Educating Ronnie

Everyone knows what Reagan is thinking – except Reagan

US President and Republican presidential candidate Ronald Reagan makes the V sign as he addresses supporters at an electoral meeting, a few days before the american presidential election in November of 1984. Credit: DON RYPKA/AFP/Getty

WASHINGTON D.C.

IN THE ANNALS OF JOURNALISM, THE 1984 CAMPAIGN may well be remembered not for the dreary coverage of the candidates but for what happened after the election. Overnight, the national press corps executed an abrupt twist in the news, a turnabout so swift and nimble it resembled a pirouette. Rather than rest on its laurels, the press plunged eagerly into a new assignment –– telling Americans what they had actually voted for.

This must have been dizzying for many readers, because, throughout the campaign, the most influential political reporters had made the differences between Walter Mondale and Ronald Reagan perfectly clear. If Mondale were elected, he would raise taxes. Reagan promised not to. Mondale harped tediously on the supposed dangers of $200 billion deficits and claimed they would continue to grow in the years ahead. The president dismissed Fritz' analysis as negative thinking. The deficits were shrinking painlessly, Reagan explained, because the economy continued to grow robustly, generating more tax revenues for the government As Republican leaders said afterward, the American people voted for economic growth (presumably the forty-one percent who supported Mondale voted for a recession).

Yet the day after the election, for reasons never explained to readers, editors and reporters at leading publications pivoted 180 degrees in their thinking about what the administration would do over the next four years. Fortune magazine, always a dependable booster of the Reagan presidency, displayed special courage in its first postelection issue. In fact, that issue had gone to press before election day, its editors boasted, yet the cover bore a shocking headline: THE COMING TAX INCREASE –– WHO'S ON THE HIT LIST.

Newsweek also scored a quick triumph. Its special election issue, on sale only one day after the landslide, contained a startling revelation: Mondale's accusation that the Reagan White House had a "secret plan" to raise taxes was correct. "There was a secret plan, as it happened, although Reagan had not then accepted it or even seen it," the magazine revealed. "One of its central premises was that the deficits were indeed a danger, to the economy and to Reagan's place in history." The White House remedy, Newsweek explained, would be packaged as "tax simplification," but its real effect would be to "simplify taxes upward."

White House officials, understandably embarrassed, quickly denied the Newsweek report, but perhaps the editors of the newsweekly felt mild embarrassment of their own. Three weeks before the election, their lengthy analysis of the deficit question had cheerfully sided with the president's version of reality. "President Reagan's economic dreams have to a remarkable degree come true." The article approvingly cited administration estimates that the budget deficits would shrink naturally in the years ahead to $139 billion and might be as low as $21 billion in 1989.

Possibly the Newsweek reporters who had discovered the White House's "secret plan" on the dangerous deficits did not share this information with the Newsweek reporters who were pooh-poohing the problem. In any case, the magazine soon resolved its internal differences on the matter. The November 19th issue, on newsstands six days after the election, revealed a troubling trend that had been visible to economists since August –– namely, that the economy was not growing as robustly as Reagan had said. It was slowing down sharply. Newsweek concluded somberly:

"Above all, that low a rate of expansion probably isn't enough to support Reagan's belief that the economy can grow its way out of federal deficits. Further cuts in federal spending and tax hikes seem certain to follow if economic expansion is to be kept on course."

Perhaps the president, if he read the newspapers, was confused, too. Certainly he had the right to wonder where all this talk of tax increases and growing deficits was coming from. After all, he was the president, just reelected by a historic landslide, and he had declared no such thing. At a press conference the day after the election, Reagan offered special reassurances about his program. The idea of "tax simplification," he promised, would not conceal a tax increase. Certain deductions might be eliminated, but they would be offset "so that it would not result in any individual having his taxes raised by way of a tax reform."

That promise, alas, is impossible, since any changes in the tax code will inevitably raise taxes for some citizens and lower taxes for others. The Treasury Department experts understood this well enough since they were drafting the president's "tax simplification" plan. A treasury spokesman immediately invoked that now-familiar clarification: "The president misspoke."

The president was also reassuring on the questions of budget cuts. What he had in mind, he said once again, was the celebrated Grace Commission report, which listed 2478 recommendations for reducing government spending by eliminating practices the commission's business executives regarded as wasteful. "These are things that have to do with not going along with the idea that the only way you can cut spending is to eliminate or reduce some program," the president explained. "What we're talking about is being able to do things government is supposed to do, but doing it more efficiently and economically."

