Reagan: The Life (42 page)

Part two of Reagan’s program was tax cuts. “Our proposal is for a 10-percent across-the-board cut every year for three years in the tax rates for all individual income taxpayers, making a total cut in the tax-cut rates of 30 percent,” he said. He realized that conventional wisdom among economists said that cutting taxes at a time of high inflation would simply drive inflation higher, by fueling demand. He disagreed. For one thing, like the spending cuts, the tax cuts were cuts only in projected increases.
Taxes would continue to rise from current levels. For another, the conventional Keynesians were wrong, Reagan judged. Without uttering the phrase “supply side” or mentioning any supply-siders by name, he referred to “a solid body of economic experts” who contended that tax cuts would
reduce
inflation by expanding output. “I’ve had advice that in 1985 our real production in goods and services will grow by 20 percent and be $300 billion higher than it is today. The average worker’s wage will rise in real purchasing power 8 percent, and this is in after-tax dollars.”

Beyond the across-the-board tax cuts, Reagan proposed to accelerate depreciation of business expenses, to encourage investment. He wanted to index tax brackets to adjust for inflation, but this worthy reform would have to await another day. He didn’t state explicitly that indexing would dramatically increase the projected federal deficit; experts understood this, and others didn’t know what they were missing. For similar reasons, other reforms—of the marriage penalty, of inheritance taxes—would also have to wait.

Part three of Reagan’s plan was
deregulation. Reagan agreed with conservative economists who likened government regulations to hidden taxes, and he believed regulations should be cut along with other taxes. He disavowed any intention of removing regulations essential to the health and safety of Americans. But many others could be dispensed with and should be. He said he had declared a moratorium on new regulations by the executive branch and was convening a cabinet-level task force, headed by Vice President Bush, to undertake a comprehensive review of existing regulations.

The fourth and final part of Reagan’s economic plan dealt with
monetary policy. “In order to curb inflation we need to slow the growth in our money supply,” Reagan said. He acknowledged that monetary policy wasn’t, strictly speaking, within the purview of the president. “We fully recognize the independence of the
Federal Reserve System and will do nothing to interfere with or undermine that independence.” But he wanted to let the Fed chairman,
Paul Volcker, and the rest of the Fed board know the White House was watching and expected cooperation in reforming the economy.

R
EAGAN PAUSED TO
let his listeners catch their breath. He realized that no economic program so sweeping had been presented to the legislature since the New Deal. It was
his
plan, but it required the lawmakers’ assent.
“I’m here tonight to ask you to join me in making it
our
plan,” he said. “Together we can embark on this road.” The room burst into applause, loudest from the Republican side but with many Democrats joining in. Reagan ad-libbed: “Thank you very much. I should have arranged to quit right here.” The lawmakers laughed.

But he had a bit more to say. “Together we can embark on this road, not to make things easy, but to make things better. Our social, political, and cultural, as well as our economic institutions, can no longer absorb the repeated shocks that have been dealt them over the past decades. Can we do the job? The answer is yes. But we must begin now.” There was nothing wrong with the American economy that Americans, acting together, couldn’t fix. Government must do its part. Yet the results would rest with the American people, once they were freed to do what they did best.

Reagan repeated his stock theme of the greatness of the American people. “The substance and prosperity of our nation is built by wages brought home from the factories and the mills, the farms, and the shops,” he said. “They are the services provided in ten thousand corners of America—the interest on the thrift of our people and the returns for their risk-taking. The production of America is the possession of those who build, serve, create, and produce.” Government must simply get out of the people’s way. And it must do so at once. “The people are watching and waiting,” he told the lawmakers.

M
ARGARET
T
HATCHER HAD
had her eye on Reagan for years. “
I had met Governor Reagan shortly after my becoming Conservative Leader in 1975,” the British prime minister later wrote. “Even before then, I knew something about him because Denis”—her husband—“had returned home one evening in the late 1960s full of praise for a remarkable speech Ronald Reagan had just delivered.” Thatcher got a copy of the text and was equally impressed. She arranged to meet Reagan at first chance. “I was immediately won over by his charm, sense of humour and directness.” She followed his rise in American politics and kept reading his speeches. “I agreed with them all.”

