The Politics of Recession

DANIEL BERGER

December 21, 1991|By DANIEL BERGER | DANIEL BERGER,Daniel Berger writes editorials for The Sun.

Expect many things from the recession, but not consistency ingovernment response.

The federal government may give the quickest fix, a tax rebate. Maryland may increase taxes. And the federal tax decrease and state tax increase may cancel each other out.

So far, neither Washington nor Annapolis is of one mind about what to do. Each is in confusion. Contrary advice is being heaped on the respective chief executives.

The opposition party (Democratic in Washington, Republican in Annapolis) has no plan. It is waiting to see what the chief executive will do and will clobber him for it.

One thing is clear. Our foreign-policy president will go out the door with Old Man '91. Our domestic-economy president will come in with Baby '92. The State of the Union Address will be his unveiling, and the start of his campaign for re-election.

That is the effect of installing Samuel K. Skinner as chief of the presidential staff in place of John Sununu. Mr. Skinner was no sooner in the door than spokesman Marlin Fitzwater began talking out of the other side of his mouth.

That is at the exalted end of the pipeline. Down here at the other end, Baltimore is asking its most deprived communities to provide volunteer labor to keep libraries open as after-school havens, safe from the disorder on the streets, for children whose schooling will be shortened a week in violation of state requirement.

A survey of state budget cuts found that, as in Maryland, most are targeting the poor. The politics of redistribution -- taking from the poor to give to the rich -- was begun in the Reagan administration and is still going on. State governments, no matter how Democratic or liberal, are implementing the Reagan revolution.

Don't expect things to get better quickly. IBM is eliminating 20,000 jobs this year and as many next. General Motors will eliminate 74,000 jobs in North America over four years. The effects will roll through communities, lowering house prices and depressing retail sales, for a long time. Long enough for the federal transportation bill, with its help to Maryland and other state highway and transit systems, to be a useful palliative.

Not every business is off. Marvel Entertainment Group, publisher of comic books, reports that net income for the third quarter has tripled. In times like these, cheap escape and fantasy are what sell.

The federal government is struggling with two paradoxes. One is that deficit spending is helpful in a recession, but the deficit binge of the Eighties produced a disaster which more deficit would worsen.

The other is that the solution to the banking crisis, a conservative prudence inflicted on banks by regulators, makes the recession worse.

Monday the Bush administration convened an extraordinary meeting of 500 bank regulators from four government agencies at the Omni Hotel in Baltimore. These technocrats were lectured by the chairman of the Federal Reserve Board, the chairman of the President's Council of Economic Advisers and the secretary of the Treasury, among others, to lighten up. They are killing business, they were told, and should be more lenient about commercial real-estate loans.

It was one of the most overt political messages to non-political employees of the federal government in a long time. The government was implying that the business paralysis they are bringing on is worse (for its re-election) than the risk of bank failures they are preventing.

Wednesday Alan Greenspan, chairman of the Federal Reserve Board, told the House Ways and Means Committee that consumer confidence is the lowest he has seen. Mr. Greenspan promised to lower interest rates, and began to fulfill the promise yesterday, but he shot at the tax-cut ideas floated from the White House.

''The Congress should approach with great caution any proposal that would expand the structural budget deficit,'' was the way he put it.

Tuesday Governor Schaefer pre-empted television prime time to address the citizens on the emergency. They are still trying to figure out what he said. Maryland is in a bind, but what to do? He did not propose raising taxes. He was trying to lower expectations. Instead of proposing service cuts and tax increases for critics to condemn, he is trying to get them to do it. He will say if they are right.

Yesterday Henry Butta and the Governor's Commission on Efficiency and Economy recommended operational economies of government that could save $60 million a year. That won't get Maryland out of the woods, but every $60 million helps.

The reason Washington lurches one way and Annapolis the other is that they have different roles and constitutions. In the Reagan years, the nation pushed responsibilities onto the states. Maryland and many states constitutionally forbid themselves deficit spending. Washington has no such constraint.

Mr. Schaefer is not the only uncomfortable governor. Gov. Mario Cuomo, the strongest-looking potential Democratic candidate for president, is in deeper trouble. He faces a Republican state senate taking advice from the White House not to let him succeed. New York is in danger of closing down. In response, Mr. Cuomo removed himself from the presidential race yesterday. Every governor is a failure just now.

So expect to see your taxes raised and lowered. Expect the president and Congress to torpedo each other. (If politics stops at the water's edge, it also starts there.) Expect the social safety net to droop the more the need for it rises. President Reagan's economic policy was a boomerang. It has come back and hit President Bush and everyone else, except Marvel Comics.

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