[JOBS NOW UNEMPLOYMENI B UA Fed chief l'olcker…]

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JOBS NOW UNEMPLOYMENI B UA Fed chief l'olcker amount he had demanded. Reagan forced the Congress into extending the calth France spending should be made congressional passage of Reagan's first batch of budget cuts in July, Stockman became the main advocate of the new round of cuts which would be necessary if the budget was to be balanced as promised in 1984.

Stockman even wanted to make a substantial cut in the sacrosanct military budget, though in the end he was forced by Reagan to compromise on only a token military cut.

If Stockman had his way, Reaganomics would be massively deflationary at a moment when the economy is sinking into slump without help from the federal government. Stockman admitted in a recent, now notorious, interview that most of the OMB's figures were guesswork anyway. And he unwittingly revealed how, since every new calculation on the computer gave a bigger predicted deficit, or Jude Wanniski, author of "The Way the World Works'. Of the latter work, Laffer has said, 'In all honesty, I believe it is the best book on economics ever written' Just as they insist that capitalists thrive on profits and men thrive on dominance in the family, supply-siders themselves thrive on adulation (most of it mutual).

Disciple These intellectual (for want of a better word) high priests of the supply side all say that, tor capital to recover, all assistance must be given to the present and potential entrepreneur. That means (they say) allowing capitalist investors to pocket more of their earnings - and so, more than anything, reducing taxes, especially on profits and any other form of capitalist income.

Arthur Laffer has inventthe now famous 'Laffer

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'You mean there's a limit to the number of wishes I get?' But what mostly made ulation and high taxes. his efforts futile was that A new spirit of capitalist the public squabbling has initiative would be leading The main responsibility period of boom. for that goes to a sensa- Instead what is happentional article in the Decem- ing is that cuts in governber issue of the Atlantic ment spending are throwMonthly, based on 18 tape- ing government and recorded interviews with private sector workers out David Stockman. It reveal- of work and removing the ed, if not all, then enough already inadequale prur tion to be a very serious are intensifying the slump, blow to the prestige of most of all in already sevParticularly damaging like house construction and opinion that the supply- Ordinary Americans side economics of Reagan's workers and the middle plan was a 'Trojan Horse' race — who were nromised Wall Si broke mies in are no: singing rested h: Reggar Ive' which is alleged show that if tax rates are duced then the response terms of revived entreeneurship will be so tat that at least as much wernment revenue will be aduced by the lower tax e. Income, production, d profit will all go up. The main Congressional kiple of supply-side pnomics is Representati Jack Kemp of New York ate, the author of the emp-Roth tax cut bill lich was accepted by lagan.

The Kemp-Roth tax cuts landed very dramatic -110% cut in all Federal come tax rates in three ccessive years. In practe they are not nearly as eat as they look, even if ey are not quite as fraudent as the Thatcher tax *s (which were matched ¡ a more than proportnate increase in VAT in le same budget).

'Preventing' First, Kemp-Roth was iduced in the legislature la 5% cut in the first year » as to lessen its immedke impact on the budget eficit. Second, the personI and other tax-free allowaces have not been incrused, and so in real terms re being eroded every day y intlation. That means iat, in spite of the tax cut, le number of people pay1g federal incomes ontinues to grow; and it lso means a higher proprion of everyone's income i subject to taxes as incomIs rise in money, but not in eal, terms.

The tax cuts will make ery little different to the eal take-home pay of lower ind middle-paid workers. All that can be said is that vithout the tax cuts, the imount they pay in taxes vould have tended to go ip. A leading accountant recently concluded, "We ire not really cutting taxes lor most people; we're simply preventing them from going higher' use net result of the tar ncome tax as a share of the Vational Product will stay Rocketing arms spending at about the same level tor the next few years, but it will not go down.

But just about all Americans will find their tax bills increased as a result of other aspects of the Adminisratise she longs s and istration' the Treasury are already talking about raising other taxes to close the obstinate Federal deficit. Second, because the cutting of many Federal programmes throwing new burdens back on the States and cities.

And if they are to cover even part of the glaring social needs, they will have to raise 'local taxes to finance higher spending. Virtually every state and city legislature is at present in the throes of discussing spending cutbacks and tax increases.

In the face of all this, supply-siders are increasingly disowning the KempRoth cuts, saying that their tax cuts would have been different.

Tax cuts were never very popular with the third element in the Reaganomies coalition - the monetarists, whose high priest, of course, is Milton Friedman. Though 1 Reagan himself is much less dogmatically monetarist than, for example, the Thatcher government, it is ironically the monetarists who have so lar achieved more of their stated policy than any other part of the coalition.

And this, also ironically, is due to an appointee of President Jimmy Carter: Paul Volcker, the chairman of the Federal Reserve Board (known as the 'Fed'), who has turned out to be so successful at cutting the money supply that the senior members of the Reagan administration, from the President downwards, have been publicly asking him to stop.

One of their worries is that one particular aspect of his tight monetarist policies - the high interest rates.burdens on those buying a home on a mortgage or goods on HP (in response to falling real wages, credit purchases have expanded rapidly in recent years in the USA). High interest rates are also leading many unprofitable, debt-laden firms dangerously close to the edge of bankruptcy.

For this reason the monetarist aspect of Reaganomics is something on the whole unpopular with nearly all of US industrial capital, though the bankers are, as in London, making good money out of it.

