Intervention in the Gulf and no new taxes - 26 October 1990

A picture, a photograph, in the paper, a giant of a man, probably you'd say at first glance a Japanese sumo wrestler. But no, he's an American, a black man and, surprisingly, a boxer, for he looks at least 30lbs too heavy even to qualify as a heavyweight. But that's what he is.

A year ago, he was a journeyman boxer, known only to the small world of other journeyman boxers, and to coaches, trainers, and the nondescript men who hang around local gyms.

On Thursday night this hulking former unknown received, whatever happened, $24 million to defend nothing less than his World Heavyweight title, which he picked up one cold night last February, in Tokyo, when the odds against his beating the unbeatable Mike Tyson, were 40-1.

Looking at the Thursday morning picture of the new champ, James Buster Douglas, I thought, I don't know if it's the last flicker of the American dream or the last gasp of the 1980s.

Buster Douglas did seem today to be a symbol of an old American myth and of a new one. The poor boy, rags-to-riches saga, and the peculiar myth of the 1980s, more applicable though to young white men, the recent graduate of a business school, snapped up by an investment firm at the ludicrous beginning salary of $80,000 a year, who got into the habit of picking up the phone and taking an order for zero coupon bonds that brought him in, right there, a $50,000 commission, so that with some healthy junk bond deals along the way, at the end of the year, this youngster of the dizzy '80s earned, as he'd say, 1.8 mil. And thought himself master of the universe.

Either way, the sure mark of the '80s, and a phenomenon that is on its way out, was preposterous salaries for starting investment bankers and preposterous prize money for athletes, for unbelievable purses for boxers down to scarcely less believable prize money for skinny 14-year-old, 16-year-old girl tennis players. These latter rewards have not yet passed but as the country – slides is the popular word – slides into a recession, they surely will.

Certainly the junk bond business is dead and gone. And literally hundreds, maybe thousands, of the masters of the universe in every big city of America are selling their gorgeous German cars, cancelling their subscriptions to the country club and looking around for a job.

Well, there's no need to prolong this search for symbols, something happened at the end of this week that, more firmly, more glaringly, announced, as if by presidential proclamation, the certain end of the 1980s and the passing of the Reagan area of careless rapture.

President Bush was ready to sign a budget which raises taxes, including income taxes. That gross act – on the president's part, surrender – reverses the whole movement of Reagan's eight years and Bush's two years.

For 10 years, these two leaders carried a banner with the beautiful device, "No new taxes!" Of course, we shouldn't forget that there were lots of new taxes under President Reagan, but he called them painless things like "user fees" and "revenue enhancements". And he did keep his promise to send the standard income tax rate from 50% of earned income to 28% and he held it there.

Well, now the top rate is to go from 28 to 31% for couples earning $80,000 or over. The minimum tax rate will go to 23 from 21%. There has always been a regular personal exemption, a figure something like $5,000 a year deducted from the taxable income of individuals. This will be gradually eliminated for people earning $100,000 a year and eliminated altogether for incomes above $275,000.

What the Democrats failed to get the president to agree to was a super tax on the very rich – very rich, these days, being defined as anyone who enjoys an annual income of over $1 million.

This had been a sore point between the Democrats and Mr Bush. They'd been squabbling about it for five months, because it strikes at an almost sacred belief of Reagan economics – that the more you tax the rich, the less money they'll have to invest in new factories, new plant, less able to create new jobs.

The Republicans have constantly cited the triumph of this theory in the fact that throughout the 1980s the United States created more millions of new jobs than the countries of western Europe combined. Now, whether that is so or not, the Democrats doggedly ignored it and pointed to all those rich men whose firms made whacking profits which did not go so much in to reinvestment as to paying out $3, $5, $10 million bonuses for the company's directors.

The president has also given in on the capital gains tax. He's always said this was sacrosanct and untouchable, on the same theory as that governing a super tax. Increase the capital gains tax and business will be less brisk and less profitable, and you'd soon see the signs of it in unemployment and rising inflation. The new capital gains tax is 3 points up from 25%. However, the taxes – and they're called taxes – are being raised on petrol, on alcohol, on tobacco as, also, on yachts, expensive cars and other expressions of sin.

The seemingly unending five-month fight over the budget has been between the president's men, allied most of the way with the Republicans, against the Democrats, especially in the House, all of whose members are up for election the first Tuesday in November.

The various budget bills proposed by the House along the way have been, in the president's view, downright punitive – wanting to have a super tax from the start, to raise the capital gains tax. In the main, to leave the impression on the people who are going to be voting for them on Tuesday week, that the tax battle has been a simple one between the fat cats and the honest, middle-class family.

It used to be the honest working man, but since about 85% of working people regard themselves as working-class, you very rarely hear an American, unless he's a recent immigrant, say I am lower middle-class. Nowadays, it is the struggling middle-class that is the object of the House Democrats' compassionate concern.

Well, I think you can say that on the whole the Democrats, in both Houses, have won. Republican leaders in both Houses are not willing to say, but they will reluctantly admit that the finished budget represents an imminent threat to their holding their numbers in the new Congress and has delivered a political blow to President Bush.

However, the result will leave him more time to deal with what, to put it in an odd way, he's more "at home" with. Foreign affairs. And foreign affairs means you know who.

It's been one of the most striking consequences of the budget obsession in the past month that the Gulf crisis has, in the television coverage of the news, retreated from centre-stage to the wings. Of course, Saddam Hussein hasn't retreated at all but the daily preoccupation with the budget has had the effect of making it seem that Saddam's threat to the Middle East has weakened, that the whole crisis has cooled off.

This is a dangerous delusion. It has provoked the first protest groups across the country, "Our boys must not die for oil". And misgivings, at least, in millions of Americans about why they are in the Gulf at all.

During the past month too, Mr Bush has been rattling around the country, speaking up for various Republicans who are up for reelection to the Senate or the House, so we've heard less about the Gulf even from the president who, in the beginning, did such a whirlwind but controlled job on stating the American case, mobilising the support of many United Nations countries and dictating or supervising the quickest overseas deployment of the largest fighting force there has ever been.

Now Mr Bush is going to have to face something I don't think he anticipated in the first fine flush of early August – a steady, rising, widespread movement across the country against the American presence in the Gulf. Slowly, down the past three months with no sign of the expected drama, public opinion has been drifting into one or two attitudes with little or no guidance from the man at the helm, Mr Bush.

One attitude, as I say, stands against any American involvement in war in the Gulf. People who take this attitude say either that we have no business being there at all or that the war is not worth fighting for oil alone. It's odd that practically nobody points out that many of the great wars of history have been fought over the prospective loss of an economic resource thought essential to one nation's prosperity.

The other attitude, shared by many respectable statesmen and public figures and fanned by the Soviet Union and the French, is that there must be what is called a diplomatic solution. And that getting Saddam Hussein out of Kuwait would be a diplomatic victory.

Very little is heard of the warning that many older statesmen and pundits voiced in early August – and the president is not saying it – that Saddam Hussein's invasion of Kuwait was Hitler's invasion of Czechoslovakia, the first course of a martial feast. That Saddam Hussein needs no more than two or three years to have a nuclear weapon and the chance, with his enormous and very modern army, of using nuclear and chemical weapons to conquer the Middle East at least.

These old voices which Mr Bush is not echoing, so far, say that Saddam's retreat from Kuwait would be a Munich. And we are now living through the daydream of a phoney war. In other words the question of 2 August has not yet been answered. "Who will stop Saddam Hussein?"

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