In Washington, March 10-13
Jude Wanniski
March 16, 1981, 3 p.m.

 

Bottom line: Very bullish.  Robert Strauss had been telling friends that Reagan is so popular at the grass roots that the Democrats can't oppose him.  They have to give him everything he wants or be cast as obstructionists, "everything, of course, but Kemp-Roth.  We can't give him that."  I heard the story and had it passed on directly to Reagan by Rep. Jim Courter of NJ, who had breakfast with him Thursday morning.  Courter said RR loved the story and understood its implications.  Liberal Democrats especially will do anything to stop personal tax cuts, but I sensed they know they are losing.  Mail on Capitol Hill running 5-1 demanding support for RR program, and the people want no arguments.  Rep. Stan Parris (R-Va) says 30 percent tax cut would pass on House floor with ease, and Dems know they must water it down and prevent a straight up and down vote.  The point man on supply-side in Ways and Means is Rep. John Rousselot (R-Calif) who is very optimistic that there will be such a vote on House floor.  All 12 Republicans are solid, he tells me, and Hance (Texas) and Holland (S.C.) are signed on.  He figures of the four other Dems needed of remaining 22, Reagan himself will be able to do the job with a personal plea.  Dems don't want RR going on TV asking for nothing more than a House vote on the central economic issue of his campaign.  (RR, by the way, tells private audiences exactly that the tax cut is the centerpiece of his program).

The 22 point surge on the Dow Jones of March 12 probably reflected a major breakthrough for supply-siders when  Rep. William Brodhead (D-Mich) a key man on Ways and Means, sent around a "dear colleague letter" urging an immediate cut in maxtax on unearned income to 50 percent from 70 percent.  Brodhead is apparently persuaded that the cut is for the country's good, knowing it loses trivial revenue and has terrible supply-side effects.  The Washington Post of March 13, lead editorial, supports cut to 50 percent, but says "Tax expenditures" should be cut, i.e., loopholes, to pay for cuts.  Sen. Metzenbaum of Ohio (up next year), a leading manic-egalitarian, now poses as a RR supporter, says he thinks it will be great if only "tax expenditures" are cut to help pay for it and make it "equitable."  Liberals probably remember that the Kennedy tax cuts of 1962 were delayed until after his death by the "loophole" proposals, "Martini lunches, etc."  I sensed that the opponents are so close to being scorched by the supply-side fire that they are using the 70-to-50 cut as a "firebreak."  Hoping to halt the idea there, while White House gets tangled up in the loopholes. It won't work because Reagan is not afraid of defending Tax Cuts for the Rich, which is how Dems always talked Republicans out of proposing cuts in high rates.

In other words, opposition has just had their "at bats" and could not score.  Supply-side has a chance to make rapid advances which would be reflected by sharp advances in D-J over 1000. I had sessions with Stockman, Kemp, Treasury and OMB folk, and for the first time since Election Day felt that everyone was submerging their own career interests and committing themselves to Reagan.  Factional disputes will emerge again later in the year, the struggle for "succession" continuing, but as the White House heads into the fight everyone is a comrade in arms.

Similarly, all other issues are being submerged over the budget battle.  The monetary issue is on the back burner, with awareness that "convertibility" has to wait its turn behind taxes, but that its day is coming.  Also, independent oilmen are aware that they are not going to get a cut in windfall profits tax if Reagan's assault against the Budget/Tax System is thwarted, but if he succeeds, all the rest becomes possible.  This is real: I spent a day with 100 wildcatters, the directors of the Independent Petroleum Association of America, in their political strategy session, and one after another they talked about supporting Reagan instead of asking for special breaks for oilmen.  Senator McClure (R-Idaho), chairman of Senate Energy, told them to forget about ending Natural Gas Regs in 1981, and they surely won't push in that direction as long as the Budget is center stage.  But they also know that deregulation is in the national interest, and is not a special interest.  Which means it could also be live before the end of the year.  Anything becomes possible with a successful President.  Note RR's trip to New York City, standing applause wherever he goes.  They don't want him to stop doing what he is doing.  (In the 1920s, I remember stories about how audiences would stand and applaud Andrew Mellon the great supply-sider of the century -- when his image appeared on movie screens.)

Again, pardon my optimism, but I feel that we are on the threshold of a global victory.  Supply-side is spreading around the world, and most recently has infected Israel.  I've already heard the buzz in Washington about the llth hour tax-cutting spree that may have saved Menachim Begin from defeat in the June 30 election.  At last, Begin got a finance minister, Yoram Aridor, who saw the economy in supply-side terms and reversed the austerity programs that had driven the economy into the ground. See The Economist of March 7, p.39, for details on the "Aridor Fiesta," which, says the magazine scornfully, "has produced some short-term benefits: January was the first month for a very long time in which no money was printed.  The longer term results are in the air."

All we've needed all along is a few solid political success stories.  JFKennedy's message was "Let's get the country moving again."  JFKemp's message is "Let's get the world moving again."