High interest rates have been the scourge of two industries in particular: the automobile industry (most private cars are bought on credit), and the construction industry (virtually all private homes are bought on mortgages, which are becoming impossibly expensive).

Fed chairman Volcker and Treasury Secretary Donald Regan, are now engaged in a public shouting match about the money supplyinflating the money Volcker says supply now would only aggravate the situation'. But Regan points out that the Fed has cut money supply growth to 4 per cent a year - 2 per cent below even the minimum of the target range agreed. between the Fed and the Administration earlier this year.

'I think we're going to insist' , Kegan has warned, 'that they the Fed stay on target. We as an Administration cannot be content to see the economy stay flat quarter alter quarter. We want a growing economy that is producing jobs And that was said before the Administration was forced to recognise the intensity of the present recession.

Donald Regan seemns • to position in 11SL disputes in the Reagan Administration. Which means appears in his public statements as just about the most confused of its members: today's statements contradict yesterday's.

On one thing he has agreed with Volcker: that 'the right solution is the hard solution - to cut the budget' Though he rejects Volcker's blackmail on the money supply - the policy of refusing to ease up until the Federal government does its job of cutting the budget.

Some days Regan seems to go along with the President's present determination not to increase taxes to cover the budget deficit.

And on that score he has several times crossed swords with Stockman who, despairing of cutting spending fast enough, has become the main advocate (along with some Republican and Democratic Senators) of raising taxes or even delaying the tax cuts already voted.

But on other days Regan has popularised the idea that the deficit could be closed by a series of 'painless' tax increases -on gasoline, cigarettes, and liquor.

Aside from the bill in the name of Democratic presidential hopeful Senator Gary Hart of Colorado which would delay all personal tax cuts until the Federal budget was in balance, several other ideas for tax increases are presently floating around Capitol Treasury chief Donald Regan Hill. Some of them have strong support in the upper reaches of the Republican Party and so have some chance of passing, which Hart's largely propaganda Bill does not.

As well as Regan's painless increases in the cost of living they include proposals to end tax concessions now available for consumer interest payments (except - to satisfy the automobile lobby - for cars), proposals to tax social security benefits là la Thatcher), cuts in tax allowances medical expenses (so there are benefits only if medical expenses are over 15 per cent of income, instead of 3 per cent as now), and a few proposals to tax businesses.

All these tax rises and many others are being disguised by their proposers with *euphemisms which reduce them to 'measures of revenue enhancement' They do not please the born-again supply-side faction of the Administration's support - in particular the outspoken and quotable Jack Kemp, who to give him his due seems to be a very consistent expansionist.

'You don't start advocating new taxes in a recession' , he says like a true Keynesian. And he is just as adamant on spending, "I wasn't elected to cut spending' he often remarks, I was elected to cut taxes'. He has even daringly suggested that 'Republicans no longer worship at the shrine of the balanced budget' President Reagan still does worship there, but perhaps he is beginning to realise that Kemp's expansionist rhetoric represents the populist and popular part of Reaganism, which is why his visits to the shrine are becoming less frequent. Now instead of balancing the Budget in 1984 he only wants to be 'headed in that direction' Even David Stockman, the high priest of the shrine, has begun in desperation to tone down his zeal. His latest encyclical on the doctrine states that, 'I don't think anybody' talking about literal accounting balance or making a fetish of a balanced budget' The inconsistencies and contradictions between the various component parts of Reagan's economic strategy are now being widely recognised and debated -though mostly by those whose alternatives are not more coherent. But the decline of credibility is so great that the Administration feels obliged to take every chance to square the circle by claiming the consistency of its policies.

for instance, the Assistant Secretary of the Treasury, Paul Craig Roberts, was recently assigned to write an article in Fortune magazine, the glossy business monthly, showing how the three elements of the policy were consistent with each other.

supply-siders really love nonetarists, he said, because they keep inflation down and inflation would undermine the real value of the tax cuts; and they both love budget-cutters because they help control the money supply, stimulate private initiative to replace Federal programmes, and allow further tax cuts in the future.

Alas, he might have sounded more convincing if in the month that the US economy approached its worst unemployment since the war and consumer price inflation jumped, he had not concluded on the following note, 'Much has been accomplished in a short period of time. Federal spending is coming under control and incentives to work, save and invest àre being restored. Inflation is falling...

Jobless queue in Detroit got sharper than ever the confusion and discord within the AdministraReagan's presidency.

was Stockman's candid for handing out benetits to the rich.

Stockman's indiscretions have exposed further the huge gulf which exists between Reaganomics in theory and Reaganomics in practice. In theory what was supposed to happen was that government spending should have been curtailed, but that no-one would suffer too much because the private sector would be rising like a Phoenix from the ashes of excessive government regthe economy into a new of welfare from many ir acute need. And monetarism and high interest rates erely depressed industries automobiles.

lower tax rates find themselves paying almost as much in tax as before, or more, and they have stopped hearing promises of further reductions.

They hear a babel of conflicting voices from the Administration and Congressional leaders. And from the President they no longer hear confident predictions but rather vague and amhionus coniectures - much like the astrology on which he and Nancy Reagan are said to be very dependent.

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Socialist Organiser no. 68 January 14, 1982 Page 10 Troops in use against strikers in the 1911 Dock Strike.

Trade union demonstration in Waterloo Place in 1867 - shortly preceding the founding of the TUC то 49073. 1 r...~.inl They lie even they pretend that it