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Show Joseph Kraft Reagan Aims at the Short Run Los Angeles Times Syndicate The Keynesian Rule is that in the long run well all be dead. But far more relevant to the era of Ronald Reagan is the obverse principle Prolonged Haggling on Budget Inflames Public Resentment Posturing and maneuvering for political advantage is an accepted part of the legislative process. But in the case of crucial federal budget compromise, it has gone on long enough. It is time for the White House and Congress, for Republicans and Democrats and all other special interest touters to stop fooling around. They must reach quick agreement on a 1983 budget which will, or at least has the potential to, bring the deficit for that fiscal year below $100 billion and set the stage for decreasing deficits in the years following. Even as President Reagan and House Speaker Thomas P. ONeill Jr., spar and bluff and Sen. the majority Howard Baker, a to tries put good face on it leader, some are there all, signs that the recession has hit economic present bottom. But these scattered bits of hopeful economic news are neutralized by the generally conceded fact that a sustained recovery is impossible without a substantial lowering of interest rates. Interest rates, it is also roundly acknowledged, are not likely to come down unless the federal budget is reduced by several hundred million dollars in 1983 and the two years following. And the deficits cannot be reduced without agreement between the Republican President and the Democrat House Speaker. It is understandable why neither man wants to go first on proposing or agreeing to deficit cutting measures that carry a high risk of political backlash. But the need for deficit slashing is so widely recognized and the need for action in that direction so urgent that a disgusted public is more likely to denounce both leaders and their parties for inaction than it is to punish either for agreeing to positive though painful deficit reducing measures. In the present situation the best the short run can last an eternity. The President's newfound flexibility means that the negotiations on the 1983 budget, which have already gone on for months, are sure to continue. Even so, significant legislative action this year is virtually impossible. While there may be a slight economic recovery in summer, circumstances the monetary authorities to cut it short. Then the whole issue will go back to the voters who will elect a new Congress that will start all over again. Behind all this are the huge budget deficits shaping up for the years ahead. If nothing is done, the deficit will be well above $130 billion for fiscal 1983, which begins this coming October. It will be over $180 billion for fiscal 1984, and over $225 billion for 1985. Reducing those deficits requires significant cuts in spending or big tax increases or both. Economic and political logic, however, militates against both tax rises and spending cuts during this period of deep recession. Spending cuts take money from poor people, thus sharpening the bite of hard times. Tax increases cut purchasing power, thus holding back economic growth. Without exactly saying so, the budget conferees decided weeks ago against any truly big moves on either taxes or spending this year. Politically, for both Democrats and Republicans, the least painful way to approach the 1982 elections is with a deficit say around $100 billion for fiscal 1983. For the rest of this year, to be sure, life on Capitol Hill will not come to a standstill. There will be continued negotiations for a budget compromise, and perhaps even an accord. Some small tax increases and some minor spending cuts may be enacted. The budget committees will pass resolutions that envisage bigger spending cuts, bigger revenue increases and reductions in the deficit that nudge the budget toward balance sometime after 1985. But those actions will be in the nature of pledges. They will set forth objectives and codify good intentions. Legislation to achieve those goals will be subject to the course of the economy and its impact on the political climate. The economy cannot continue to decline forever. The tax cut enacted last year will combine with an increase in Social Security benefits to put a vast payment into the pockets of consumers on July 1. Disposable income will increase by something like $40 billion. That windfall, together with increased defense spending, should give the economy a lift in July or August. But the lift will not come in increased business investment. For profits have been very low, and corporate debt is tilted toward short-terloans. So with better times, the major corporations will try to switch from short-terto long-terdebt. Investment will stay flat, and so will productivity. The combination of big deficits, high consumer spending and little improvement in investment and productivity is a red flag to the Federal Reserve Board. It says there is more inflation in the wings. So the Fed will not ease m up significantly on money supply. It might well tighten the screws. Interest rates will thus stay relatively high, and the recovery is apt to stall The fall elections, in these conditions, are not easy to call. President Reagan remains popular, and the country seems to go for his economic slogans. Maybe the country will still look as though it is on the move. Perhaps the President will be able to stick the Democrats with the blame for what went wrong. Certainly he has been brilliant in making it seem that he is flexible on the budget, and that if there is difficulty there, the fault lies with the Demo- crats. A more likely outcome, however, is that the Democrats will benefit from continued high unemployment. They can argue that President Reagan initiated a loose fiscal policy with his big tax cut. The loose fiscal policy obliged the Fed to stick to a tight money policy. The tight money policy yielded the high interest rates that started the recession and kept it going. Therefore, the monkey is on the Republican back. Either way, the Congress that comes to Washington next year is almost certain to be where the Congress is today. It will have to cope with high unemployment. It will still face big deficits. It will thus be under pressure to raise taxes or cut spending while the economy is sluggish. But that is the political