The president had repeatedly invoked the Grace Commission's 2478 recommendations during his victorious campaign, but none of the major news outlets examined the contents for their readers. Nearly a month after the election, The Wall Street Journal finally did and discovered that the Grace Commission's ideas for saving money were quite controversial –– closing 12,000 post offices in small towns, cutting retirement benefits for soldiers and sailors, things like that. The Journal did not, however, raise one very compelling fact: The commission's chairman, J. Peter Grace, complained loudly about wasting taxpayers' money, but his own corporation, W.R. Grace and Company, paid no federal taxes over the last three years, according to a study by Citizens for Tax Justice.

The press brushed aside the president's own statements on the Grace Commission and tax reform and, instead, plunged into a footrace to see who would be first to report other, more shocking details. The Washington Post took the lead over competing newspapers with an authoritative account on Thursday morning, November 8th, barely two days after America had voted. White House correspondent David Hoffman revealed that the second Reagan term would seek "deeper cuts in some federal programs benefiting the middle class." Relying on important anonymous sources at the White House, Hoffman cited these likely targets: financial aid to college students, health care for veterans, medical benefits for the elderly, military retirement and such business subsidies as federal rivers-and-harbors projects. Hoffman's sources assured him that this time Reagan's budget cuts would not be aimed at the poor since they had suffered disproportionately in the first round of cutbacks in 1981.

This list was puzzling, not only because none of these painful matters had been brought up during the campaign, but because the budget cuts seemed to be aimed at the very citizens who had voted for President Reagan by such overwhelming margins: the young, the military, business executives, the middle class. The vanquished Democrats must have been confused by this, too. In the postelection lectures from political pundits, the Democratic party was scolded for "turning its back on the middle class" and warned that it must make amends, if it ever wished to regain the White House. Now, it seemed, the Democrats were being told that the awesome "Reagan mandate" required them to vote against the programs that benefit the middle class –– education, health, business subsidies.

The Post's authoritative account contained another startling revelation about White House plans: " . . . there is a consensus among fiscal analysts, both inside and outside the administration, that a tax increase will probably be necessary as part of any sizable deficit reduction." Shocking as this news was, one might have expected it to be the "lead" of his story, but Hoffman did not get around to it until the twenty-third paragraph, as if this "consensus" were already widely known. Under the ground rules of Washington reporting, he could not, of course, reveal the names of these "fiscal analysts" inside the administration who believed a tax increase was necessary. Nor, for that matter, did Hoffman explain how this "consensus" developed miraculously in the single day that had passed since the election. Perhaps all the "fiscal analysts" telephoned one another and reached an agreement on the necessity of a tax increase, then phoned the Post with the news.

The Post article, however, did illuminate the White House's strategy for getting around the sticky matter of the president's promise of no tax increase. "Although Reagan yesterday reiterated his opposition to a tax increase to deal with the deficit, some of his aides say they think Congress will inevitably pass one, allowing Reagan to reluctantly accept it later, as happened in 1982," the Post explained. In other words, there will be a tax increase, but it won't be the Gipper's fault.

Then, The Wall Street Journal reported that the Democrats in Congress were not exactly enthusiastic about this approach. They had joined Republicans in supporting "bipartisan" tax increases in 1982 and 1983 and were subsequently battered for it in the 1984 campaign. Perhaps they had learned something, after all, because House speaker Tip O'Neill vowed this time: "If there is going to be a tax bill, Ronald Reagan is going to have to say to the American people, this is Ronald Reagan's tax bill."

Wrong again, chided Lou Cannon, The Washington Post's senior White House correspondent and the reporter closest to the Reagan administration's inner circle. The Democrats, Cannon wrote, "seem ready to respond to the Reagan landslide by taking revenge against the electorate." How could the Democrats' refusal to propose a tax increase add up to "revenge against the electorate"? Cannon explained: Ronald Reagan has "a better intuitive understanding of the American people than his opponents do. He knows, for instance, that people value results more than consistency." When a "semidisguised" tax increase is passed, Cannon predicted, Reagan will not be blamed for going back on his word. The public will give him credit for "acting responsibly."

