Growing US deficit

My live-in mate, I think we now say, is always complaining about digits. 'What's all this,' she'll say, 'about a $200 million deficit?' 'Not 200,000 millions,' I say, 'two hundred billions! Two hundred thousand millions.' 'Billions, trillions,' she says, 'who cares so long as he loves his mother.'

It's an enviable view to take of America's plight and its new role as a debtor nation. I must say it used to be more difficult to talk about these figures when Britons and their imperial cousins used to think, if ever, of a billion as a million millions. But now, in spite of the insistence of the Oxford English Dictionary, the Treasury, along with all, I think, other English-speaking countries have adopted the American usage and mean, by a billion, a thousand million. Still, I believe the overwhelming majority of citizens everywhere are like my room-mate. They look at the word 'billion' and don't stop to register amazement and alarm by translating it truly into one thousand million.

But since governments have been running to these gaudy figures, politicians, at least, have got used to tossing them off – at least, members of the administration, any administration, have. Which reminds me of the grilling a Senate committee was giving years ago to a general who was defending, in an open hearing, the Pentagon's budget for new fighter bombers.

The general was reeling off the price of this and that and was stopped by the famous Senator Dirksen from Illinois, a watchdog with the voice of an operatic basso profundo. 'Hold it right there, General!' he said, 'You talk about a billion here, 2.1 billions there. Pretty soon, General, that can run into money.'

And the trouble is that it runs into money beyond our ken, so that when a friend of mine, a friend on the right, told me six years ago that another Carter presidency would plunge the republic into ruin and I asked him why, he said, 'Do you realise that in one year, from fiscal 1979 through fiscal 1980, the budget deficit has gone from 27 billions to 60 billions?' It sounded awful. And it made me understand why the Republicans and, as it turned out, millions of Democrats, were getting behind young old Lochinvar from out of the west, former governor of California, name of Ronald Reagan.

He was even more scared and outraged than my friend and he swore, if he became president, that his absolutely top priority was a balanced budget by the end of his term by 1984. Now for people to whom such routine government lingo as 'net receipts' and 'undistributed offsetting receipts' are as unreal as billions and trillions, let me explain in the simplest possible language the difference between being solvent and being broke.

The words are those of Mr Wilkins Micawber. 'Annual income,' said Mr Micawber, 'twenty pounds. Annual expenditure nineteen pounds, nineteen shillings and sixpence. Result, happiness. Annual income twenty pounds, annual expenditure twenty pound, no shillings and sixpence. Result, misery.'

This view of economics, that you can't spend what isn't there, that you shouldn't buy things you can't afford, is so naive that it has not been held by any government I can think of since Bismarck and is obviously irrelevant in the world of bank loans, mortgages, usury, which is called the prime rate and credit cards – buy now, pay later if you feel like it.

And yet, there arrived on the scene in 1980, as I say, this western politician, Reagan, who actually believed in Mr Micawber's economics. I ought to say that he was not born that way. For 16 years of his adult life at least, he'd been a passionate disciple of Franklin Roosevelt and voted for him four times in the long-gone days when it was possible to vote four times for a president.

Roosevelt was a Democrat and the Republicans were so enraged by the practice of letting anyone run for president four times that they managed to get through Congress, and then through the states, a constitutional amendment limiting the highest office to two terms. It was Roosevelt who, at the peak of his power and popularity, once gave vent to his economic rule of life. 'Spend and spend,' he said, 'and tax and tax.'

Well, after 16 years of this heady life, Ronald Reagan was not the only Democrat who came to the realisation that he'd been living a life of sin. He became a born-again Micawberite or Republican, and so, when he said around the country in 1980 that any government of his would cut both spending and taxes, the country rose to him. First item of business, as he said, was to wipe the word 'deficit' from the language. The budget would be balanced in four years. Taxes would be cut by 30 per cent. Money would go out by way of education, health to the poor and the disabled. Only to the truly needy. No more disgraceful Carter balance sheets and a deficit going from 27 billions to 60 billions in one year. Or any year. There would be no debt. No deficit at all.

