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Economic jitters.

Not the least of President Reagan's many successes has been his ability to influence the timing of events ordinarily beyond mortal control. Recessions, recoveries and other macroeconomic vagaries may or may not respond to fiscal fiddling and monetary fine tuning, but they rarely come and go in a matter of a month, much less a week. Reagan seemed to command his indexes to leap or lower on the hour, and precisely to the point of his political advantage.

But magic has a way of wearing thin, and events can overtake even a master manipulator of time and truth. Some of Reagan's best statistics were suspect as early as last summer (see Alexander Cockburn, page 606). But the generally rosy picture of recovery and boom has faded so fast since November 6 that even manufactured optimism cannot reverse the spreading gloom.

The nomenclature for the approaching crisis comes from economics: growth recession, flat taxes, deficits and deflation. But the problems are primarily political, and they are largely in the Administration's hands. The looming debates on monetary policy, budget cuts and tax reform will be focused within the Republican Party, with the Democrats acting as mischievous kibitzers on the sidelines of the struggle. Many in the President's party fear that the next recession will not only lead to their defeat at the polls two and four years hence but could also reverse the "Reagan Revolution" which has given rise to conservative power and put liberals to rout. The faint of heart eager to return to the conventions of Keynesianism and maintain social programs that affect the voting majority. Stauncher Reaganauts, however, want more of the magic they believe led to the last recovery: the supply-side formula of lower taxes for the rich, higher profits for corporations, widespread cutbacks in social spending and unlimited growth for the military machine. But the size of the deficit and the level of interest rates make it all but impossible to maintain social programs without significant tax increases, which would exacerbate the slump. And reliance on the notions of 1981-style Reaganomics seems certain to multiply its unfortunate consequences without gaining any benefits.

As many economists, both Republican and Democrat, have been saying all along, the imbalances in the economy are structural and have to do with radical changes in the international order as well as long-term shifts in domestic relationships. For the sake of short-term political gain, Reaganomics has devastated basic industry and manufacturing while encouraging the evanescent service sector; it has sacrificed whole regions of the country to the growth of the resort belt; it is forcing millions of middle-class families into the ranks of the overworked poor; and it is subsidizing a rapacious imperial system at the expense of self-sufficiency in less-developed countries.

For now, Democrats in Congress have the power to veto or ratify important parts of Reagan's response to the crisis he has precipitated, but they are not in a position to redirect policy on a grand scale. The Republicans must wrestle with the results of their own shortsightedness. That should provide some political entertainment for those of us who have found very little of it in the past year. After that, there will be work enough for everyone, picking up the pieces of those policies which are already doomed to fail.
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Publication:The Nation
Article Type:editorial
Date:Dec 8, 1984
Words:549
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