The befuddled Democrats may have had difficulty following the elusive logic of Reagan's political intuition. Cannon seemed to be saying that, while the voters gave Reagan a resounding landslide because he promised no tax increases, what the people really want, down deep in their responsible souls, is for the president to do the right thing and raise their taxes. "After a few mental handsprings and some more ranch time, Reagan is perfectly capable of going on national television next year and blaming the Democrats for slowing the recovery by refusing to raise taxes and cut the deficit," Cannon explained. He did not go into why this platform had gotten so few votes for Walter Mondale.

"This may sound preposterous after the campaign we've just been through," Cannon acknowledged, ".  . . but stick around, folks –– you ain't seen nothing yet."

SURE ENOUGH, MORE SURPRISES WERE IN STORE FOR the "folks." On Tuesday, November 13th, seven days after the election, Hoffman scored another big scoop. The lead story on the Post's front page had this headline: NEW BUDGET FIGURES SHOW RISING DEFICIT.

The article revealed that David Stockman, director of the Office of Management and Budget, had recalculated the budget prospects after the election and discovered that Mondale was right, after all, though the Post did not put it in those words. The federal deficit for the coming year was not $170 billion and shrinking, as the president had claimed throughout the campaign, but $190 billion and growing. This estimate was precisely what the Congressional Budget Office (CBO) had given out in August, the figure that Walter Mondale had relied upon and Reagan had dismissed as more negative thinking by gloomy economists. Hoffman took pains to explain that economic conditions had changed in recent months, though he did not say why this was known to the CBO forecasters and not to those at the White House.

The next day, other newspapers scrambled to catch up with the Post's story and, at the same time, knock it down a bit. The Wall Street Journal's Jane Mayer and Laurie McGinley reported matter-of-factly that the "updated" deficit would exceed $205 billion, but made no reference to poor Mondale. The New York. Times' Steven R. Weisman straggled in the following day with the news that the deficit was "about $200 billion," though Weisman prudently warned that White House officials "doubt whether even the new deficit projection was high enough."

Not to be topped, The Washington Post was busy revising its own deficit story upward. On Wednesday, David Hoffman revealed that the "new estimate" of $190 billion he'd disclosed the day before had been recalculated again by David Stockman. Now it was $210 billion. The federal deficit, it seemed, had grown by $20 billion "over the weekend." Without a hint of whimsy, Hoffman explained that Stockman had discovered still more "new figures" that compelled the budget director to raise his estimate.

According to the Post, the president was "taken aback" when Stockman told him of his discovery. Still, the Gipper was reported to be sticking to his campaign promise, telling aides firmly, "I will not submit a budget with a tax increase." Hoffman again mentioned the scenario in which "Reagan would let Congress raise taxes for him, over his objections," but conceded that Reagan's stubborn refusal "seemed to shut the door for now on such a ploy."

The New York Times, however, provided a different account of what the president knew and when he knew it. After the Reagans flew to their California ranch for Thanksgiving, reporter Francis X. Clines inquired about the apparent inconsistency between the president's optimistic campaign assertions and these post-election revelations. "I think the president was aware of all this," deputy press secretary Marlin Fitzwater told reporters at the ranch. "It was clear to everybody that the deficit would be somewhat higher." So, was the president "taken aback," as the Post reported, or did he know it all along? The press didn't pursue the question.

THE PRESS HAD MOVED ON TO OTHER meaty matters. Details of the Treasury Department's "tax simplification" proposal began dribbling out, and when the full plan was unveiled, it also boggled the public's expectations. The reformers proposed to repeal nearly all of the tax loopholes that allow major corporations to escape federal taxation, from oil-depletion allowances to the investment-tax credit Liberal reformers, who have impotently railed against these provisions for years, could hardly believe it. Most astonishing was the proposal to eliminate the generous depreciation rules that Ronald Reagan himself had pushed through Congress only four years before, saving corporations more than $20 billion a year in taxes. It was perhaps the first time in history that an administration had enacted a major tax reform, only to denounce it later as a loophole.

The press celebrated the virtues of this reform plan, and some liberals rushed to endorse it, but once again the question arose belatedly: Where was the president? Did he understand what his own Treasury Department was proposing? The plan not only violated Reagan's pledge that no individuals would suffer tax increases, but it threatened to raise taxes for the people whom Reagan had rewarded in his first term –– corporations and upper-income families. Is that what the mandate of 1984 was really about?

The press did not offer much enlightenment on these questions. The president offered a bland endorsement of the general concept, but avoided embracing the details. These matters were complicated, he said, and would have to be studied further.

