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Some Wall Streeters accused Pickens of "greenmail," the business world's version of blackmail. In a greenmail deal, an investor buys a large enough chunk of a company's stock to pose a takeover threat in the hope that its management will buy the shares at a premium. Pickens denies being a greenmailer, saying that he made a sincere bid to take over Phillips and that all company shareholders will benefit from his actions because the value of their stock will rise. The most venerable greenmail victim of 1984 was Mickey Mouse. Saul Steinberg, a New York City financier, bought 12% of the stock of Walt Disney Productions and then sold it to the company for a profit of $32 million.
Many corporate chiefs took a tough stance against takeover artists. Said William Norris, chairman of Control Data, a computer company: "We're not for sale. If anybody comes to try to buy us, we'll kick their butts out the door."
Among economic issues, the flash point of debate in 1984 was the federal budget deficit, which is expected to reach $200 billion this year. The deficit depressed Wall Street, alarmed businessmen and created a civil war among President Reagan's advisers. Treasury Secretary Regan argued that strong growth and spending cuts would take care of the budget gap, but Martin Feldstein, chairman of the Council of Economic Advisers, publicly maintained that a tax hike was needed. Said Feldstein, who resigned in July to return to teaching at Harvard: "The longer the deficits are allowed to persist, the greater are the risks to our economy."
Like most economists, Feldstein contended that the budget deficit helped keep U.S. interest rates high in 1984, which attracted about $100 billion in foreign capital to American investments. While the money from abroad helped finance the federal deficit, it also boosted the value of the dollar to new peaks. The dollar's strength was a boon to American tourists, who traveled overseas in record numbers, but it was a burden to U.S. companies that tried to compete with cheap imports or sell their products abroad. Primarily because of the robust dollar, the U.S. racked up a record trade deficit of more than $115 billion. If that trade gap keeps growing, economists warned, the U.S. could be headed for another recession.
The first order of business in the new Congress will be to tackle the budget deficit. President Reagan will make the initial move early in 1985 by proposing a new round of cuts in domestic spending. But the Democrats, and some Republicans, are not likely to go along unless the White House agrees to curb military spending and raise taxes. For the moment, Reagan is adamantly against a tax hike. Despite the urgency of the challenge, Congress and the White House seem no closer to resolving the budget dilemma than when it first arose in 1981. Only by breaking the gridlock can they ensure that the prosperity of 1984 will be a prelude to more good times ahead.