equivalent of climbing rope. It comes very, very hard. It is far easier to pass the problem along as the president and the Congress are doing now. So the outlook is for sideways motion in the economy, a continuation of slow growth and high unemployment, a short run that lasts a long time. (Copyright) politics is no politics. President Reagan and Speaker ONeill can, if they want to, resolve differences as to how best to trim the deficit. They can then make a joint announcment that would leave no partisan stigma and get on with preparing for the anticipated recovery their compromise promises. The unseemly and overly long haggling while the national and world economies worsen is a fools exercise that is bringing discredit on all participants from the President down to the lowest member of the House of Representatives. Mideast Promise amply display, turbulence in the Middle East is nowhere near an end. But Camp David still points in a promising direction. In dismantling the Israeli settled ments, forcibly removing was announced was one picked to Jewish occupants, Mr. Begins govunleash Israeli warplanes on Palesi-nia- n ernment is risking its political future. enclaves in Lebanon. In fact, the The Israeli military has outspokenly second should not detract from the protested losing the buffer zones first. formed by Sinai desert lands revertThe air strikes on Beirut are a ing to Egyptian control. The financial dispiriting, technical violation of the cost alone is stunning for a country truce previously observed in Leba- the size of Israel. non. It was a ceasefire, however, According to sources in Tel Aviv, lacking the formal, binding and Israel spent $17 billion, since 1968, on n crucial commitments of the military, commercial and communipeace treaty. ty facilities in the Sinai Peninsula. It is genuinely significant that Redeploying defense installations initial phases of the Camp David from there to the Negev is expected to agreements are being met by the cost Israel another $4 billion. Israels detractors will say such participants, especially Israel and Egypt. As the air raids over Lebanon losses are the price in rightfully returning what was taken by force. Certain Egyptians still argue Israelis gave up nothing because the Sinai wasnt their land to begin with. The Palestinian replight of long-tim- e The only people who can afford a could be insinuated into such a house are those who dont have any fugees too. These points, however, kids. rebuttal, The government should either close all the are mostly secondary to the mo- Unfortunately for the value which should have been gained from the Israeli government of Prime Minister Menachaem Begin adhering to Camp David accords and restoring all Sinai territory to Egypt, the same day this die-har- Israeli-Egyptia- Orbiting Paragraphs tax loopholes or provide enough to go around. ments dominant one. Which is, Egypt and Israel continue to demonstrate that peace arrangements can be made between former The most refreshir g thing brought into the in the bitter, often brutal Arab-Israefoes home so far by cable television is the cold air let in by the hole in the wall. struggle. More than that, the signatories can be relied on to meet Proposals to cut back on mail service come the terms, even when costly or as a surprise to people who thought they distasteful. There remains, then, a already had. future for and meaning in negotiating The skill of a politician is measured by how many terms he can keep blaming things on his those Middle East conflicts more apt now to summon bullets and bombs. predecessor. Nothing is sadder than seeing how old your contemporaries have grown. li When are your ehange-of- - address cards, please? Flora Lewis Time Running Short for Arabs, Israelis New York Times Service JERUSALEM The state of Israel, soon to celebrate its 3ith year, has a history of unrelieved drama, sometimes triumphant, often deeply painful, always changing. When I arrived in the middle of the 1948 war, the first people I met after an arduous journey were three soldiers. One was an Irishman, naturally called Paddy, who had defected from the British Army with his tank. Asked why, he said jauntily, Im a mercenary, I couldnt resist that two pounds (then about $8) a month they pay here. The other two were Jewish, cousins from Rhodesia. They had volunteered, they said, because we knew when we walked off the ship wed be in the one country where you can joke about Jews without being Later, I met the first chief of police, a Frenchman The point, he said, is to be a normal country. We have Jewish policemen, Jewish criminals. Jewish whores. Were making it. There was a sense of wonder at the sheer existence of the state, despite terrible danger, an awe and delight so great it had to be expressed with humor. Gradually, the newborn state developed lusty strength and confidence. Myths faded, myths about the character and capacity of Jews for physical labor. Many came from Oriental countries they are perhaps a majority now and the myth was destroyed that Israels problem among Arabs was its Western, modem character in an area swamped in tradition. When the Israelis become more Levantine, more integrated with the climate and geography, went the conventional wisdom, they'll get along better. The opposite proved to be the case. It is the people who brought their memories from Moslem lands who have the most strident, emotional hostility to Arabs. When a new generation rises, went another myth, it will have learned to live without complexes in the neighborhood. When Israel is more securely armed, argued Henry Kissinger, it will be more generous. But the expanded armaments and the sense of power haven't diminished the fear; they have transformed it so that now when Arabs come to fear Israel, many Israelis seem to fear peace. Our country is shrinking, complained one early Zionist about the impending Sinai withdrawal, though he is a man of great gentleness with little taste for acquisition. A young woman, a political critic of the harsh policies of Prime Minister Begin, said, "We are giving away the land for nothing " For peace? Its only a promise," she said How do we know? Peace can never be more than a promise. It two broad strains in Israeli opinion now. They overlap, not only isnt an object. There are Whetting the Appetite If Argentina Wins, the Next Combatant May Be Chile