Notes on the Revolution XV Jude Wanniski June 15, 1995

CLINTON: By caving in on a Balanced Budget and Medicare cuts, President Clinton did what he had to do to have any chance of winning re-election. The White House now concedes the 105th Congress to the GOP, which is why liberal Democrats are beside themselves with anger at his surprise announcement. The President knew enough to make a clean break, without consulting the congressional troops in advance, which only would have muddied things up. As it is, the Clinton plan is to persuade the American people in 1996 that a Democratic President and a Republican Congress is the best of all possible worlds. Democratic leaders know that as soon as Clinton moved right, Republicans would be free to move further right. That’s fine with Clinton, as it enables him to make the argument that without a reasonable Democrat in the White House, the GOP in 1997 would go hog wild and tear down the New Deal.

BIPARTISANSHIP: Will the New Democratic Clinton go as far as to sign a bill later in the year cutting the capital gains tax, as called for in the Contract With America? There are arguments on both sides of this question, but our tendency is to think the President’s new bipartisan mood is aimed at winning the plaudits of the budget-balancing Old Bulls in the Senate. The last thing he will cave in on is a capital gains “tax cut for the rich.” If he did now, after caving in on Medicare, it might even encourage a serious challenge in the Democratic primaries. It’s pretty murky, but we guess he will try to sell his troops that this bipartisan mode will enable him to hold the line at middle-class tax cuts in this Congress, then go on to defeat a likely Dole candidacy next year as the GOP overplays its hand on spending cuts. He could always concede prospective indexation of capital gains as a further sign of his reasonableness. The Democratic platform could even include a tax reform in competition with an almost certain GOP flat tax. Of course, a Democratic flat tax would continue to cover investment income.

GINGRICH: Newt helped himself enormously by his Mr. Nice Guy routine with the President on Sunday. It will be much harder now for the electorate to think of him as a Bad Guy. The President also has a stake in maintaining Newt’s popularity as a bipartisan figure who is not running against him in 1996. Gingrich has in a sense chosen to elevate himself above the battle and remain in the public’s mind as the soul of Republican reasonableness. In this mode, he and Bill can both dance their way to re-election in 1996 and spend the rest of the century as co-Presidents. If Dole defeats Clinton, he would probably only serve one term anyway. Newt, who will be 52 on Saturday (also my birthday, at 59), would then be ready to go for it all in 2000. Or, as he is telling friends, drop out of politics when the revolution is a done deal and do something different.

DOLE AND BUCHANAN: In his syndicated column today, Robert Novak argues that Pat Buchanan has now leaped from the lower tier of Republican presidential candidates to the upper tier and in New Hampshire is “starting to look like the leading conservative alternative to front-running Sen. Robert J. Dole in this earliest-primary election state. Any possibility of Buchanan seriously contending for the nomination terrifies the Republican establishment, which began to panic when it witnessed his masterful performance June 4 on NBC’s Meet the Press. In his newsletter yesterday, Novak reported: “Dissatisfaction with Dole at the grass roots is not fully appreciated in Washington, and really is not susceptible to improvement. Having done everything just about as well as can be done up to now, Dole still has not -- and presumably, cannot -- overcome massive suspicion at the party’s grass roots that he will become ‘another Bush.’ He surely is the heavy favorite to be nominated, but this cannot be considered a nomination that is locked up.” 

FORBES: Novak’s current report on the incipient candidacy of Steve Forbes: “Will publisher Malcolm S. (Steve) Forbes really run? Nobody knows whether he will make this commitment, but he is the outsider who could fill the GOP’s obvious conservative vacuum. We find enormous skepticism about him in the political establishment, but that is to be expected by professional politicians.” Forbes flew off to Paris this morning with his family, for the annual Forbes balloon festival. He’ll be in Europe for a week, gathering assessments of business and political leaders on a variety of global issues, with a stop in London. New Jersey Network News came by our Morristown office today with a rumor out of Trenton that Steve was going to declare his candidacy in two weeks. Not so. In an interview, I said I talked to Steve last night and that while he is still very interested, if he did declare his candidacy I doubted if it would be before September. I am told The New Republic has gone to press with a 1700-word article about the possibility.

JAPAN TRADE SANCTIONS: The June 28 deadline draws nearer with little sign that an agreement can be reached between the Clinton administration and Tokyo. Republicans in Congress, obviously including Dole & Gingrich, see no percentage in criticizing the outrageous posture of the Clinton team, led by Special Trade Rep Mickey Kantor. The polls show public hostility to Japan, although the public is hardly aware that our government is trying to force the people of Japan to buy U.S. auto parts. I called Sen. Bill Bradley [D-NJ] yesterday, advised him he was the only voice of sanity on this issue among the elected officials of Washington, and urged him to make a last-ditch initiative to avoid a collision. There are several GOP senators, I think, who would argue at the level of parliamentarians that we should not be asking the Japanese government to order its auto industry to buy U.S. auto parts. The issue is one of sovereignty, which essentially requires Japan to agree to de facto colonial status. Bradley, the only member of Congress I know of who has spoken from the floor against the administration strategy, remains as concerned as we are that the precedent is unconscionable. It is the very essence of fascism, which is my word, not his. He’ll try something, though, we hope. 

HALIFAX SUMMIT: The G-7 economic summit in Canada seems to really think it can endorse a scheme to bail out IMF member nations that are unable to pay their debts. A bankruptcy slush fund of $28 billion has been suggested by the architect of this latest swindle, Harvard’s Jeffrey Sachs. The Evil Empire of IMF and its friends at the Big Banks found it distasteful to come to the U.S. Congress last year to bail out Mexico, after Mexico’s economy was savaged by the evil economic advice of Treasury Undersecretary Larry Summers and his pals. Summers and Sachs, of course, were the inside-outside team at the World Bank that demolished the Russian economy with “shock therapy.” Sadly, the GOP political leadership in Congress on these international banking issues is so disgraceful that the G-7 thinks it can get away with another swindle. Did you notice that Summers has been nominated by President Clinton to be Deputy Treasury Secretary? Which would put him in line to be Treasury Secretary when Bob Rubin is moved to the Fed Chairmanship next spring in time to grease the wheels of commerce for the elections. Somebody please pinch me. I must be dreaming all this.

CHRYSLER: Chrysler Corporation was Polyconomics’ first client when we hung out our shingle in July of 1978. Our first assignment by CEO John Riccardo was to develop a strategy for a government bailout, which we did gladly, as the government regulatory hammer had put Chrysler on the brink of bankruptcy. When Riccardo left, Chrysler drifted away from us in the Iacocca era. The company’s corporate economist, Wynn Bussmann, responded this week to our invitation to return, and we are thrilled to pieces. Welcome back!