US budget deficit

Just before Christmas a headline appeared in the New York Times which I'm sure must be just as true of many more countries than America. It said, 'Shoppers Are Shopping But Not Spending'. In other words, they're mooching around, the livelier, more practical ones, women especially, hopping from store to store imitating the professionals that every department store employs, namely the comparison shopper.

However, the point of the headline is that, as the story reports, for every dozen people who went into a store, two or three went out again without having bought anything and the ugly question crosses my mind, do they walk out as empty-handed as they came in? If this is a mean thought to express at Christmas time, let me tell you that a couple of months ago, in Dallas and again in Los Angeles, I checked the point with two large department stores. They both admitted losing, every year, more than a million dollars in merchandise from theft and they both mentioned that a chronic problem was not only with the customers, but with the staff who may be checked and re-checked but many of them turn out to be no better than they should be. This is not a problem that merchants like to publicise but, believe me, it is not an exclusively American problem.

I gathered, from a convention of business people some time ago, that it's epidemic throughout the Western world. I imagine it's nothing like so bad in the Communist countries, partly because the punishment would be brutal, partly because there are just so many copies of 'The Life of Brezhnev' or 'The Beautiful Thoughts of Chairman Mao' that you'd want to swipe, but this outrage, now so common as to be written off as a form of amortisation, was something I first heard about it must be 10, 15 years ago.

On lonely evenings in London, I used to smoke out the hotel manager when he was on night duty and we'd sit around and talk about what for me was the absorbing, the romantic, topic of running a hotel. What interested me was the downstairs view of, or arrangements for, the upstairs clients. How much beef you had to figure on against veal or chicken? What happens when somebody collapses and dies in Suite M54? That's a tricky one – getting the body decently disposed of by the back lift. No elegant hotel wants to be known as a mortuary.

One evening I asked him, with all the proper apologetic sounds, for this was, is, an eminent hostelry, I asked him if they had much trouble with guests swiping things. I don't mean things like ashtrays which, by now, are immune from considerations of morality. I remember a famous hotel in Austria which had rather splendid porcelain ashtrays, each one of which was indelibly stamped on the underside with the legend, 'Stolen from the Imperial Hotel'.

My man said, 'Oh, of course, we allow something between £100-150,000 a year of various items that depart with the guests.' He chuckled to recall one man, a regular, a highly respected guest for many years who, one time, was in a fearful hurry to catch his ship. He phoned downstairs for a taxi and the manager, as was his custom, was waiting in the lobby to see him off and wish him well. The man came hurtling out of the lift, shook hands warmly, said he'd had his usual splendid visit and the manager moved to help with his suitcase and lifted it. It was heavier than he'd expected and he dropped it. A fatal slip. The bag burst open and out fell bed sheets, comforters, towels, pillows and a clatter, or clutter, of cutlery.

Again, the hotel's intense ambition not to be thought of as a nest of thieves, kleptomaniacs and other crooks, got the better of the manager's instincts. He briskly summoned a porter, indicated the pile of loot and said winningly to the trembling guest, 'I don't think you'll be needing these things on the voyage, sir. Do have a good trip and goodbye.' He did then retreat to his office and inscribe some private bar sinister against the guest's name who, need I say, took his custom and his customs elsewhere.

Well, that's not the most cheerful way to celebrate peace on earth, goodwill to men but it's worth a passing thought when we talk about the crime that plagues our cities to recognise that, for some reason nobody has satisfactorily explained, the fringe of it encloses most of us. Routine dishonesty among otherwise impeccable citizens is something that all governments are having to face, including now, we hear, the Russians and the Chinese.

The American Internal Revenue Service reported the other day that many millions of dollars go out to people who regularly countersign welfare cheques for relatives who are dead and that fudging one's income tax amounts to a loss of revenue in the many billions.

Talking of taxes is something that, of all Americans I can think of, President Reagan is least willing to do. His supply-side economics has arrived at the point familiar to other nations that have tried it where the wonderful boon of having your income tax slashed has, after only one year, left the government with thumping, indeed with historic, deficits. Now the Reagan campaign theory – the promise – was that by 1984, maybe before, the budget would be balanced and we'd have put an end to the thriftless, accursed Keynesian habit of deficit spending.

