts the annual loss in the first year to the Treasury around $4 billion -- or more than six times the amount that Bush proposes to spend on all programs for the homeless.

Buried within the Bush budget is an odd change in policy: the President seems committed to reversing tax reform, the major legislative triumph of Reagan's second term. A reduction in capital-gains levies would erode the reform principle that earned and unearned income should be taxed equally. Bush also retains an unmistakable affection for the kind of special-interest tax breaks that the 1986 legislation was designed to curtail. The President has quietly asked Congress for $2.7 billion annual tax reductions for business, including $400 million for oilmen, who include some of Bush's most faithful supporters. In comparison, the Administration's aggressively ballyhooed child- care tax credits for low-income families would cost around $2.5 billion.

Behind the smiles and sweeping promises of last week's speech lurks a calculated, if short-term, political strategy. The President and his team believe they can maintain the illusion of a "new breeze" with minor recalibrations of priorities and finances as long as Bush continues to talk a good game with both the voters and Congress.

This chameleon style may be a shrewd defense mechanism, designed to mask the harsh reality that Bush is more constrained than any other President in modern memory. The borrow-and-spend policies that Ronald Reagan presided over have bequeathed to his chosen successor a downsized presidency devoid of the resources to address long neglected domestic problems. The Bush campaign strategists -- with the candidate's active complicity -- burdened the new President with an obdurate stance on taxes. And for all of Bush's conciliatory zeal, Congress remains an enemy camp; no elected Republican President in this century has come into office faced with such lopsided Democratic majorities.

* Hemmed in as he is, the risk for Bush is that his Administration could drift for months without major victories -- or, worse, be burdened with a mortifying setback. Already, the uplifting sermons have begun to sound repetitious and a trifle hollow. A budget concordat with Congress would, of course, provide the tonic that Bush craves, but the Oct. 15 Gramm-Rudman deadline all but ensures that serious negotiations will be delayed until late summer. In the interim, Bush should have more than enough time to grapple with that transcendent -- but still unanswered -- question: What precisely does he want to accomplish as President?

CHART: NOT AVAILABLE

CREDIT: TIME Charts by Cynthia Davis

CAPTION: PROMISED PROPOSED

CHART: NOT AVAILABLE

CREDIT: TIME Charts by Cynthia Davis

CAPTION: REALITY GAP

With reporting by Michael Duffy and Richard Hornik/Washington