British voters were quicker to appreciate Margaret Thatcher’s virtues than American voters were to reward Reagan’s; she became prime minister in the spring of 1979, eighteen months before he was elected president. British Conservatives, or Tories, shared the small-government predilections of American Republicans, and Thatcher was the most forthright, indeed combative, of the Tories. She tackled the British welfare state, slashing spending and reducing red tape. She challenged British labor unions, provoking strikes that caused the entire economy to shudder. But she held her ground until the strikes collapsed and the unions’ power was broken. She privatized public utilities, undoing decades of growth of the government’s hold on the British economy.

Her stern policies took a toll on her popularity. In late 1980 her job approval rating sank to depths not visited by any prime minister before her. Number 10 Downing Street, the prime minister’s residence, became a lonely place. Her convictions never wavered, yet she valued her steadfast
supporters more than ever, and she welcomed the ascendance of a kindred spirit across the Atlantic.

She sent congratulations on Reagan’s election and laid plans to visit Washington as soon as possible, consistent with the dignity of her office. Inquiries were made, and she was delighted to learn that she was the first foreign leader the president-elect wished to see after assuming office. Travel arrangements were made and diplomatic briefings held. She grew expectant and somewhat anxious as the time neared. “
Mrs. T told me that she was a little worried by her forthcoming visit to Washington,”
Nicholas Henderson, the British ambassador to Washington, recalled. “She did not quite see how it would go. She admitted to being nervous about it. She looked drawn—pale and rather distinguished. I did my best to reassure her, telling her how welcoming Reagan would be and how much he was looking forward to her arrival. I told her about the Californian gang who had come to Washington. We went through the programme. She was somewhat taken aback when I said that her after-dinner toasts would be televised. ‘Then I shall have to think about them very carefully,’ she said, adding, ‘I shall want all the best historical advice I can get so as to get the allusions just right.’ ”

She asked about gifts: What would the Reagans like? They decided on Halcyon boxes. “As we became more and more involved in the plans of the visit, the worries seemed to flow off her and she became less taut,” Henderson said. He grew aware that Thatcher saw the American visit as a break from the labor and political troubles at home; in Washington, at least at the White House, her conservative views would be valued and shared. “It was noticeable how little we talked about the substance of her discussions with Reagan. She was rather clear that she wanted to see him alone for a few moments, and then in a restricted meeting—the fewer the better, but she did not give me the impression that she had decided upon what subjects she wished to focus.”

She flew to Washington at the end of February. Reagan greeted her on the White House lawn. A color guard provided pageantry; both leaders gave speeches extolling the special relationship that existed between America and Britain. They adjourned to the Oval Office, where they spoke privately for half an hour. They were then joined by their foreign ministers,
Alexander Haig and
Lord Carrington, and things grew more formal again. Larger entourages surrounded them in the Cabinet Room. Thatcher noticed the jelly beans on the table; Reagan said they came in
thirty flavors, including peanut. “ ‘We haven’t yet had time to take them out,’ he quipped, referring of course to Carter’s background as a producer of peanuts,” Henderson commented.

Thatcher talked of relations between the democratic world and the communist sphere. The evolving crisis in
Poland was one point of contention, turmoil in Central and South America another. Reagan responded, “The villain in Central and South America is the same as confronts the world at large.” Thatcher nodded. Henderson observed of Reagan, “He went on, his head shaking slightly, his voice quite deep and with a frequent smile, very charming and very unBismarckian: ‘The U.S. has tried a variety of programmes that were and look like our plan. But we looked like the Colossus of the north. We will now try a new approach to bring the continents together.’ I didn’t really know what he meant.”

