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A Public Service Message from the American Income Life Insurance Co.Waco, TexasBernard Rapoport, Chairman of the Board and Chief Executive Officer THE STOCKMAN PAPERS Reagan’s policy makers knew that their plan was wrong, or at least inadequate to its promised effects, but the President went ahead and conveyed the opposite impression to the American public. With the cool sincerity of an experienced television actor, Reagan appeared on network TV to rally the nation in support of the Gramm-Latta resolution, promising a new era of fiscal control and balanced budgets, when Stockman knew they still had not found the solution. This excerpt encompasses the only real gap in the Atlantic Monthly’s stunning revelation of duplicity and cynicism in the making of Reagan Administration economic policy. The gap is that readers never learn whether Ronald Reagan was a knowing participant in his top staff’s deception of Congress and the American people, or merely a doddering pitchman sent out to sell a package whose contents he knew nothing about. In a sense, it makes little difference. William Greider’s masterly Atlantic article tells us that intellectual rot infests the Administration virtually to its highest level. Still, the American people need to know whether the man at the very top was a coconspirator or merely a dupe. That would help them decide whether to be angry at Ronald Reagan, or at themselves for electing him. It’s being said in Washington and elsewhere that people knew all along that supply-side economics would never work that they didn’t need David Stockman’s indiscretion to tell them that the combination of big tax cuts and big defense increases could lead only to big budget deficits, high interest rates, and recession. That much was clear back in the 1980 primaries, when George Bush unforgettably called the Kemp-Roth plan \(esclear later in the campaign when John Anderson said it all could work only “with mirrors.” It was clear when Walter Heller, James Tobin, Charles Schultze, John Kenneth Galbraith, and other Democratic economists pointed out \(sometimes in this money policies working against each other was like two locomotives pulling in opposite directions, or like a driver jamming on the accelerator and the brake at the same time. So we “knew” just as we knew that the Vietnam War was a mistake and a tragedy well before the Pentagon papers were published. What the Stockman papers tell us is that Mr. Reagan’s own budget director knew as well knew practically from the minute he took his solemn oath of office that Reaganomics was an empty promise. What the Atlantic’s article teaches us is that the country was treated to a kind of economic Gulf of Tonkin inci dent, and that Congress was bulldozed into signing a blank check equivalent to the Tonkin resolution. In early January, Mr. Greider writes, the Office of Management and Budget’s computer model of the U.S. economy was instructed by Mr. Stockman and his staff to estimate the impact of Mr. Reagan’s proposed tax cuts. The results, Mr. Stockman confided to Mr. Greider, were “absolutely shocking.” The Reagan program would produce the highest peacetime deficits in history $82 billion in fiscal 1982 and $116 billion in 1984. Mr. Stockman told Mr. Greider that if those figures were made public, the financial markets would panic, interest rates would go sky-high, and inflationary psychology would soar. What did Mr. Stockman do? Why, he reprogrammed the computer to produce the forecasts he needed to sell Reaganomics. One could say that at this early point he was deceiving himself as well as Congress and the country in hopes that somehow Reaganomics would work magic and make the rigged computer projections come true. If Mr. Stockman back then was an innocent believer, however, he wasn’t one for long. What Mr. Stockman witnessed, and then became a party to an apologist for, was the conversion of an unrealistic \(but of greed in American society. In the 1980 campaign, Ronald Reagan promised that his tax cuts would unleash such productive energy that few if any federal programs would have to be done away with only two percent of the whole, he said, all of it consisting of waste, fraud, and abuse. Once elected, though, Mr. Stockman and Mr. Reagan set out to slash $40 billon in domestic programs. “Zero out” was Mr. Stockman’s phrase for what would happen to minimum Social Security benefits, CETA job training, and other social programs. In the Phoenix program in Vietnam, the equivalent phrase was “terminate with extreme prejudice.” To his credit, Mr. Stockman originally wanted to pare away subsidies for the fat and rich along with programs benefiting the weak and poor. He was for a cutback in Ex-Im Bank subsidies for IBM and Lockheed, for a “mansion cap” limiting mortgage interest deductions on palaces, for elimination of oil depletion allowances, for cutting tax subsidies on industrial development bonds. But to the Reagan Administration, sharing austerity is pointless when the poor can be made to bear it all. Mr. Stockman wanted to target what he called “weak claims”; the Administration ended up training its sights on “weak clients” American Income Life Insurance Company EXECUTIVE OFFICES: P.O. BOX 208, WACO, TEXAS 78703, 817-772-3050 BERNARD RAPOPORT Chairman of the Board and Chief Executive Officer 18 FEBRUARY 12, 1982