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Show hhaJLakeTnbum'. Tlit Triumph of Politick Stockman Quit After Concluding Continued From lose confident; A-- m our easy dollars and prosperity. and then the chickens will come home to roost In the short run, we will be absolutely dependent upon a $1LK) billion per year inflow of foreign capital to finance our twin deficits trade and the federal budget. Faced with a sinking dollar, the Fed will have no choice but to suddenly and dramatically tighten monetary policy, forcing up interest rates to attract the foreign savings needed to underwrite our lavish current spending This action will cause a recession, but this time neither Paul Volcker nor Ronald Reagan will have the wherewithal to stay the course. American politics will resound with the pleas of debtors demanding relief in the form of reflation. Since our balance sheets already reflect the highest ratios of debt in peacetime history, there will be no margin at all to weather an interruption of cash flow: not at the federal level, where we are borrowing three times more relative to GNP than at the comparable stage of any previous cycle: nor at the corporate and household level, where debt service relative to income has soared off the charts. The clock is thus ticking away inexorably toward another bout of inflationary excess. If we stay the course we are now on, the decade will end with a worse hyperinflation than the one with which it began. Indeed, the increased fragility and instability of the global economy, along with still fresh memories of "the debauched financial assets of the 1970s, will make this inflationary cycle even more violent and destructive. One reason I plotted to raise taxes in 1985, then, was to help correct an economic policy course that was disaster. leading to long-ru- n But there was also another more compelling reason. As the original architect of the fiscal policy error now threatening so much grief, I was appalled by the false promises of the 1984 campaign. Ronald Reagan had - been induced by his advisers and his own illusions to embrace one of the more irresponsible platforms of modern times. He had promised, as it were, to alter the laws of arithmetic. No program that had a name or line in the budget would be cut: no taxes would be raised. Yet the deficit was pronounced intolerable and it was pledged to be eliminated. This was the essence of the unreality. The president and his retainers promised to eliminate the monster deficit with spending cuts when for all practical purposes they had already embraced or endorsed 95 percent of all the spending there was to cut. The White House itself had surrendered to the political necessities of the welfare state early on. By 1985. only the White House speech writers carried on a lonely war of words, hurling a stream of presidential rhetoric at a ghostly abstraction called Big Government. Some will be tempted to read into the failure of the Reagan Revolution more than is warranted. It represents the triumph of politics over a particular doctrine of economic governance and that is all. It does not mean American democracy is fatally flawed: special interest groups do wield great power, but their influence is deeply rooted in local popular support. Certainly, it does not mechanically guarantee the inevitability of permanent massive budget deficits or economic doom. Our budget is now drastically out of balance not because this condition is endemic to our politics. Rather, it is the consequence of an accident of governance which occurred in 1981. That it persists is due to the untenable anti-taposition of the White House. After five years of presidential intransigence, all of the normal mechanisms of economic governance have become ensnared in a web of foil v. But this condition can be reme- - died whenever the White House cides to face the facts of life de- debt-finance- - ' x Chieago Mayor Wins Control of Council for 1st Time - CHICAGO (UP1) Mayor Harold Washington, in control of the City Council for the first time since he was elected three years ago. Wednesday called for negotiations with his foes of the Democratic machine. "I would just as soon sit down and work things out, Washington told reporters during a breakfast meeting. We are not going to go in there with swords drawn. We are not going in there to fight." The victories Tuesday night of Marlene Carter and Luis Gutierrez over candidates backed by Alderman Edward V'rdolyak and the remains of the Democratic machine, constructd ed and by Mayor Richard Daley, give the city's first black mayor the edge over Vrdolyak, his council nemesis. The mayor and Vrdolyak now each control 25 council seats, with Washington able to cast the vote. Vrdolyak had used his majority to stymie regular city business and Washington's reform program. Yesterday was clearly a tremendously shocking defeat for the machine," said Washington, who this month celebrated his third anniversary as Chicago's mayor. He can run fine-tune- for in 1987. Washington said his first order of business will be to spted city appointments held hostage in council committees controlled by Vrdolyak Meanwhile, the economic danger mounts and the fiscal fully of the Reagan Revolution's aftermath reaches new heights. The recently endeficit reducacted Gramm-Rudmation law stands as testimony to that proposition. It is truly difficult to conceive of a more mischievious. unworkable blunderbuss than this aln leged automatic budget-cuttin- g device. Gramm-Rudma- n will never reduce the nation s giant and dangerous budget deficit by any significant amount. After one or two years, its mechani across-the-boar- life-savi- short-hande- d All of this chaos and much, much May I, hdit A) Economics Dont Work Supply-Sid- e excal formula for all m the reductions percent penditure of the budget not exempted or protected would produce havoc The defense cuts would be so draconian as to amount to unilateral disarmament, a large portion of the IRS staff would be fired and we would collect no revenew drug applinue at all, cations would pile up at the Food and Drug Administration unreviewed, our airports would become a parking lot for cars, people, and planes because the FAA would be too to manage even a fraction of the normal traffic Thursday, more is mh rent in the arithmetic ut Gramm Kudman. and is the reason it will be eventually rep a led or duti caliy amended Hopefully the Su preme Court will spare us rime h trou ble bv ruling it unconstitutional Still, extricating ourselves from the fiscal folly now upon the nation bv means of an alternative legislative solution will test our institutions of governance and our political leaders as rarely before Folly has begotten folly, and the web has become hoper history lessly entangled in a of action and reaction. But the politicians of both parties will have a sound and valid reason for disengagde- ing from the Reagan Revolution's five-yea- struciive aftermath A radical hange in national economic policy was not their idea, economic utopia was nut their conception of what Was possible in 1981, when the policies of i the past collapsed Republican and Democrat politicians together cjn tell the American people that a few ideologues made a giant mistake, and that the government the public wants will require greater sacrifices in the future in the form of the new taxes which must be levied The politicians can tell the American people that a dangerous experiment has been tried and an old lesson has been demonstrated once again Economic governance of the world s greatest democracy has been shown to be a deadly si rious business There is no room in its equation tor sertb biers, dreamers, ideologues and passionate young men bent upon renuk mg the world according to their own grand prescriptions The truth to be remembered is that history in a de mocracy does not live to be rewritten and rerouted, it just lives for another day finding its way into the futuie i along the trajectory of its and pjlpabie past well-wotr- t 1V86 t)v DciviU A. Stockman 1 rom the bouk "Trie Triumph of Politics: Why The Reu tan Pe.olution Fuied by Dew id A r Stockman, Published by Harper & Po At, Inc Distributed by Las Angeles Times Syndicate |