So now at the end of six years in office, where do we stand? The deficit this year is going to be around 220 billions and – what is a very annoying mystery to the poor, skulking Democrats – Ronald Reagan is, today, more popular over the long run than any president in American history. I don't know if there sounds something fishy in all this to you.

There is no mystery. Reagan has convinced most of the American people that he has done what he said he'd do. He has cut taxes by 30 per cent, which is a mighty popular policy in any country. But how about the other side of the prescription, to cut spending?

Well, he's done his best, hasn't he? It's that dreadful Congress that won't let him stop handing out money in all the ways the government has been handing it out since Franklin Roosevelt, following Lloyd George 26 years later, invented the New Deal and three years after that, the idea, the practice, of social security.

Social security started in 1935, was intended originally as a form of compulsory savings, the ordinary family's pension savings plan. A small percentage was deducted at source from your pay cheque and kept by the government in your name. And when you retired at 65 – then and still the official retirement age – you drew all the money you'd put into social security. It was pointed out early on that, of course, since the government was holding the money and not just keeping it in a bag, but investing it, you had a right to the interest earned. What was not appreciated early on was that with the ups and downs of the banking business and the stock market and inflation and other forms of casino, the interest would, from time to time, get ahead of the original investment.

So that, by now, there are millions of people who are getting monthly cheques from the government which, in one year, amount to one or two or even three times as much as the amount they put into their social security every year. That's a system that pleases everybody. Once you get to the age of 72, your wife, whether she was or was not ever gainfully employed in the government sense, a job outside the home, well, she also gets – surprise, surprise – a monthly cheque, even if she's a billionaire.

I don't know a woman, however anti-Reagan, however fervent a Democrat, who doesn't think this quite right, not to say, delightful.

The result is that as the president and his director of the budget sit down to compose or propose next year's budget, there is one enormous figure that stares mockingly at them from the start. It's the percentage of the budget that is marked off, already spent, so to speak, for social security. It is 40 per cent of the whole domestic budget.

When Mr Reagan came in, he looked at that figure and he was understandably appalled. His bright young director of the budget, one David Stockman, pointed out that if there was going to be any balancing act with the budget, a colossal cut would have to be made in social security. In fact, Mr Stockman, a whiz of an accountant and a realist, more or less told the president that if he was going to cut taxes so drastically, if so much less was coming in, just so much would have to stop going out.

In other and plainer words, Mr Stockman said – and he said this behind closed doors, mark you – the economic revolution that the president had promised could only be accomplished by dismantling the whole welfare system. The only people who would remain beneficiaries of it would be the very poor. No more college-tuition loans to students whose parents earned 20,000 or 200,000 a year. No more fat cheques to the ageing comfortably off, no more food stamps to the children of families that earned 18,000 a year, twice the poverty rate. And so on and on.

But the word behind closed doors got out. The Democrats screamed with warnings that the wily Reagan was going to eliminate or cut social security. The president then learned, to his astonishment, that social security in the 50 years of its life had become the ark of the covenant – an untouchable sacred script for the acting out of democratic life. The president eventually had to say that the rumours were ugly and unworthy. Of course he wouldn't dare touch that 40 per cent, that bit of holy writ.

Well, young Mr Stockman – as I say, a very sophisticated accountant – was very naive about the American system of government. He thought it was like a prime minister and a parliament. Parliament would pass practically any law the prime minister put up. When the Congress went to work on putting back into the budget all their favourite programmes, their local handouts, all the presidential cuts, Mr Reagan called the speaker of the House, Tip O'Neill.

'Mr Speaker,' he said, 'you're doing a great job but you must make some more cuts!' The speaker was appalled. 'Mr President,' he said, 'have you ever heard of the separation of powers? You think we're a rubber stamp?' That's all.

So, the president pretends he's doing what he said he'd do and he is cutting taxes. But actually more money is going out than ever on all the welfare goodies we all love so much. So instead of no deficit, it's now approaching four times the deficit Jimmy Carter left us with. The Democrats howl at the size of the deficit and the size of the cuts Mr Reagan keeps saying he wants.

Meanwhile, 67 per cent of the people, the most Americans in history, say their president is doing a fine job.

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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