Except perhaps for some earnest reporters, no one in Washington seemed gullible enough to believe that the treasury's tax-simplification plan would ever be embraced by the president. It was not plausible that Reagan had labored to win a second term in the White House in order to raise corporate taxes by an average of twenty-five percent. This possibility became even more remote as various interest groups –– real-estate agents, high-tech manufacturers, bankers, the Chamber of Commerce and the National Association of Manufacturers –– chimed in with their objections. During the campaign, the Democrats had been portrayed as the party of special interests. Now we shall find out if the Republicans represent special interests, too.

When the White House list of proposed budget cuts became known, it seemed to be almost as improbable politically as the tax-reform plan. Notwithstanding earlier assurances, the poor would be hit again –– cuts in food stamps and Medicare and milk for infants, elimination of legal services. Since the very poor were the only income group to vote for Mondale, it served them right. The president also reportedly favors abolishing the Small Business Administration, shrinking farmers' price supports, ending export-loan subsidies for major corporations, making private-airplane owners pay their fair share for using federally supported airports, plus many more similar whacks at the middle class.

If the press had a better memory, it would recognize this list. It's the same one David Stockman first proffered to Congress in 1981. Some of these cuts are good ideas, but it is hard to take them seriously as a deficit solution in 1985. Stockman admitted a year ago in an interview with Fortune magazine that the Reagan administration had no chance of selling these drastic measures to Congress. "The point is," he explained, "we have knocked on all those doors for three years and three budget rounds. I can't foresee that anytime in this decade we will have the kind of people in Congress who will abolish those things."

The most devastating blow to Reagan's stillborn tax simplification was the disclosure from economists that the changes in the tax code would depress growth by removing incentives for capital investment. Indeed, as many Wall Street analysts complained, the mere announcement of the administration's thinking on tax changes was already affecting the economy adversely. It chilled corporate managers, home buyers and other consumers worried about what sort of tax breaks they could expect on their investments.

So the economy was already teetering on the edge of recession, the very thing people had voted against. If a recession occurred, then David Stockman's newly enlarged estimates of the federal deficit would prove to be much too modest. It would also be very difficult for Congress or anyone else to do much about the deficits.

What did the president think of all these new complications in his mandate for optimism? Lou Cannon, perhaps chastened by the sour turn of events, reported more somberly on the president's mood. It was, said Cannon, "a time of listening and learning." The White House staff, not entirely unanimous on what course to take, was trying to educate our leader, challenging some of his most cherished views. Cannon described this process solicitously, the way one might talk about the schooling of a small child.

"In the past," Cannon said, "competing advisers have tried to overcome presidential indecision by waging an open struggle for Reagan's heart and mind. This time they have been more subtle about it, trying to educate Reagan about the nuances of budgets and strategic-arms negotiations and hoping that his own desire for achievement will lead him into sensible decisions."

EDUCATING RONNIE –– MAYBE THAT IS WHAT THE press thought it was doing with its flurry of scare stories. Two birds with one stone: Break the bad news to the voters and also instruct the president on sthe finer points of governing.

Thus, he is excused from personal responsibility. This man has now been our president for four years. When are White House reporters going to start treating him like a grown-up? When Reagan says something stupid or wrong or completely off-the-wall, instead of letting him speak for himself, the press runs around to interview anonymous "senior officials" for a sophisticated explanation of what the man really meant. This is an invitation to be manipulated, and that's precisely what "senior officials" have in mind. If the press were to focus on the duplicity of what the White House said before the election and what it said afterward, readers might also wonder why the press wasn't asking these questions earlier.

The postelection news, invented in the White House and faithfully transmitted by the press, did have a serious purpose. It was intended to create a new climate of urgency in which the president could gradually be excused from his campaign promises. That strategy produced two stalking-horses –– the tax-reform plan and the drastic lists of budget cuts. When Congress turns a cold shoulder to both, then we will see the real action –– "the sensible decisions" that Lou Cannon predicted. Presumably tax increases.

When Reagan finally breaks his word and blames the Democrats, the press will doubtless congratulate him on his political intuition and his ability to compromise. None of the reporters or editors seem to recognize how cynical they have become. Big, broad lies are celebrated as wise politics. The economic reality conveyed in the news is deftly jerked around by White House leakers to suit their own purposes.

Hold onto your wallets. When the dust settles next summer, I expect that forty-one percent of the voters will be able to joke about it:

"They told me if I voted for Walter Mondale, there would be a tax increase. Sure enough, they were right. I voted for Mondale, and my taxes were increased."