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After the meeting, the White House announced that the President would soon propose major new cuts in federal spending. To emphasize his determination to balance the budget, Reagan has tentatively decided to trim $13 billion from his once sacrosanct defense spending goals over the next three years. His only alternative would be a politically risky move to reduce Social Security benefits. Defense, Social Security and interest on the national debt make up about 60% of the budget, and other programs have already been slashed to barebone levels, prompting street demonstrations by labor unions and other angry groups. Without rollbacks in Social Security or military spending, said Alice Rivlin last week as she testified before the House on the budget outlook, "you would simply have to close down the rest of the Government."
Any new cuts in federal spending, however, will face a difficult time in a Congress that is becoming increasingly uneasy about Reaganomics. Said Senate Majority Leader Howard Baker last week: "Already Senators are saying to me, 'What the hell difference does it make? If we cut another $10 billion to $15 billion, the financial community will just come back and ask for another $15 billion cut."
During the month the President was in California, legislators returned to their home districts, where many of them heard loud complaints about the level of interest rates. Said House Republican Leader Robert Michel of Illinois: "We can't live with a 20% prime. Something has got to give in the next 90 days." Added California Republican John H. Rousselot, a strong Reagan backer: "On a crisis scale of one to ten, I'd say we're about seven and climbing."
The President himself sowed many of the seeds of the current disillusionment by his boundless campaign promises and early, far too rosy economic predictions. Rather than adopting a Churchillian posture and admitting that it would take sacrifice and patience by all Americans to set the economy right, Reagan has steadily underplayed the pain involved. During last year's presidential campaign, he pledged that strong growth, less unemployment, lower inflation and a restoration of American military might were all just over his supply-side horizon.
Once the new Administration was in office, the happy talk continued. When the supply-side Reaganauts were preparing to unveil their economic plan last February, they used imaginative new computer models to project what would happen when their tax cuts took effect. The results were absurdly Pollyannaish. Growth in 1982 was going to surge to 7%, while inflation would fall to 6.5%.
Businessmen and economists immediately scoffed at the idea that the problems of sluggish growth and high inflation could be solved that quickly. Charles Schultze, former chief economic adviser to President Carter, called the Administration numbers "wishful thinking." Murray Weidenbaum, Reagan's top economist, and other officials eventually persuaded the Administration to tone down its projections. Yet even then,