Well, the president's right-hand man in the Senate, the majority leader, Senator Baker, a fervent supply-sider and budget-balancer, went to the White House the other day with a series of projections put together not by the villainous Democrats, but by the president's most reliable disciples in the Senate. They did their damnedest to account for all the savings, the budget cuts, even the proposed cuts the president will detail next month when he delivers his economic message to Congress.

This is what they forecast unless there are drastic changes in the president's policy. In the fiscal year of 1982, a deficit of 82 billions. In 1983, 165 billions; 1984, 215 billions; 1985, 252. And in 1986, when Mr Reagan will either have been put out to pasture or will be a hale, but not very hearty 74-year-old president, by 1985, 299 billions, or not much short of four times the estimated deficit for next year.

If anybody fears that I'm getting into the dismal and baffling science of economics, which nowadays is as baffling to its professors as it is to you and me, let me offer the simplest but, as far as I can see, the truest explanation of what deficits and Mr Reagan's and Mrs Thatcher's problems are all about.

I wouldn't dare to offer this simplicity as coming from me. It comes from a friend who's been in international finance and investment banking for over half a century. A man who never voted for Roosevelt, who deplored the deficit financing of the New Deal, who thought President Carter was very intelligent but hopelessly defeated by the same problem and a man who voted enthusiastically for Reagan, with the one qualification – that he couldn't see a year ago how all the cuts in spending were going to work if President Reagan also cut taxes.

What this man said to me this week, after Mr Reagan's loyal senators had brought their bad news was, 'This government, like every other government, is finding out that you can't spend more money than you take in unless you start printing it and, once you do that, you guarantee endless inflation and the likeliest end of that is dictatorship.'

Now this is a very cheerful man by temperament, almost unbearably optimistic and he added with a chuckle that, 'If I live another ten years, I hope – I don't hope but I anticipate – saying to my grandchildren, "I remember when you could get a hamburger and a Coke for $30".' In other words, the big, the dramatic cut in income taxes has left the government with nothing like enough money to cover the budget, the 'stripped to the bone' budget that the president has offered.

Now, of course, taxes to most of us means income taxes, whether personal or corporate and a few days ago, the president swore again that he will never increase taxes. The solution, his delegation from the Senate proposed, was tightening all the loopholes through which rich men and corporations legally avoid taxes. Tax avoidance is smart and legitimate. Tax evasion is criminal. But between them is a twilight zone in which super-smart tax avoiders cavort with much success.

This, however, is obviously no brilliant solution. It's like saying you're going to stamp out human greed. So the other big suggestion is to impose what we now call 'sin' taxes on luxury items, most especially on tobacco and alcohol. Not much trouble with alcohol, except the president could lose the Senate seats in his home state of wine-producing California next year, but tobacco is something else.

The base of the president's strength in the Senate is the South and, of the 1,800,000 pounds of tobacco America produces every year, 1,600,000 pounds come from the six biggest states of the South ***. They would very likely exact a terrible revenge in other ways for any stiff increase in the tobacco tax.

'Every day in every way,' the president said the other day, 'somebody seems to be making my job more difficult than ever.' He said this after the dark night descended on Poland and, surely, Poland haunts us all.

I'll leave you with two Christmas scenes in Washington which not even the most sentimental Hollywood producer, or the most cynical Italian director, could have filmed without inviting jeers from the audience.

One was the sight of President Reagan in the White House embracing the defecting Polish ambassador and his wife. All three of them in tears and the President saying, with touching candour, 'I am proud to be with a very courageous man and woman who have acted on the highest of principle.'

The other scene was in the British embassy in Washington a few nights ago – a Christmas party thrown by the ambassador. The whole party of many types and several nations, sitting around a Christmas tree, singing carols. Not least among the happy singers, Mr Dobrynin, the jolly Soviet ambassador, piping away, 'Peace on earth and mercy mild, God and sinners reconciled.'

***FOOTNOTE: these figures are not accurate. The US International Trade Commission figures for 1981 show total tobacco production was 162.5million pounds.

This transcript was typed from a recording of the original BBC broadcast (© BBC) and not copied from an original script. Because of the risk of mishearing, the BBC cannot vouch for its complete accuracy.

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