Clinton, Whitewater, China and Korea Jude Wanniski March 22, 1994

The decision by the Democratic leadership to hold full-scale congressional hearings on Whitewater in a month or so, makes me seriously wonder for the first time whether Bill Clinton will make it to the finish line of his one-term presidency. There has been one straw after another bearing down on the congressional camel, but the one that may have broken its back was an incendiary article in The New Republic. This publication for years has provided the intellectual glue for the Democratic Party. In an April 4 article, "The Name of Rose," TNR for the first time lays out a persuasive case that in their years in the Arkansas statehouse, the Clintons worked together on a grand scale to milk the taxpayers for the profit of themselves and their friends. The lengthy report by L.J. Davis, a contributing editor of Harper's, develops the argument that the Clintons used the Arkansas Development Finance Authority, which issued $719 million in bonds in the Clinton years, as a political kitty -- with him pushing the buttons in the statehouse, her in the Rose law firm. In its lead editorial yesterday, The Wall Street Journal called the Davis report "must reading, especially for all those confused by all the excitement about a two-bit land deal in the Ozarks." 

Democrats who had steeled themselves to think the President's indiscretions went no further than his hormones, and that the First Lady would take the fall on their finances, are now seeing that fig leaf blow away. It also did not help that House Banking Chairman Henry Gonzalez, who seems to be in the first flush of senility, threw a tantrum over Whitewater. This left House Speaker Tom Foley and Senate Majority Leader George Mitchell little choice but to let it all hang out -- or see Democratic candidates pounded into hamburger this fall amidst a palpable cover-up. The Democratic Establishment has clearly ended its damage control phase, protecting the President, and is now preparing for the worst, their own Watergate in spades. In the last few days, White House Counsel Lloyd Cutler and Special Counsel James Fiske both gave clear signals that they work for the voters and taxpayers, not the Clintons. It's hard to see where it may stop.

Our concern here, as we ponder the effects of various political scenarios on the financial markets, is primarily in the area of foreign policy. There is really not much damage the White House can do on domestic policy, because of the independence of the Fed and the checks and balances of the Congress. President Clinton and Hillary are touring the country on behalf of their health-care plan, unsuccessfully trying to change the subject, but it now seems less likely that anything serious can be done on health or welfare reforms this year. Whitewater is pushing serious business toward the mid-term elections and a fresh mandate from the American people. The Administration can, though, do serious damage in foreign policy, with the President exercising powers granted him in trade policy vis-a-vis China and Japan, and acting as commander-in-chief to play war games with North Korea. Here, too, the Ruling Class Establishment seems frantically at work, trying to figure out how to save the country from the mess it has gotten us into: the human rights/trade issue with China (a product of the Carter Administration), and the war scare with North Korea (a product of the general incompetence of the Clinton team).

Korea is a danger only because our aging Cold Warriors, with nothing else to do, have decided to prod the dying animal in Pyongyang, with sticks and stones and now Patriot missiles, into a last gasp lunge at South Korea. Neither the Chinese nor South Koreans believe Pyongyang would be a threat without these idiotic U.S. provocations, and neither do we. If the Chinese, who should know, say the North Koreans are not a nuclear threat, and the South Koreans, who have most to lose if North Korea is a nuclear threat, tell us we should not be getting so excited, why are we now threatening to fight the Korean War all over again? South Korea clearly does not want our Patriot missiles on Seoul street corners, replaying the scene in Tel Aviv. Seoul went along with our blusterings for economic sanctions against North Korea only to keep the Patriot missiles out. President Clinton has now overruled the South Koreans and instructed that the Patriots be shipped to protect U.S. troops stationed there. If I were President Kim Young Sam, I would invite President Clinton to remove the U.S. troops along with the Patriot missiles! The Wall Street Journal, which has been as bad on China and Korea as it has been good on Whitewater, this morning offers the preposterous argument that North Korea may be keeping out UN inspection teams for fear they will discover that they DO NOT have a nuclear capability! 

In fact, all of Asia is wondering what kind of crazies currently occupy the United States of America. China, which now has the most stable government of any major country in the world, cannot really grasp what's driving this human rights issue here. They know they have 1 million people in prison, out of 1.2 billion, and they know we have 2.5 million people in prison, out of 250 million. They know their families are intact and ours are dissolving. They know we have a horrendous race problem and they do not. Their political and intellectual leaders are venerated for espousing traditional values, while ours are forced to explain one disgraceful lapse from ethics and morality after another. Our myriad contacts all over Asia and our readings in the Asian press lead again and again to this giant questionmark in Asian minds: Where is the basis of our moral authority that leads us to dictate theirs? In this morning's New York Times we have A.M. Rosenthal, the voice of the Israeli government within our Establishment, egging President Clinton into punishing the Chinese for proscribing radical political dissent. The Chinese see Israel, though, as an apartheid government, one that openly discriminates against everyone who is not Jewish by birth, and who treats West Bank Palestinians as if they were under house arrest -- unable to move about without security passes. Are the Chinese allowed to view Abe Rosenthal as a hypocrite? Or have we all lost our moral compass?

The Chinese now have until June 4 to shape up or lose Most Favored Nation treatment. MFN, remember, is the last vestige of the Smoot-Hawley Tariff Act of 1930, which triggered the Great Depression at home and pushed Japan from a peaceful posture into a military crouch. If MFN is not extended, China faces the original prohibitive Smoot-Hawley tariffs instead of the low rates we have negotiated with the rest of the world (Iraq, Myanmar, North Korea and Cuba being the exceptions). The MFN concept is really a relic of the Cold War and should be wiped off the books entirely, which would enable China and the rest of Asia to make serious commitments to the U.S. market. As it is, China is clearly indicating that it is no longer going to submit to this annual morality gauntlet and have advised U.S. businessmen to straighten out the politics. President Clinton has in fact privately indicated that he would like to find a way out of his China dilemma. We continue to worry that his Whitewater problem might get in the way of resolution.

The best way would be for Clinton to replace Secretary of State Warren Christopher, who, because of his humiliation at the hands of Beijing this month, can now be counted upon to do everything he can to antagonize China. There are plenty of aging Cold Warriors around who will find ways to provoke Beijing into further acts or statements, to influence public opinion here. The Council on Foreign Relations, horrified at the prospect of making China an adversary in a troubled world that stretches out to a distant horizon, is now agitating for Christopher's head. The big guys in the business community are also aghast at being isolated by MFN while the rest of the world jumps into China's booming economy. Normally, it might persuade their man in the Oval Office to turn this around, but with his back to the wall on Whitewater, Billary becomes unpredictable. He loves Christopher, despite his string of failures across the entire global landscape. And nobody can figure out how Christopher can persuade the Chinese to solve the Korean dilemma now that he and his chief assistant, Winston Lord, have committed the Administration to a hard line. Lord, ambassador to China in the Reagan years, has a Chinese wife who is fanatical about helping the dissidents. So it goes.

We have ten weeks to straighten this out. If Christopher is still at State, we must assume the worst. A replacement by anybody would mean a policy change that would get us past this crisis. The names floating around are Morton Abramowitz of the Carnegie Endowment for Peace and Leslie Gelb of the CFR. Even better would be Cy Vance, as we need as many old hands as we can find to get close to the levers of power. On the bright side of things, remember that beyond whitewater lies bluewater. If we can shoot the rapids ahead without cracking up on some stupid international rock, the mid-term elections should produce blue in abundance.