(10 of 10)
Instead of job programs, Bradley suggests a short-term remedy of extending unemployment benefits; he predicts there will be growing pressure from Congress within the next two months as the 2.5 million people who lost their jobs late last year begin to run out of benefits. But in a meeting of the Cabinet Council on Economic Affairs last week, in which unemployment was on the agenda, Reagan and his aides did not discuss the proposal to extend benefits. Said a White House aide: "We feel we need to demonstrate concern for unemployment, but without reinstating benefits that would affect the budget." If the unemployment rate worsens, aides predict, Reagan may move up the starting date of some federal construction projects already approved by Congress, which would produce a limited number of jobs without raising the budget.
The Administration plainly plans to stick to its conviction that its program of tax and budget cuts will revive the economy and eventually cure the triad of economic troubles: high inflation, high unemployment, high interest rates. Liberal and conservative economists tend to agree that the only real solution to unemployment is to focus on the entire economic picture. To a certain extent, though, the Administration's goals are contradictory in a faltering economy. "In large measure, you're stuck with a choice between unemployment and inflation," says Economist Rudolph Penner of the American Enterprise Institute, a conservative think tank. "The politicians who say they will not use high unemployment to cure inflation are just dreaming."
Inflation is indeed dropping: the rate for 1981 stood at 8.9%, down from 12.4% in 1980. The political question centers on how much unemployment the public is willing to accept to continue the battle against inflation. "There are a lot of people out of work now who aren't used to it, from General Motors executives to Oregon timbermen," says Frank Leary of Washington's Urban Institute. "A lot more people are feeling the cold breath of unemployment." On the other hand, inflation touches all Americans, and the country as a whole would pay a price if the White House switched from fighting inflation to combatting unemployment. Warns Federal Reserve Board Member Henry Wallich: "By the time you've made a dent in Detroit's unemployment, you've sent inflation through the roof for everyone." In effect, Reagan is betting he will not have to make that switch, but if the unemployment rate continues to climb, he may have no real choice.
—By James Kelly.
Reported by Gisela Bolte/Washington, with other bureaus