Black Monday'-or `Glittering Monday'?
So thick has been the marijuana smoke, and so myopic is Washington about Reagan's recent misadventures, that people have not noticed the extent to which the lame duck is limping across a political landscape he has shaped to his liking. Furthermore, proof that Reagan's reservoir of luck has not run dry is this: Oct. 19, "Black Monday," may help economic expansion continue past the 1988 election.</br></br>Republicans may remember it as Glittering Monday. The stock market plunge was caused, in part, by a surge in interest rates. The surge was driven, in part, by inflationary expectations. They were washed away, at least for the moment, on Oct. 19, and the washing made possible a freshet of money creation by the Fed.</br></br>Capitalism-and therefore civilization as we know it-depends on the annual Christmas shopping binge, now beginning. The stock market has not yet had a significant depressing effect on consumer spending, on which two-thirds of economic activity depends. In the automotive sector, anxieties produced by Wall Street, combined with the decline of the dollar and interest rates, have primarily hurt expensive foreign imports. Puppies (previously upwardly mobile persons) are thinking about the unthinkable-driving a domestic car.</br></br>The sobriety induced by the stock market shock will help Reagan resist a protection-ist trade bill and has put even Social Secur-ity on the agenda, at least for a while, in deficit-reduction negotiations. Here is a measure of the rightward ratchet of the Reagan years: on the eve of an election, Congress has at least considered two difficult choices.</br></br>One is "CPI minus two"-limiting cost-of-living increases to two percentage points less than the increase in the consumer price index. An even better idea is "two years, two percent." The policy regarding COLAs for Social Security and military and other pensions, and all federal pay increases, would be: for two years everyone gets two percent, but only that. Everyone's "sacrifice" would be a slightly smaller increase. Assuming economic growth of 2.5 to 2.8 percent-an optimistic but not unreasonable assumption-Reagan could leave office with a budget deficit below $100 billion.