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With No Time to Spare

November 21, 1987

Stocks closed higher Friday after President Reagan and congressional leaders announced their $30.2-billion deficit-reduction compromise for this fiscal year. But the Dow Jones index had fallen 43.77 points Thursday in exasperation with Washington's foot-dragging. Net loss for the week: 25.53 points.

That sums up the dramatic impact of the agreement to lop $76 billion from the deficit over the next two years, a deal that will take considerable head-cracking by the President and Democratic leaders to muscle through the full Congress. But the pact was better than nothing or almost nothing--almost nothing in this case being $23 billion in automatic cuts under the Gramm-Rudman law.

In describing the compromise, the President engaged in both overstatement and understatement when he said, first, that the proposal sends a strong signal to the markets while, secondly, it probably is not the best deal that could be made.

Reagan and Wall Street clearly were not on the same wavelength. New York financial wizards were condemning Washington in familiar terms--harsh and uninformed--and sneering about government's inability to rearrange the deck chairs on the Titanic. The President suggested that Wall Street was more interested in blaming Washington than mucking out its own stable.

The past month has not been seen bold, selfless leadership from either Washington or Wall Street.

The President and Congress allowed ideology and politics to prolong the negotiating process and forgo most truly painful choices. Concern over the market crisis becomes secondary. Pressure eased as time passed and it became evident that voters were not clamoring for deficit reduction.

The President has been almost invisible on the issue since his press conference of Oct. 22. Reagan doubtless believed that the best way to buoy confidence was merely to keep a smile on his face. But he could have been much more reassuring and more effective by demonstrating forceful action and taking a direct role in the budget negotiations.

Wall Street demonstrated a lack of understanding of the political system and little appreciation for the difficulty of cutting $20 billion to $30 billion from a federal budget that already has been subjected to tremendous political pressures from all sides.

Friday's agreement is a business-as-usual palliative that fails to forge new ground against complicated and far-reaching economic problems. But it is, as they say, the only game in town and Congress should ratify it with a minimum of quibble and fuss.

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