The Washington Zoo/Fedwatch Jude Wanniski and David Gitlitz August 19, 1994

THE WASHINGTON ZOO

Watch closely, for you may never again see the United States Congress, not to mention our Government, in the chaotic, frenzied condition it is in at this moment. It's nothing to worry about, as our fundamental institutions are not failing us, and when the frenzy ends, nothing terribly destructive will have been done to the country. But I can't remember a time when reason and logic and deliberation and civility were so close to a vanishing point. In a desperate attempt to "save" the Clinton presidency, at any cost to the nation, the Democratic leadership in Congress is willing to do anything it takes to produce a health care bill which the First Lady will permit her husband to sign. In a New York Times op-ed today, "Before You Wreck the Health System...," Ross Perot, bless his heart, reminds us of his 1992 warning about the incredible complexities that will have to be dealt with in a reform of the health system: "Successfully reshaping health care is far more complicated than building an aircraft carrier or designing the space station or inventing the atomic bomb." And yet the best and the brightest of the Democratic Party are trying to whack it all together in what they correctly perceive to be the dying moments of their party, at least as it has been constituted for more than 60 years.

In order to get this whacko health bill passed at any cost, it is now determined that the President must get his crime bill passed at any cost. The crime bill has almost nothing to do with crime, except that it does federalize 60 new capital crimes, as if there are not already enough laws on the books that are not being enforced. The price tag of $33 billion is only a small part of the added financial burdens the law would pass on to state and local governments and the legal bills of the private sector. All of this, of course, further saps the vitality of the underlying national economy and the opportunities for employing those who otherwise turn to a life of crime. Twenty years ago, Daniel Patrick Moynihan noted sadly that we had reached a point in public affairs where political people believe it is permissible to say anything. Alas, Senator Moynihan, who predicted the miseries society would have to endure at the hands of Great Society Legislation, is now a major player in this sad denouement of a once Great Political Party.

Sen. David Boren [D-Okla.] may be the last of the Democrats who refuse to say and do anything, and should be urged to seek the Democratic presidential nomination in 1996 in order to rebuild from scratch. Boren is still alone in urging the Congress to end this spectacle, and to simply go home for fresh instructions from the people. The Clintons and the Senate and House Democratic leaders are horrified at the idea that members of Congress should be "lobbied" in this fashion at the grass roots, as the pollsters are telling them the people are in essential agreement with Perot and the Republicans. The Democratic Party, the party of the people that was my father's and mine, now lives in fear of the people.

Its minions in the national press corps, who owe their careers to the continued care and feeding by the corrupt Democratic establishment, report this casually in the news columns and on the networks -- as if it were perfectly proper to keep Congress in session during this traditional August recess in order to prevent it from contacting the people. The story that has shocked the press corps this week is only one example of the state of the Washington Zoo. In trying to win Republican votes for the crime bill, the Clinton White House promised two GOP House members in Massachusetts that if they voted for the bill, the White House would persuade the Boston Globe's distinguished political correspondent, Tom Oliphant, to write favorable columns about them. Oliphant, now horrified to find he was shopped around by the White House, in fact produced a column that glorified the one Republican who voted with the President and trashed the other who voted against him. 

Another obvious example of the incestuous relationships between the press corps and the party in power was Wednesday's Wall Street Journal "Capitol Journal" column by Gerald R. Seib. This is the same young man who last year celebrated Ed Rollins in his column for having been so shrewd as to bribe the black ministry of New Jersey into support of Christine Todd Whitman's gubernatorial effort. Now, Seib is denouncing Rep. Dick Armey [R-Tex.] for having told the Democrats on the House floor, during last week's crime bill debate, that "Your president is just not that important to us." In context, Armey was merely reacting to the Democrats, who had been accusing the Republicans of blocking action on the crime bill in order to deny their President a "victory." Armey, who is more concerned with legislative substance than any other Republican I know of in the House, subsequently explained his statement and changed it for the Record to: "Let me say, my friends on the Democratic side of the aisle, the President's fortunes are just not that important to us." Whereupon Seib accused Armey of hypocrisy!

How does this end? One at a time, Democrats who are alarmed at the palpable disintegration of their party's standing with the people are joining David Boren. Sen. Robert Byrd of West Virginia can be as partisan as any, but it now appears to be too much for him, as he begins to signal retreat from the anything-goes White House strategy. A few gestures of civility from the Republican leadership might be all it takes. During this weekend, I hope, cooler heads will prevail, and next week we may begin to see the return to deliberation and civility in the Washington Zoo.

Jude Wanniski

FED WATCH

Sorry, but we warned you. Today's market action, with the long bond back up to 7.52%, is erasing any hint of Tuesday's glow that saw the 30-year T-bond yield drop to 7.37% on the Fed's 50 basis point boost in fed funds and the discount rate. Any hope that the Fed was getting ahead of the curve of rising inflation expectations were quickly dashed by the rising gold price (it's back up to $382 today) and the dollar ducking back under 100 yen (at noon, it was fetching 98.5 yen). Somehow, the Fed continues to ignore these obvious market signals of an excess supply of dollars, and has thus far failed to keep the funds rate from trading below its new 4.75% target. Yesterday, with funds at 4 11/16%, the open market desk should have drained reserves. Instead, the desk conducted an add operation with four-day fixed-term system repos, which prevent banks from cashing in before expiration of the rp even if they don't need the reserves. It could soon get worse. There is now talk of the desk making a large outright purchase of securities before the end of the month, which will result in a permanent increase in the monetary base even amid all indications that the market is choking on available liquidity.

David Gitlitz