Margaret Thatcher: The Authorized Biography (96 page)

A few days later, Hugh Thomas had reported to Mrs Thatcher on a private conversation with Edward Luttwak,
^§
then consulting for the new admin
istration. Luttwak summed up the President neatly: he ‘knows much less than he seems to’ but ‘is personally and socially secure’, and is ‘
genuinely morally brave
’. Mrs Thatcher underlined these last words. Luttwak thought that Britain and America could now have ‘a period of very close friendship if this opportunity were to be seized properly’.
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Mrs Thatcher was determined to seize it.

Months earlier, in July 1980, Reagan’s aides had been talking secretly to British officials about an early meeting with Mrs Thatcher, should Reagan be elected president.
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Contingency planning had been under way well in advance of the election. Mrs Thatcher thus easily fought off an attempt by Helmut Schmidt to become the first to meet Reagan after his inauguration. As she told the Pilgrims’ Dinner at the end of January, ‘next month I shall be visiting the United States at the invitation of President Reagan and as the first European Head of Government to visit him. Perhaps, though it’s for others to say, that too is not altogether a coincidence. I believe that that visit will underline the closeness of the friendship between our two countries but it will also, I am certain, mark the opening of a period of particularly close understanding between the two Heads of Government.’
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Three days later, Reagan cabled to thank her, ‘You are indeed right that we share a very special concern for democracy and for liberty,’
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and he instructed his aides to ‘make the visit special’.
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The aim, as Secretary of State Al Haig put it, was to ‘Demonstrate publicly and privately that Thatcher is the major Western leader most attuned to your views on East–West and security issues. The Prime Minister wants, above all, to build upon her relationship with you and to have her visit perceived as a very strong reaffirmation of the “Special Relationship”.’
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The challenge, in the words of the National Security Advisor Richard Allen, would be to ‘dramatize’ the ‘meeting of minds’ between the two leaders.
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But in reality the situation was more difficult for Mrs Thatcher than these warm words made it sound. Many Americans, even among those who supported Reagan, were coming to the view that Thatcherism was going wrong and had begun to distance themselves from the British approach. Earlier in January, Charles Anson, press officer at No. 10, had written to Mrs Thatcher’s private office noting that ‘There has been a good deal of editorial writing lately in American papers about “the failure of the Thatcher economic experiment” and advising Ronald Reagan not to follow down the same road.’
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The Treasury duly briefed her on these views.

Critics came from different camps. Supply-siders, who believed that tax cuts would bring automatic benefits, disliked Mrs Thatcher’s failure to cut the overall burden of taxes. They preferred what the economist Herbert Stein called ‘the economics of joy’.
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With her greater insistence on
prudence and her anxiety about the size of the government deficit, Mrs Thatcher stood, at this time, for the economics of misery. ‘I’m not sure she was as committed as Ronald Reagan was to the idea that if you get taxes low enough you are going to generate increased tax revenues by virtue of increased economic growth,’ recalled James Baker,
*
then Reagan’s Chief of Staff.
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As she herself wrote, ‘We feared that the new administration’s plans for tax cuts might widen the deficit – though at this stage we were still hopeful that the President would succeed in achieving the large expenditure cuts he had put before Congress.’
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Bernard Ingham remembered a fundamental difference with Reagan about economic matters, almost one of temperament:

I think she probably felt that Reagan was never more wayward than over economic management. She used to worry intensely about the huge propensity for spending and refusal to tax. She felt this was altogether too lax. She said that he believed that it would all come right in the end. That was the sunny disposition, the optimistic outlook on life to which she was not entitled, being a British politician who’d seen 35 years of post-war mismanagement. She was constantly worried about the budget deficit.
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But even those sympathetic to monetarism were highly critical. Paul Volcker, who was chairman of the Federal Reserve Board at the time, recalled: ‘My impression of the UK was that nothing was working very well’;
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his own development of monetary policy owed little to the British example. In advance of Mrs Thatcher’s visit, Reagan’s Treasury Secretary, Don Regan,
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requested a last-minute paper from the arch-monetarist Beryl Sprinkel, then his under-secretary for monetary affairs, comparing and contrasting the Thatcher and Reagan plans. Sprinkel pointed out Mrs Thatcher’s tax increases ‘as a percent of national income’, her failure to cut government spending and the apparent ‘soaring’ of the money supply, in the form of M3, by a government committed to its tight control.

