Carter's austere budget

For some reason I've forgotten now, I had to look up the other day the results of a Gallup poll taken three years ago at the end of January and taken always at that time as a useful reminder to the incoming Congress of what is on most people's minds.

If I'd been asked offhand to recall what was troubling us, I should certainly have put inflation high up on the list, but it wasn't there at all. The first anxiety was crime and after that drugs, employment and the financial plight of the big cities. But this year, with unemployment declining quite remarkably except, as always, among the young blacks, inflation is first, second and third. 

I may be wrong but for the first time that I can remember, the president got out his budget message to Congress before he appeared at the usual joint session to give his State of the Union address. The pressure on him has been unflagging in the past few months and never mind his preoccupation with Egypt and Israel and the Shah and the Strategic Arms Limitation Talks, the pressure has never let up to have him declare – and the budget message is the place to do it – what he proposes to do to try, yet again, to stem the rising flood of inflation. 

Last Monday he came out with it, what he called a 'lean and austere budget'. After 40 years, the wheel has come full circle from the days when Democratic presidents told us as gospel that a balanced budget was a superstition of the 'horse and buggy' era (that was Roosevelt's phrase), that the way for the government to get out of debt was to spend its way out. After all, the government, the treasury, owns the printing press, doesn't it? The Democrats, after 40 years of looking on John Maynard Keynes as the economic oracle of the twentieth century, have come to admit that while the government can print all the money it wants, it cannot spend more than it earns without getting into deep trouble. 

I think the... the big turning point, what the Greeks call 'the moment of recognition', came only in the past year or so when most of us came to realise that the Vietnam War was the only war in American history that wasn't paid for in taxes. It cost $270 billion and it all came from the printing press. Nobody paid a dollar to finance the war. The income tax on earned income, which ballooned during the First World War and again in the Second, and Korea, stayed exactly the same – 50 per cent during the long and expensive ordeal of Vietnam. 

And now it begins to occur to us, economists or not, that the vast amount of money was in fact handed to the public to spend on goods. And we did it. I ought to remind you, though, that American inflation has only once in the past dozen years gone over ten per cent. More than at any time in living memory foreigners, Europeans in particular, are investing in American industry, and real estate, and country clubs and hotels, and tourists are reversing the old flow to Europe by coming here in huge numbers because, as an old American friend of mine says who de-camped into retirement in France eight years ago and has now decided to live out his days in southern California, because, he says, things are so much cheaper over here. 

James Reston, the veteran commentator of the New York Times, wrote a piece from London a couple of weeks ago and seriously threatened his reputation for truth by putting down the daily cost of a stay in a London hotel. Starting with breakfast and going through three nights and days, it was about twice what it would have been if he’d been staying at a hotel of comparable standing in New York or Chicago or San Francisco. However, since 99.9 per cent of any nation's people don't have the opportunity to compare prices at home and abroad, Americans are not convinced by the report that things are cheaper here. They're dear enough and getting dearer all the time. And even the Carter administration has to vent the fear in private that this year America will once again go to an inflation rate of over ten per cent. 

Now a Briton might well say, 'But how can it be since our inflation rate is only eight per cent?' Britons, I've noticed, while howling with the rest of us about the prices of everything, tend to forget that the current eight per cent comes on top of 15 per cent in 1971, 20 per cent in '72, 22 per cent, 15 and so on. So that there's no argument that in Britain retail prices have doubled since 1974. Americans – economists and businessmen and labour leaders and ordinary citizens – read about Britain, the big strikes and the big wage claims and tend to say, 'Not there but for the grace of God go we, but there, as sure as you're born, is the way we're going!' 

Well, if there's one thing this administration has learned in its first two years, or let's be very judicious and say one thing it's come to believe, is that unless the country is producing more and more, it cannot go on financing social services more and more. And that's where Jimmy Carter has finally broken with 40 years of Democratic doctrine and with the liberal wing of his party and yet, because it is almost wholly Democratic doctrine, he cannot announce cuts in welfare, hospitals, social security and so on and then just brazen it out. 