Enight-Ridde- r Newspapers Solzhenitsyn has written that governments require victories and people need defeats He went on to explain that whereas victory whets a governments appetite for more of the same, defeat often enables a people to attain freedom One may speculate with reasonable certainty that Argentina, as a direct consequence of the Gary Frenk is a research associate at the University of Miami's Center for Advanced international Studies. He has written two books on U S foreign policy in Argentina. nations recent adventure in the Falklands, could experience either of the above phenomena With regard to the latter alternative, it is not unlikely that the military government would fall if Argentina were to suffer a British victory. A win by the British, incidentally, need not be military; a diplomatic triumph might also topple the Galtieri regime. Under those circumstances, it is not unreasonable to project the return of civilian rule to Argentina A A A more ominous scenario would follow, however, if Argentina is successful in culminating this adventure. There is every likelihood that Buenos Aires, after digesting the Falklands, would once more look southward. this time to the disputed islands in the Reagle Channel This boundary dispute between Argentina and Chile, possibly the most serious threat to peace in South America, very nearly provoked a war between the two nations only 3'2 years ago. The Argentine military rulers, emboldened against Great Britain, would surely turn their attention to this festering source of contention with Chile. Moreover, success against Great Britain will hardly alter the grave state of the Argentine economy; an economy, I might add, that many observers believed was on the verge of collapse prior to Galtieri's precipitous move. It is now generally accepted that Galtieri embarked upon this adventure in order to divert the nation from the severity of the economic crisis afflicting Argentina Valid testimony to this theory is the fact that many of the same people demonstrating in the streets of by success A Buenos Aires against the government's economic policy prior to the Falklands episode, swiftly threw their support to Galtieri immediately after the military action. Inasmuch as the nations economic problems will not go away (they may even worsen as a result of this action), the military government will require more such victories in order to remain in power. Moreover, it is essential to point out that there has been, for some time, an element in the Argentine military that has wanted a war against Chile. Under these circumstances, a clash between the two principal powers of the Southern Cone might become inevitable. The Galtieri government deluded itself into believing that London would not respond in bellicose fashion over the Falklands. Let there be no such delusion in Buenos Aires about the reaction of the Chileans. The Pinochet regime will fight. One may also speculate that conflict will not be confined to the three disputed islands of Nueva, Picton and Iennox in the bleak and forbidding waters around Cape Horn. A collision between Argentina and Chile could easily spread to the entire region Not since the A 1930s, when Bolivia and Paraguay were locked in a bloody struggle over the Chaco, has this vast area had the potential for such extensive combat. At that time, Argentina supplied weapons to the Paraguayans while Chile supported the Bolivians. Brazil sympathized with the Chileans and Peru cast a longing eye on the real estate it had lost to Chile during the War of the Pacific. Needless to say, all the elements were present for a wider war. Only timely and insistent intervention by the United States prevented a more serious clash. If conflict once more comes to the Southern Cone, can Washington again serve to influence events in the region? Thus far, the Reagan has not acted wisely. By administration recently agreeing to resume arms shipments to both Argentina and Chile, we have only accelerated the possibility of violence between the two nations Furthermore, the United States, in recent years, has largely ignored events in much of South America. Washington would now do well to pay a good deal more attention to this vital area. between political and social groups but even within individuals. One yearns for peace and shrinks from the endless prospect of violence that seems to lie ahead. One suspects peace as a trap, the ultimate risk that can only be parried with land and readiness to strike hard. The degradation of being an occupying power imposing its will on unarmed civilians is felt in Israel, but so is the insidious sense of natural superiority bred by success and privilege. Jerusalem's MayorTeddy Kollek, one of the few who has frequent social contacts with Arabs and who is a blunt, highly vocal critic of occupation policy, said, But the Arabs dont help either. When did an Arab speak out against an act of terrorism? He thinks a majority of Israelis would still accept a compromise with Palestinians, as however warily the they have accepted withdrawal from Egypts territory, in return for a promise of peace. But time is running out Kollek quotes the founding prime minister, in retirement, telling a David Palestinian several years after the 1967 war. You'd better hurry. The Israeli appetite will grow." Now new myths are taking hold, myths of superstrength, myths of justification based on ancient history. It is a tragedy of the deadly Arab Israeli embrace that the partners never manage to discard their myths and reach an awareness of realities at the same time. The months ahead are going to be crucial. If, as Egypts government hopes, the return of Sinai leads other Arabs to conclude that negotiation is the one way to success, there is still a chance of eventual settlement. However, if the impasse persists much longer, the chance will be lost again until another tragedy brings drastic change. A new period is opening in the Middle East. Each element affects the others. Jordan is budging, but is afraid to join Egypts isolation. The PLO's Yasser Arafat is worried. The lraq-Irawar and Syrias renewed ambitions for preeminence are shifting alignments. If another person in the area has the late Anwar Sadats courage, he must act soon. Ben-Gurio- n The president has been invited to LISTEN to a joint session of the British Parliament. (Copyright) A A J, |