Sprinkel went on, however, to report on a conversation with ‘Messrs Allen [sic] Walters and Terry Burns’ after which he was ‘convinced that in fact the UK has been through a period of severe monetary restraint’. He concluded, ‘I should add that Mrs Thatcher’s government has the same
overriding objectives that we have, namely reducing the public sector while increasing the private sector, cutting government spending, cutting taxes and reducing inflation by reducing monetary growth. So far results have been mixed but I am confident that the lady will not turn, and that if she can hang on politically somewhat longer as I believe is the probable case, she will make further progress.’
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The State Department’s briefing for Mrs Thatcher’s visit was more ambivalent still: ‘so far she has failed to implement effectively her tactical policy goals of reducing the budget deficit, government consumption and the growth in the money supply, but it is too early to say whether or not she will eventually succeed.’ A core objective for the visit, the briefing continued, would be to ‘Exchange views with Thatcher on her experience, in part to learn from British mistakes.’
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It was the new President himself who ignored all these difficulties. He liked Mrs Thatcher, and he knew that he and she were essentially on the same side. ‘You know what I want to do in the United States is what Margaret Thatcher has started to do in the United Kingdom,’ Reagan had told one of Mrs Thatcher’s associates during his election campaign, ‘to get the government off the backs of the people.’
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He was not interested in second-order or technical disagreements. To the question, ‘Where did the President stand in the debate over how to implement economic policy?’ Paul Volcker answered, ‘I think the President stood nowhere in all this. He had a few basic convictions. Fortunately one of these convictions was that inflation was a bad thing.’
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This worked to Mrs Thatcher’s advantage. Briefing Reagan in advance of his meeting with the Prime Minister on 26 February 1981, Richard Allen began with an exordium about the relationship between the two leaders which could read equally well as its epitaph:

Your reunion with British Prime Minister Margaret Thatcher – whom Nico [sic] Henderson, her old-pro Ambassador here, calls a ‘committed monetarist’ – will dramatise something rare in the exchanges between US and West European leaders these past few years: a meeting of minds which encompasses not only philosophical affinities, similar economic outlooks, and a common
allegiance to the idea of revitalized defense efforts, but also a tough, pragmatic determination to
do
something about them.

In Allen’s view,

Mrs Thatcher’s problems [he listed her economic and trade union woes] merely accentuate what I feel should be the major theme, both public and private, of your meeting with her. The image which could most usefully emerge from these talks is of two like-minded leaders who have taken the measure of the difficulties their nations confront, who underestimate none of the situation’s gravity, but who are neither daunted by such problems nor doubtful of our ultimate success in dealing with them. Sleeves-rolled-up, sobriety-with-optimism is the main message you should be getting across with this visit; politically it can prove an especially effective chord both at home and abroad.
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The woman Prime Minister who flew into what
The Times
called a ‘lavish, colourful ceremony of the kind not seen in the American capital for the past four years’
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had a packed schedule, but was also careful to make the right impression.
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Her office set aside forty minutes each day for hairdressing (with rollers), and submitted her personal details in preparation for receiving an honorary degree at Georgetown University: ‘Height 5’4”;
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Weight 10.5 stone; Coat 14 English; Hat size 7’. In the White House, Reagan welcomed her, declaring, ‘we share laws and literature, blood, and moral fibre’,
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and she responded, ‘The message I have brought across the Atlantic is that we, in Britain, stand with you. America’s successes will be our successes. Your problems will be our problems, and when you look for friends we will be there.’
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The private reception was equally warm, which encouraged Mrs Thatcher to be frank. In his diary, Reagan recorded: ‘We had a private meeting in Oval office. she [sic] is as firm as ever re the Soviets and for reduction of govt. Expressed regret that she tried to reduce govt. spending a step at a time & was defeated in each attempt. Said she should have done it our way – an entire package – all or nothing.’
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But not everyone in the Reagan administration was willing to be as
supportive as the President. On the same day, Don Regan testified before a Congressional committee. Mrs Thatcher, Regan said, had failed to control the money supply, produced ‘an explosive inflationary surge’ by her pay increases to public employees and kept taxes too high, which ‘provides little incentive to get the economy started again’. ‘She failed’, he added, ‘in the effort to control the foreign exchange market and the pound is so high in value that it ruined their export trade.’
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Here was a clear effort to distance the administration’s policy from the perceived mistakes associated with Margaret Thatcher. Such perceptions were commonplace in US media reports throughout the visit.
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Regan then left Capitol Hill to hurry over to the British Embassy for lunch with Mrs Thatcher.