He's had to say, almost in the same breath as announcing a 'lean and austere budget' he's had to say, 'But... it is a budget that keeps faith with the obligations of a compassionate society to the poor and the disadvantaged.' He has allowed an increase of four and a half billions in aid to the poor while bluntly admitting that it falls so far short of keeping up with inflation that he's having, for instance, to cut training programmes for nurses and making children pay for school lunches that up to now have been free. 

He faces, I think, an almost impossible debating opposition which says: 'While you've made cuts everywhere, there is only big increase and in the one item you promised over and over during the campaign to trim: the defence budget.' He's adding almost 11 billions to make a defence budget of 123 billions and that's where the liberal Democrats – led with a quite new ferocity by Senator Edward Kennedy – are going for him. 

Of course it's always unfair to say, 'If you only saved money on betting on horse races, you could afford more housing for the poor.' For instance, we discover, from the research frills that have gone into figuring the budget, that Americans spend $20-odd billion a year on beer, hard liquor and soft drinks. It must be depressing to teetotallers to realise that if everybody in America stopped drinking everything but water tomorrow, it would still only pay off one-sixth of the money for defence. 

What sort of defence? The president puts it sharply: 'For strengthening our NATO forces and maintaining the strategic balance with the Soviet Union.' And Senator Kennedy sees in this contrast between social service spending and defence spending an irresistible emotional issue. He laments wasteful increases in defence spending while the poor, the black, the sick, the young, the cities and the unemployed must bear a disproportionate share of restraint. 

Now quite apart from Mr Carter's backsliding from the rhetoric of his campaign speeches, which is always a feature of the difference between what a new president says he'll do and what he finds he must do, there is, I believe, no doubt that Mr Carter is a compassionate man and he must have sweated and groaned to have to cut, for instance, 34 separate health programmes and trim social security. So why the increase in defence spending? 

The answer must be that Mr Carter, as president, knows things that he did not know as a presidential candidate, things about the actual power of the Soviet Union and its navy and its nuclear capability, that – and this is the rub for any president – he simply cannot tell us. He's clearly convinced that the 'strategic balance' as he calls it, is far more precarious than he thought and he will have to stay with his judgement and hope to brief the Congress persuasively and say to us, perhaps, which is nothing but the truth, that whereas, in 1960, 49 cents in every tax dollar went into national defence, next year it will be only 24 cents. 

Mr Carter is getting it from all sides. The Republicans, of course, are party-bound to object. They're saying there should have been a tax cut and many more drastic cuts in spending on social services. One Republican, who I suspect will be widely and admiringly quoted in next year's presidential campaign, put it in this salty way: 'The taxpayer has been sacrificed on the altar of a cosmetic deficit. Sure it's a lean budget, it's lean like a package of bacon, you don't see the fat till you open the package.' And from the outside, from black leaders and social action centres and the like, he will hear another memorable argument, 'What Carter couldn't do to the three-Martini lunch, he's doing to the school lunch.' 

Last year, you know, he tried to get the Congress to make business lunches non-deductible but was overcome by a landslide of protest and a quick, quiet government study which showed that what the government would gain from taxing the so-called 'three-Martini lunch', it would lose several times over from paying out welfare to unemployed waiters, cooks, washers-up and the owners of bankrupt restaurants. 

The one cheerful sound that breaks through the banshee cries going up over the budget comes from the Supreme Court which also this week went back to work. 

A few years ago, a couple of cartoonists got out some comic books depicting Mickey and Minnie Mouse making public love, using very rough language and taking drugs. The famous couple and other Disney characters were drawn accurately enough to leave no doubt that they and nobody else had succumbed, in the most alarming way, to the so-called 'counterculture' which some of us call 'hippydom'. The Supreme Court has ruled that the copyright of the Walt Disney Production Company had indeed been infringed. 

The honour of Mickey and Minnie Mouse, in their fiftieth year, has been vindicated.

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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