Assassination Attempt
Jude Wanniski
March 31, 1981, 3 p.m.


The event shocked the system, scrambling calculations vis-a-vis the President's economic program.  Obviously, Reagan will have an easier time with Rostenkowski and House Democrats: Previous concern about getting diluted in Ways & Means, an up-and-down vote prevented by unfavorable Rules Committee action, is now washed away; Dems can not obstruct in any way.  What is not so obvious is the fresh opportunity to construct a bipartisan bill superior to Kemp-Roth. This possibility had already begun to emerge prior to March 30, with liberal Democrats offering as bargaining material their ability to cut tax rates for the "rich," i.e., Brodhead bill to cut top rate on unearned income to 50 percent from 70 percent.  Rostenkowski's statement that "Kemp-Roth is dead" plus Reagan's threat to veto any bill less than three years sets up genuine bargaining opportunity, really signaling Rostenkowski's willingness to make a deal.  Dems want to get credit for tax cuts, which means bill cannot resemble Kemp-Roth, which they campaigned against.  This presents Reagan with marvelous opportunity to trade away Kemp-Roth label and relent on his insistence on a three-year bill, and in exchange get a one-or two-year bill that accomplishes all the K-R incentive effects in a shorter span -- opening the way for a second tax package in 1984.  Rostenkowski's bargaining strength is now so weakened that he'd be grateful for a potent supply-side tax bill dictated by Reagan administration, so long as it did not have Kemp-Roth earmarks (10-10-10, etc.)  In other words, according to this, analysis, a one or two-year tax bill would be more bullish than a three-year bill, the latter evidence that the White House did not wish to share credit with the Democrats even though by doing so it could get a better bill.  I'm now betting that we'll get a quick, deep cut in tax rates a la Brodhead, plus bracket widening across-the-board that concentrates the incentive effects of Kemp-Roth.  This would give a crisp lift to the economy and stock market instead of the dribbled-in effects of 10-10-10 (which would be partially offset by inflation).

***If Reagan had not survived, who would Bush have named V.P.? Probably Laxalt, to satisfy California Reaganites.  A brainstorm of conservative activists in D.C., conducted while RR was still under surgery, concluded Laxalt would be a weak choice, the strongest Bush would be likely to make would be Sen. William Armstrong of Colorado.

*** I was in D.C. March 29-31, by happenstance.  My feeling is that General Haig's days are numbered, speculation on grapevine is that his problem is not ego, etc., but health.  High blood pressure, high-strung, he creates his own tension. He no longer has support of conservatives who originally backed him because of his hard line on Soviets.

*** DOT Secretary Drew Lewis is No.2 supply-sider on Cabinet, after Stockman. Lewis' stand on Japanese autos reflected, assignment from White House. He will push dollar convertibility!