She did not react unfavourably, but publicly praised President Reagan, giving a sanitized version of what she had told him privately: his attack on expenditure was ‘the one thing which I could have wished that we had been even more successful at’.
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Reagan recorded in his diary that Mrs Thatcher ‘Went up to the hill [Capitol Hill] and was literally an advocate for our ec. program. Some of the Sen’s. tried to give her a bad time. She put them down firmly & with typical British courtesy.’
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As far as issues of substance went, the visit was fairly thin. Mrs Thatcher was a little worried by the administration’s obsession with Central America, when she felt more attention should be paid to the East–West relationship. She and Reagan did, however, discuss the Soviet President Leonid Brezhnev’s speech of 23 February in which he had called for an international summit and a moratorium on Intermediate Nuclear Forces (INF) in Europe, and they agreed on a cautious response (see
Chapter 20
).

More important, for both sides, was the need for éclat, for the dramatization of the ‘meeting of minds’ of which Dick Allen had written. The state dinner for Mrs Thatcher at the White House gave Reagan’s people the chance to show the difference their President made:

The Reaganauts were determined to throw off the grungy, downtrodden look of the Carter Administration … Some of the Carter people used to walk about the White House in bare feet. As soon as Reagan came in, out went the memos banning jeans, banning sandals and requiring everyone to wear a suit. ‘Glamour’ was a word often used, and ‘class’ too. The Reagan people thus planned the Thatcher dinner as a white tie affair. It was going
to be infused with Hollywood glamour and would show the world how classy the Reagan people were.
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Mrs Thatcher, however, asked the White House if the dinner could be black tie, since ‘some of her people would not have the requisite clothing’. She had another concern too: ‘she was the grocer’s daughter. She didn’t want to come over here dressed up like that. It was an impoverished time in Britain after all.’
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Black tie was agreed, but the dinner was still grand enough in all conscience.

Then there was the return match. Taking advantage of the Reagan team’s inexperience, Nicko Henderson had got Dick Allen to promise that the President would come to the customary reciprocal dinner at the British Embassy the following night. This was in violation of the existing convention that only the Vice-President attended these return dinners, but the Reagan team did not know this. By the time they had realized their mistake and tried to get out of it, Henderson had sent out the invitations.
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Reagan came with a good grace.
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In her speech that night, Mrs Thatcher added her own passage to Henderson’s draft, words about the ‘two o’clock in the morning courage’ which leaders have to have when faced with lonely decisions.
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This greatly pleased Reagan, who replied that she herself had already shown such courage ‘on too many occasions to name’.
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‘Truly a warm & beautiful occasion,’ Reagan wrote in his diary.
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The only disappointment for Mrs Thatcher was that the Reagans left without dancing to the band. After they had departed, Henderson invited her on to the floor: ‘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 evening. She loved dancing, something, so I found out, she did extremely well.’
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She was most reluctant to go to bed, threatening a different sort of ‘two o’clock courage’ by going off to see the floodlit Washington monuments, ‘but Denis put his foot down, crying, “bed”.’
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On her last night in America, after a rapturous reception for a speech in New York, Mrs Thatcher gathered with Denis, Henderson and aides in her suite in the Waldorf before taking the plane home. ‘Mrs T was still in a
state of euphoria from the applause she had received which was indeed very loud and genuine and burst out: “You know we all ought to go dancing again” … Denis’ foot came down heavily.’
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