Curtain drops on New Deal era; New Federalism takes center stage

Move over New Deal. This is your grandson -- New Federalism! Fifty years after Franklin Roosevelt started America's trend toward bigger, centralized government, and greater activism in social affairs, President Reagan is attempting to halt or reverse that trend by what he calls the "new federalism."

He's doing it at a time of economic turbulence with cuts in federal expenditures designed to curb inflation by ultimately balancing the budget.

In a new "supply side" economic program he has simultaneously cut taxes to encourage savings for investment in a revitalized industry.

There is another factor in this unique political-social-economic experiment: a massive increase in arms expenditure.

Watching breathlessly, state governors and city mayors ask if they can take up the governmental responsibilities that have accumulated in Washington and which are now being peeled away.

In a breathless mood Washington heard the President justify the new era at his fourth press conference since taking office; saw the federal debt go over the trillion-dollar mark; watched the start of the new fiscal year bring actual confrontation between federal budget cuts and the people who will bear them, and finally waited for Wall Street's verdict and its possible effect on investments, savings, interest rates, and the economy.

Forty-eight years after Roosevelt addressed a country with a quarter of the labor force unemployed, declaring, "This nation asks for action, and action now. . . .We must act and act quickly," a chapter was closing.

Since 1969 the federal budget has not been balanced, the President notes. America has been going through the longest inflation binge in history. The administration is disappointed that the so-called "economics of expectation" has not taken hold in the stock and bond markets where a sharp dip in his occurred. But it notes that actual implementation of its program has only started this week.

The federal government's influence has expanded so that now, state and local governments get an estimated one-quarter of their income from Washington. Half the states will shortly hold special or extendend sessions to deal with the new responsibilities. Mr. Reagan signed the overall budget law Aug. 13 which will save $35.2 billion in a budget that is over $700 billion.

President Reagan's attempt to contract the government may stand or fall on factors which have little connection with his philosophy.

The presidential honeymoon is over and critics are sharpening their attacks. At a breakfast with reporters House Democratic leader James Wright of Texas charged that 35 percen of the Kemp-Roth tax cuts "go to 5 percent of the people, " and that 10 percent go to "two-tenths of the population."

Mr. Reagan's authority in Congress is damaged by the AWACS dispute over sale of spy planes to Saudi Arabia.

Stock markets are jittery around the world. Some countries have recessions.

America's own index of leading economic indicators, in the third decline in four months, is down five-tenths of 1 percent for August, the latest figure.

And millions of Americans, particulary of low and middle incomes, lose federal social benefits starting with the new fiscal year. Their political voice is yet to be heard in the most dramatic turnaround since 1933.

There was a poignancy in the close of a chapter symbolized by the ending here of the Community Services Administration. It was the cornerstone of Lyndon Johnson's Great Society and "war on poverty." The CSA and its companion agency, the Office of Economic Opportunity, provided grants to states to help local community action agencies operate antipoverty programs. Under the Reagan budget , federal aid appropriations for specific goals will be consolidated into limited block grants, with an overall cut in funding. States will get proportionate shares to use at discretion.

"The CSA shuts its door at close of business today [Sept. 30]," said director Dwight Ink quietly testifying to a House subcommittee. It was the end of an era.