The Last Battles

By GEORGE J. CHURCH

If all goes as his doctors have forecast, Ronald Reagan will return to the White House from Bethesda Naval Hospital at midweek -- a month before his 76th birthday -- ready to face the challenges of his last two years in office. But with how much energy and effectiveness? The answer depends only partly on the outcome of the colonoscopy and prostate surgery scheduled for the President early this week. Even if those procedures turn out to be as routine as predicted and Reagan once again demonstrates his remarkable powers of physical recuperation, he faces a daunting task of political recovery. Almost immediately, he will have to map an agenda that might make the last quarter of his presidency something other than a period of lame-duck drift.

The job would be challenging for an untroubled Administration; it could prove insuperable for one embroiled in an Iran arms-contra funds scandal. For one thing, when the 100th Congress convenes this week, the Senate as well as the House will be controlled by opposition Democrats intent on pursuing their own agenda. But that difficulty pales before another: Reagan must try to reassert his leadership at a time when his own credibility and competence, and that of his staff, are being questioned as never before. The special investigating committees of the Senate and House begin probing anew into Iranscam this month; whatever they find, the President is unlikely to get much respite from a crisis that would sap the energy of the most vigorous Chief Executive.

It is possible, or so Administration optimists devoutly hope, that the crisis may actually prove helpful. The investigations, along with the need to deal with a Democratic Congress, just might bring out the pragmatist in a chastened President, causing him to listen to more moderate advisers and tilt toward compromises. But if he is to act rather than react, the President badly needs to put forward some bold new proposals. After six years in office, however, his Administration is showing telltale signs of creative burnout. Its early initiatives -- cutting taxes, pressing deregulation and launching an expensive U.S. military buildup, for example -- have been largely completed. White House strategists can think of very little that might restore a sense of drive and purpose. "We've accomplished a lot," says a staffer. "What's left is the merchandise that's harder to move."

The Reagan revolution "has pretty much run out of gas," proclaims Robert Byrd, majority leader of the newly Democratic Senate. A partisan comment, to be sure, but not very different from what the President's aides are saying. Early in December, the senior White House staff held strategy sessions to search for new domestic policy initiatives. "They could not seem to come up with anything," reports one participant. "Now that we desperately need to control the agenda, there is nothing left."

In foreign policy, the most dramatic ideas the President is hearing are dubious ones advanced by hard-liners. One group is urging that Reagan both announce he is moving toward early deployment of his Strategic Defense Initiative and greatly increase pressure on the Marxist Sandinistas in Nicaragua. The Central American initiative would mean asking for a huge increase in U.S. aid to the contra rebels and assigning American ground troops to support the guerrillas. "That would focus public debate on something useful to the country," says one adviser.

It would also be a prescription for a bitter conflict with Capitol Hill that Reagan probably could not win. The Administration will have all it can do next month to persuade Congress to release the final 40% of the $100 million in aid for the contras that it approved last year. The fear that Congress might cut off aid to punish the White House for slipping Iranian arms-sale profits to the contras has faded; reliable nose counters like Senate Republican Leader Robert Dole discern a majority in favor of continued help. But it is an extremely thin one -- perhaps 51 to 49 in the Senate -- and vulnerable to any change in the political winds.

Even with continued U.S. aid, the contras are unlikely to "liberate" any Nicaraguan territory. Administration realists foresee at best a long campaign of guerrilla harassment; they warn that the contras' ability to continue the fight depends on their retaining sanctuaries in an increasingly nervous Honduras. Says an American diplomat: "Since the Iran business blew up, we have felt a definite increase in the Hondurans' eagerness to see the contras somewhere else -- either in Managua running the country or in New York and Los Angeles waiting on tables, but out of Honduras."

Should the contras be defeated in battle or expelled from Honduras, or both, Reagan's strategists see the bleakest of choices. Some warn that the U.S. might have to consider an American invasion of Nicaragua in the year ahead. The alternative would be an unsatisfactory political settlement with the Sandinistas. Some strategists sound as if they are not quite sure which would be worse.

