Bennett at the RNC Jude Wanniski November 20, 1990

\White House chief of staff John Sununu's choice of William Bennett as the new chairman of the Republican National Committee is an extremely risky one, which could turn out to be inspired or unfortunate. Bennett, who was President Reagan's education secretary and until recently President Bush's "drug czar," is a pugnacious intellectual, like Sununu, who does not suffer fools gladly, like Sununu, which indicates a White House preference for a brawling partisan style. Bennett would almost surely have become president of Boston University if his friend John Silber had won the Massachusetts governorship. But Democrat Silber lost precisely because the electorate in the end found his intellectual pugnacity grating and exclusionary.

The optimum choice at RNC would have been HUD Secretary Jack Kemp, whose political style is inclusionary to the point of being evangelical, and who would have made deep inroads into the Democratic coalition's hold on younger voters, blacks and Hispanics. Bennett's first press conference yesterday found him getting snarled in discussion about the evils of "affirmative action" and a defense of Senator Jesse Helms, practically inviting the Democrats to make the race issue a debating point in the 1992 elections. Kemp, who opposes racial quotas as much as Bennett, would have finessed the issue by putting economic growth back at the center of the discussion, quotas being a much less sensitive or relevant topic in an expanding economy.

Which is not to say I am displeased with the selection of Bennett, a young man who is far more the Reaganaut than the traditional GOP right-winger. There is deep suspicion among conservatives about Sununu's motives in choosing Bennett, simply as a GOP pit bull to harangue the Democrats with elegant partisan rhetoric while the administration continues to give away the store. There's also suspicion Sununu may have decided this was the best way to prevent Bennett from becoming a rallying point for outside opposition to the Bush agenda. The position, though, is potentially too powerful for it to be handed away this lightly to a man not known as a Bush loyalist. Sununu has to know the GOP must be repaired in time for 1992, and the repair has to begin with the Reaganaut core of the party that believes it was abused this year on a variety of issues, taxes being foremost.

A neo-conservative and former Democrat, Bennett is the first "man of ideas" to occupy the RNC position in memory -- as opposed to a pure politician or political technician. At this moment in history, with the GOP struggling to shed its past and complete its renaissance as a party of economic growth via entrepreneurial capitalism, the RNC chairmanship is extremely important. If it had gone to a silver-spoon Republican, I would be seriously questioning a second term for George Bush. It would have signaled continued policy cleavage in the party. Bennett is actually more like Jack Kemp in outlook than anyone else in the Cabinet, and has become one of Kemp's closest friends in Washington, neighbors in the Maryland suburbs. A supply-side economic growth agenda will get plenty of attention at the RNC, which bodes well for policy emphasis in 1991, the economy, and the financial markets.

* * * * *

CREDIT CRUNCH: As The Wall Street Journal reports this morning, the Federal Reserve has turned up fresh evidence that the banks are getting tougher in loan standards, even tightening up on loans to big companies and residential mortgages. The Fed report is being used as ammunition in Chairman Alan Greenspan's struggle with SEC Chairman Richard Breeden over bank regulation, with the White House at least recognizing that there does seem to be something to the regulatory reign of terror we have been writing about this year. OMB's Richard Darman announced his opposition to Breeden's SEC proposal to force banks to mark assets to market, which suggests the Fed will again win this round, as it did in 1974 in a similar fight. This won't mean the credit crunch is over, only that the banks have in the Fed a protector that the thrifts don't have. Breeden may still squeeze credit by implementing his plan to limit money market funds to no more than 5% non-investment grade commercial paper.

MILKEN SENTENCING: The Wall Street Journal's front page performance this morning was transparent and despicable. "Page One" editor James B. Stewart, who has been prosecuting Milken for years with leaks from the U.S. attorney's office, gets in one last shot at influencing the sentencing decision of Judge Kimba Wood, tomorrow morning at 10 a.m. The lead piece, "Milken Sales Pitch on High-Yield Bonds Is Contradicted by Data," is grotesquely biased, another in the recent thinly-veiled attempts to equate Milken with the slowdown in the U.S. economy -- via the S&L crisis that the Justice Department also blames on Milken. You see how it works: Because the S&Ls bought junk, and the junk market collapsed, the taxpayer bailout costs have soared, pushing up the deficit, which raises interest rates, and forced the Bush Administration and Congress to raise taxes, etc. There is scarcely a hint that the junk market did everything Milken promised of it up until the Government turned its artillery on it, and that he had nothing to do with the junk issued in the last three years. It was Richard Breeden, of course, who was responsible for forcing the thrifts to sell off their high-yield bonds, writing this provision into the bailout law. Even BusinessWeek now concedes it was the government that sank the junk market. Insofar as this last-minute propaganda summation from Stewart's Inquisition influences Judge Wood, it can only have the result of tacking on time to his sentence. The forces of darkness never sleep. Shame on The Wall Street Journal.

PUERTO RICO CONFERENCE: We'll be getting a letter out later this week on our Seventh Annual Supply-Side Festival with Evans & Novak, at the Cerromar Hotel, Dorado Beach, P.R., Thursday, February 28, to Sunday, March 3. Make sure you and your spouse have it on your calendar. Happy Thanksgiving!