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Whether Reagan and Congress can summon the will to make such supremely difficult choices is problematic. Reagan has rebuffed all suggestions for slower defense spending increases, to the dismay of some in his own Administration. In an inter view with the Associated Press that was released as his resignation be came effective last week, Murray Weidenbaum, former chairman of the Council of Economic Advisers, charged that increases in military spending have fully offset all Reagan's cuts in civilian programs. Said Weidenbaum: "On balance, we really haven't cut the budget. When you add that [defense spending] to the big tax cuts, you get such horrendous deficits." While the Administration considers higher defense outlays to be sacred, Democrats controlling the House regard Social Security as equally untouchable.
No guidance on how, or even whether, these tough problems will be faced is likely to emerge for the next several weeks. With the tax bill passed, the White House has made it clear that there will be no further Administration economic policy actions beyond a few vetoes of appropriations bills that provide for more spending than the President wants. From now until Nov. 2, both parties will be preoccupied with the congressional and gubernatorial election campaigns that begin in earnest after Labor Day.
The state of the economy will be a major issue in many campaigns, and the predominant one in some. Until recently, Democrats had expected to score heavily by assailing Reaganomics for producing disastrous unemployment and interest-rate levels, and many Republicans had been running scared. That is still true in certain areas. In California, Democratic Governor Jerry Brown is telling voters that electing him U.S. Senator will "send a message that we're tired of deficits, we're tired of interest rates, we're tired of tax breaks for the few." In Oregon, which is plagued by an 11.4% unemployment rate, Republican Governor Victor Atiyeh has openly criticized Reagan for initially proposing a budget "so out of balance" that it "shocked" his strongest supporters, including Atiyeh.
Nationally, however, the drop in interest rates and the surge on Wall Street have made the political signals quite as confusing as the economic ones. Republicans are suddenly feeling much more cheerful. Says one top White House aide: "Now we are in a position to go out and argue hope. Here is our line for the fall: We are seeing the initial signs that the recovery might be worth the wait."
At least one prominent Democrat admits that this line might indeed lessen the large gains in congressional representation that his party had hoped to win. Says Tony Coelho, chairman of the Democratic Congressional Campaign Committee: "Now there is a psychological uplift to those who are not unemployed or facing bankruptcy. If the psychology of fear is reversed, then people will listen to the Republican message. We will still pick up seats, but not as many." Most estimates, including Coelho's, cluster around a Democratic gain often to 15 seats in the House, not particularly impressive for the opposition party in a mid-term election.