In any event, Central America is not the place to look for a foreign policy success that would repair the damage of Iranscam. That could come only from an arms-control agreement. Says a White House official: "There is a feeling around here, heightened by the Iran business, that Soviet-American relations and arms control are the only game in town."

It is, however, a game with most uncertain prospects. Mikhail Gorbachev and his chief Americanologist, Georgi Arbatov, have been talking of Soviet eagerness to negotiate arms reduction. Arbatov, on a December visit to Washington, went so far as to hint about a compromise on SDI that would permit a vigorous research-and-develo pment program, prohibiting only advanced, large-scale testing that could lead to quick deployment. However, such remarks may be intended partly to intensify pressure on Reagan to make a deal -- and intensify criticism if he does not. Gorbachev's refusal to repeat the televised New Year greetings that he and Reagan beamed at each other's countries at the start of 1986 was a reminder that the Kremlin is not counting on a breakthrough this year.

Meanwhile, the President has shown no sign of demanding the agreement within his own Administration that must precede a new approach to the Kremlin. To the contrary, a distracted President has permitted what looks like a movement away from arms control. Two signs: 1) The Pentagon is pushing for $115 million in extra funds to develop a huge space vehicle that could launch Star Wars hardware into orbit. One Administration official interprets the move as a "signal that we have to get on with SDI before arms control is allowed to get in the way."

2) Having already deliberately exceeded one of the unratified SALT II limits on nuclear weapons by equipping more B-52 bombers with cruise missiles, the Administration is proceeding with construction of radar installations in England and Greenland and other programs that raise questions about U.S. compliance with the Anti-Ballistic Missile treaty as well.

On the domestic policy front, Reagan's advisers have been hamstrung by the overriding necessity to slash the budget deficit. They simply cannot propose anything that would cost much money. Thus, though the Administration is committed to some sort of proposal to help the elderly pay the cost of catastrophic illness, it may come up with a modest plan that would serve merely as a starting point for Congress to write a more ambitious scheme.

Farm policy is likely to be the focus of one of the hottest fights on Capitol Hill. Reagan will again propose reductions in the subsidies that spiraled from $4 billion in 1981 to nearly $26 billion last year, along with a strict limit on payments to any one farmer. Democrats agree that subsidies and surpluses have got out of hand, but the approach some advocate is rigid, mandatory production controls that are anathema to the Administration.

The Administration will try to get ahead of protectionist sentiment in Congress by submitting its own trade bill this year. Two probable components: new assistance for workers who have lost their jobs because of import competition, and a relaxation of antitrust laws to make it easier for American companies to collaborate against foreign rivals. In addition, Reagan will ask for renewed authority to negotiate agreements aimed at opening foreign markets to American exports. These steps would take a long time to bring any measurable improvement in the gargantuan American trade deficit. Fundamentally, Administration spokesmen argue, the direct curbs on imports that some Democrats want are unnecessary as well as unwise. The trade deficit has flattened out and will begin to decline in 1987, they say, because of the falling value of the dollar. That argument was weakened by last week's figures: after dropping for three months, the trade deficit in November abruptly shot up to $19.2 billion, by far the worst one-month figure ever.

On other matters, too, Reagan will face a newly powerful, and newly assertive, Democratic opposition. West Virginia's Byrd goes so far as to boast that the "leadership of the Senate is going to set the agenda, not the White House." That is questionable. On the key subject of trade, for example, the Democrats seem to have no clearer ideas than the Administration on what should be done. But there is a real danger of deadlock between a President unable to get his programs through Congress and Democrats incapable of overriding White House vetoes.

Complicating all calculations is the pressure of time. Though he will be in office two more years, Reagan really has at most twelve months in which to get his Administration moving again. Congressional Democrats, similarly, have only until the end of 1987 to answer the question that Byrd rightly poses for this year's legislative session: "Can the Democrats govern in the post-Reagan era?" By next January the 1988 presidential campaigns will be in full swing in both parties, and any new initiatives will have to be put on hold until after the election. Both Reagan and the Democrats in Congress need to get off to a solid start in the next few months. They have yet to give any real proof that they will, or even can, do so.

With reporting by David Beckwith/Palm Springs and Strobe Talbott/Washington