Nation: Conservative Conservatism

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Reagan's economic package is toned down to add up

George Bush once accused him of practicing "voodoo economics." John Anderson scoffed that he was working "with mirrors." Jimmy Carter derisively charged that his schemes would so deplete the Treasury that the Government could not afford to keep even "the night watchman at the Lincoln Memorial." Through it all, Ronald Reagan fed the doubts by refusing to spell out what kind of economic program he had in mind beyond his seemingly impossible promise to lower taxes, increase military spending and balance the budget. Last week, finally, he supplied some of the details of his proposals and produced a kind of five-year plan for capitalism that was far more coherent and defensible than the impression conveyed by his earlier statements.

The new Reagonomics, like the old, reflects the candidate's veneration of the free-enterprise system as the great creator of wealth and his hatred of Government intervention as the inveterate stifler of that system. But the new plan has been stripped of excess ideological baggage, and for the first time Reagan's advisers have attached numbers—debatable, but plausible—to some of its components. The plan's essential points, as outlined by Reagan and his advisers:

LOWER TAXES. The heart of the program is, as before, a 30% slash in personal income tax rates, 10% in each of the next three years—the so-called Kemp-Roth formula. Beginning in the fourth year, tax rates also would be "indexed," i.e., tied to inflation rates so that only a rise in income greater than the rise in prices would push a taxpayer into a higher bracket. Business taxes would be reduced by speeding up the depreciation write-offs that companies could take for modernizing their plant and equipment. Cost to the Treasury: $22 billion in fiscal 1981, which begins Oct. 1; a stunning $192 billion a year by fiscal 1985. Faster growth prompted by the cuts would reduce the impact, but only to $153 billion annually five years from now.

LESS SPENDING. With revenues lowered, Reagan would cut federal expenditures at least 2% below currently expected levels in fiscal 1981 and more in later years until the total reduction reached 7% in fiscal 1985. "Actually, I believe we can do even better," said the candidate. His goal is to hold spending 3% below anticipated levels next fiscal year and 10% by 1985 (spending would still increase, but less rapidly than at present). Savings: a minimum of $13 billion next fiscal year, $64 billion to $92 billion in 1985. This would be accomplished, says Reagan, primarily by ending "waste, extravagance, abuse and outright fraud in federal agencies and programs." He gave no examples of how he would wield the knife, nor did he promise to ax any programs outright—not even social welfare projects he has inveighed against in the past. The hold-down would be achieved despite an increase of at least 5% a year, adjusted for inflation, in military spending that Reagan contends is needed to "restore our defenses."