State of the Deficit
Nicholas von Hoffman
Before the Chief went up to the Capitol to give the obligatory State of the Union address, his supporters hired a hall to celebrate the second anniversary of Mr Reagan's arrival in Washington. Hundreds and hundreds of the President's appointees came together in the auditorium owned by the Daughters of the American Revolution to scream for the Chief. They had the Marine Corps Band and the entire cabinet up on stage, including the two outgoing members who have quit to accept richly paid jobs, one of which is an ethically ques- tionable position as a political fixer for an industrial trade association.
James Watt, the fundamentalist Secretary of Interior, warmed up the crowd. Mr Watt, with his hairless, flinty pate and Coke bottle eye-glasses, talks with the low breathiness film actors use when playing child molesters. Nevertheless, the gentleman, who is the msot hated person to occupy his office since the Taft administra- tion, is beloved by your true Reaganauts. They cheered to the nines when he said in his strained sex-fiend diction, 'Let Reagan be Reagan'.
But this locution, which was apparently designed to remind people of the ill-starred international TV show, 'Let Poland be Poland', was not the Watt remark which has had Washington talking. A couple of days ago the Secretary had told a reporter that he regarded American Indian reserva- tions as 'an example of failed socialism'. For two days the television newscasts were clogged with chaps with names like Angry Hawk and Chief Troubled Waters giving Mr Watt the verbal bird. The feathers on the Sioux war bonnets had only just been deruffled when the axe murderer, as he is sometimes called by Congressional staffers, opened his mouth again, this time to characterise the objectives of environmen- talist organisations such as the Sierra Club as 'centralised planning and control' of the sort practised in Nazi Germany. A high- ranking Green Shirt shot back that 'only James Watt could fail to see the difference between Hermann Goering and John Muir,' the 19th-century, maturalist who had founded the club.
Back in the Daughters of the American Revolution's hall, the threat of Green fascism was real and the enthusiasm for the defender of traditional liberties was pierced with rebel yells and throat-searing ejacula- tions when Mr Reagan himself appeared On stage to tell them, 'How time flies when you're having fun'. If the past two years have been a bit of a drag for some Americans Mr Reagan had a word for them and for shrieking political appointees, quoting from Robert Service, perhaps tha least gifted American poetaster to creep in- to the more popular anthologies: So don't be a piker, old pard: Just draw on your grit: It's so easy to quit: It's the keeping-your-chin-up that's hard.
Outside the hall, however, chins have been dropping even faster than confidence in the ever-buoyant Mr Reagan. He may be having fun, but many of his erstwhile danc- ing partners have dropped out, complaining that their feet or, more precisely, their pocket books hurt. A committee of 500 business executives, including a cluster of cabinet officers from every administration going back to Lyndon Johnson's, issued a plea/cry of fear about projected budget cuts in the 'out-years' (the future), to use this city's newest coinage.
Something akin to a panic has seized our ruling circles about budget deficits, estimated, though with what accuracy it is difficult to say, to run anywhere from $200 to $500 billion in the out years. In their statement, a near-hysterical one for men who never show emotion in the face of famine, starvation and mass murder, the 500 notables predicted 'extreme conditions of capital shortage ... a decade or more of dangerously inadequate investment in pro- ductive plant, equipment, research and development, and public infrastructure'.
They, the mighty ones, both Democratic and Republican in Congress, and the na- tion's 10,000 illiterate editorial writers are calling out as one that, 'More revenue is . . needed. It should come principally from in- creased taxation on consumption 'ac- tivities.' The President is not immune to this par- ticular form of fiscal hysteria, promising to balance the budget which goes to Congress next week. At the same time, the tax cuts that he got out of a dubious, but willing-to- believe Congress in his first triumphal presidential year were supposed to get the wheels of commerce and industry spinning so fast that the revenue would rise as tax rates dropped. At the time it was called 'supply side economics', when it really was Keynesianism without erudition.
If supply side is to become a non-thing the legislative attack on the recession begins to look not unlike Herbert Hoover's. The bipartisan remedy to bad times in the early Thirties was to raise taxes and cut public ex- penditures as much as possible and still not leave too much garbage rotting in the streets. However, American recessions generally seem to end when retail buying begins to increase, thereby calling forth new factory orders. It has not gone the other way, with capital expenditures moving first — although that, apparently, is how the President and the 500 alarmed notables hope it will go.
The wild card is the Federal Reserve Board, the nation's central bank, which has been printing money with some gusto these past months. No one seems to know how to work the computations out, but it may be that, even with spending cuts and tax rises, the Fed will have printed enough money to get things humming at a somewhat higher level. The Fed's last figures show only about two thirds of industrial capacity In use, the lowest figure within the memory of all but senior citizens, as we like to call the old but not necessarily wise among us.
While the President rejoiced with his par- tisans in the beginning of the third year of his first term, the papers and the telly have been exploring the thesis that the Reagan administration is disintegrating in front of our eyes, that the President is a doll on the lap of his staff and that, foreign and domestic, everything is flying off in every direction, unplanned and out of control. But every two-year-old administration has been around to get nicked and cut up. This one too, but it has presided over a decline In inflation rates. The consumer price index for the month of December was actually negative. Of course, if that began a trend, we would be going into a 1930s kind of cyclone, an unlikely meteorological event. The unemployment is awful, but Mr Reagan is much better than Herbert Hoover at spilling tears of sympathy in public, and some things are happening which may por- tend the sprouts of spring.
No one knows. As a science, economics has been as thoroughly discredited here as psychiatry. As we go into Year Three, all that is known for sure is that, though time may fly when you're having fun, it also inhibits the ageing process. The first two years in the White House brought on a flab- by collapse of facial tissue for JimmY Carter and many another, but our Hollywood cowboy looks as good as he did the day they swore him in.
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