R
EAGAN
’
S PLAN FOR
Central America would unfold over time; for now the two leaders concentrated on getting to know each other better. The president and Nancy Reagan hosted a dinner at the White House; the Thatchers reciprocated with a dinner at the British embassy. “Rather to my disappointment the President did not ask Mrs. T to dance, though we had provided plenty of what we thought was appropriate music, such as ‘Dancing Cheek to Cheek’ and ‘Smoke Gets in Your Eyes,’ ” Henderson remarked after the British dinner. “I am not sure why. It is possible that he may not have known in advance that dancing would be going to take place and did not therefore know whether it would have been in order to have started. Oddly, at the White House party the previous evening, he had accompanied the Thatchers to the door to say goodbye and had then returned to the party to dance with Mrs. Reagan.”

Thatcher was disappointed too. “After the Reagans had left the embassy party a number of guests departed but Mrs. Thatcher stayed chatting and watching the dancing,” Henderson said. “She had said to me in London beforehand that she hoped people would not rush away, which was why we had arranged to have a band. Nobody asked her to dance. So I went up to her and said, ‘Prime Minister, would you like to dance?’ ” His gallantry was appreciated. “Mrs. T accepted my offer without complication or inhibition, and, once we were well launched on the floor, confessed to me that that was what she had been wanting to do all the evening. She loved dancing, something, so I found out, that she did extremely well. Long afterwards I read that one of the few frivolous things she did as
an undergraduate at Oxford was to learn ballroom dancing. The band showed great brio, and I think Mrs. T was happy.”

Other than the dancing, Henderson thought the dinner went well. Reagan seemed relaxed and engaging. “He shook hands and had a friendly remark for everyone. How excellent he is at that.” At their table the president and the prime minister exchanged toasts. “Mrs. T used most of the text I had prepared for her, including the jokes, but interjected a long passage about the courage needed at two o’clock in the morning when you woke up aware of all the problems confronting you,” Henderson said. Reagan laughed at the jokes but especially appreciated the personal reflection. “Later,
Michael Deaver, who works in the White House and is close to the Reagans, vouchsafed to me, without any prompting, that the president had been moved by Mrs. T’s embassy speech, especially the passage about two o’clock courage.”

The visit, as a whole, was a rousing success. “Despite the UK’s economic difficulties, the visit resulted in great exposure for Mrs. T, even more than planned, and in more favourable media coverage for her and the UK than the circumstances really warranted,” Henderson observed. “She returned to a very different type of reception in the UK where unemployment and bankruptcies accumulate, and there are widespread doubts within her cabinet and party about her policies. I think that her acclaim in the USA may have helped to restore her.”

A parting personal touch by Reagan confirmed the bond that was developing between the two leaders. “On the last morning the Reagans invited the Thatchers to go to the White House for a farewell cup of coffee on their way to the helicopter,” Henderson said. “This was intended, I am sure, as a gesture of friendship because they had already had plenty of opportunity for chitchat at the successive dinners.” Henderson was pleased to note that Reagan’s spokesman seconded his opinion of the affinity between the two leaders. “Brady, the White House press secretary, said after the visit was over that it had been ‘difficult to prise them apart.’ ”

R
EAGAN ENJOYED HOLDING
news conferences. He liked dealing with reporters, whose names he took care to learn, and he valued the opportunity to show that an actor needn’t be a dummy. If his mastery of policy minutiae was less than
Jimmy Carter’s, his camera presence was far greater. And he understood that presence mattered more to television viewers, the audience he cared about, than the details of his answers.

Reagan held his first news conference a week after his inauguration. He gave a brief statement reiterating the economic themes of the campaign and his inaugural address, and then he opened himself to questions. The American hostages in Iran had been released almost at the moment of his taking office; Helen Thomas of United Press International asked whether his policy toward Iran would be one of revenge or reconciliation. “
I’m certainly not thinking of revenge,” Reagan replied, while adding, “I don’t know whether reconciliation would be possible with the present government.”