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£#day, January 29/1982
STATE OF
THE UNION
G". ( ■ v-r ..f* -Mr ■ ■ '■ ■ ' - ,
ONSIDEFIING "the parlous state of the American
economy, it is no surprise that the President, Mr Reagan, chose
to concentrate on economic matters in his state of trie union
address on Tuesday, with only a passing reference to foreign
policy. Not that" American foreign "policy is unimportant,
especially now with the strains that European appeasement of
Russian imperialism is putting on the NATO alliance. But it
is to be the subject of a later, separate presidential address.
The American economy is passing through a particularly
nasty recession, the legacy of a profligate Carter
Administration and/or the result of the Reagan
Administration's ■ attempt to set it right by contracting
government activity, depending on your point of view.
Specifically, the Reagan Administration has committed itself
to reducing inflation* reducing the size of government, and
promoting economic activity and employment by deliberately
encouraging the private sector. It has cut the rate of growth
of private and corporate taxes, but cut the rate, of government
spending more, reducing the rate of. growth of the federal
deficit, hoping that it will contribute to a reduction in the rate
of growth of thfe money supply (the responsibility of the Federal
Reserve system) and interest, rates. What is "Fraserism" in
Australia, and "Thatcherism" in the United Kingdom, goes by
the name of "Reaganomics" in the United States. That, or
"supply side economics',.
But the Administration has run into problems. Largely as
a result of unrealistic expections about the efficacy ,of its
program — both shared and encouraged by members of the
Administration — the present recession has been presented as
evidence of failure and has prompted a review that nearly led
to its reversal, if not quite abandonment. Thankfully, for the
sake of both the American economy and President Reagan's
credibility, it did not. In fact, the measures outlined by the
President in the state of the union message reaffirm the
program and carry it even further. An increase in taxes has
been eschewed in favour of further reductions in spending to
cut the ballooning deficit, and Mr Reagan has announced his
intention of turning over responsibility for large parts of the
Federal Government's spending program to the States. That
is, the States are to have the privilege and the responsibility
for administeringVsome 40 existing programs and eventually,
of course, of funding them. It all sounds very familiar back
here in Canberra.: , ;
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