Dole at a Crossroad Jude Wanniski March 15, 1996

If Steve Forbes had not entered the presidential race last year, Bob Dole still would be the party’s nominee, but without a ghost of a chance of winning the presidency in November. By filling the void in the growth wing of the GOP, Steve turned the campaign conversation toward that direction, which has bought for Dole the opportunity to have a meaningful chance of defeating President Clinton. Dole, of course, has no idea how much he owes Steve in this regard. He does not yet understand that he won the nomination only because the electorate decided that neither Steve nor Pat Buchanan, who in combination have been addressing the anxieties of ordinary people, are presidential. Both showed enough bad judgment in their respective campaigns to nullify any chance of winning outside the party establishment. For Pat, who has been around the track before, there was no excuse for the giddy recklessness he displayed after winning in New Hampshire. He will continue to play an important populist role in national politics, but he is too eccentric to be President. As for Steve, the voters eventually may forgive him for the shabby negative TV spots he purchased in North Carolina, but they won’t forget. To get to the White House, he would have to travel via Trenton, to prove he really isn’t mean at his core.

The biggest winner of all is Jack Kemp. Before his endorsement of Forbes, Jack was practically a lap dog of the party establishment. Since his crushing defeat in his 1988 bid for the nomination, Jack has been the passive leader of the GOP’s growth wing. Again and again he was co-opted by the party bosses. First, he was given a meaningless second-tier Cabinet post in the Bush administration, from which he had a good view of the President throwing in the towel on his promise to cut the capital gains tax, then breaking his read-my-lips pledge on taxes. Instead of quitting to run for the Senate in California, he remained on the President’s lap, dutifully campaigning in 1992 on a Bush pledge to cut the capital gains tax if re-elected. His reward: A prime-time speech slot at the GOP national convention in Houston. A year ago, as soon as the party bosses got wind of a possible Forbes campaign, they concocted the idea of a “tax commission,” which Jack would head (and finance), in order to keep him under control. In finally bolting last week, endorsing Steve the day after Dole swept the seven primaries of Junior Super Tuesday, Jack has re-established himself as the active leader of the Reaganauts, a man once again willing to throw the long ball even if it doesn’t result in a score. A week ago, Jack may have been wondering if he might be offered an ambassadorship to Palookaville in a Dole administration. Today, he is vice-presidential material, whether Dole likes that idea or not.

Remember, the political idea being expressed a year ago was that because the GOP interpreted its 1994 mandate as a call to budget-balancing austerity, the electorate would never give the White House to the GOP if its nominee was also a root-canal austerian. Reagan Democrats would stick with Clinton if the GOP picked Bob Dole. Had Kemp decided to run, he either would have won, or forced himself on the ticket with Dole, which might have been enough to assure the electorate that Dole and Newt Gingrich would not shut down the school lunch program and throw widows and orphans into the snow. This remains the central political problem for the GOP in 1996. What does the GOP establishment do to pacify and win over the Forbes voters, the Buchanan voters and the Perot voters? The people on the bottom of the socio-economic pyramid now observe that both Bill Clinton and Bob Dole are in the grip of the corporatists. National polls indicate 47% of the electorate are unhappy with Dole and Clinton. They will force a third party into play this year unless Dole makes the right choices at this crossroad. In late 1994, I told Dole that presidential leadership does not require a vision on how to get through the Indian country to the promised land. It only requires that you want to get to the promised land badly enough, and are wise in your selection of those sent to scout ahead. Does Dole see that the direction lies somewhere between Forbes and Buchanan? 

The first litmus test for Dole will be on the debt-limit bill that will be sent to President Clinton next week. At the moment, it does not have attached a 50% exclusion on capital gains taxation. Newt Gingrich, whose confidence has been battered by the ignominious budget defeat he suffered at the hands of the Democrats in December, is too risk-averse to push capgains. It is up to Dole, now clearly the party leader, to attach capgains next week. Kemp, who has conveyed the idea to Dole via a third party, says Dole need only attach a four-year capgains cut, which is revenue neutral. To make it even easier, Dole could advise the President that if he vetoes the bill, he will send it back without capgains relief. This would put the onus on the President for having opposed a free tax cut, one that is designed explicitly to increase capital formation and drive up the real wages of ordinary Americans. Today we are told there will be a budget balancing line-item veto attached to the debt-limit, because Dole wants it done. How about capgains, Bob?

The hostility of the corporatists at the top of the pyramid to a lower capgains tax is intense. They want wages to remain low! If wages rise as capital is in surplus and labor is dear, the anxieties that Forbes and Buchanan find -- on a Main Street of two breadwinners per family -- would be relieved. The kind of dynamic change this would yield for the U.S. economy would be anathema to the multinationals, who wish to keep labor in surplus and wages down in order to compete in the global market. In yesterday’s Financial Times, Samuel Brittan was quick to connect last Friday’s Wall Street plunge with the Fed’s role in preventing growth in order to satisfy the corporatists. His op-ed, “Marx Should Be Living Now,” opens thusly: “Karl Marx would have given a portion of his anatomy for the accurate headline in last Saturday’s Financial Times: ‘US markets in turmoil after sharp rise in jobs.’ It would have supported his belief that good news for the workers was bad news for capitalists, and that the system could survive only with a ‘reserve army of unemployed.’” 

No kidding, folks. This is what it’s all about. The Big Guys have the Fed under control, pledged to keep the economy from growing faster than 2.5% -- on the argument that too many people working is inflationary. Alan Greenspan knows better, but he just works there. He must bow down to the Non-Accelerating Inflation Rate of Unemployment (NAIRU) principle, which academic economists, left and right, insist be maintained. (That means you, Herb Stein.) If we were to nail down the dollar with gold and adopt even a feeble version of the Forbes/Armey flat tax, there would be so much entrepreneurial activity across the land that the current strike at General Motors would be over wages, not job security. The reserve army of unemployed would disappear. Capital would be so plentiful that bankers would be fighting for the business of black entrepreneurs.

Bob? Are you out there, Bob? Do you really want to be President? It can be done, and you can thank Steve for pointing you in the right direction. It’s nice to see Senator Robert Bennett of Utah at your side, a solid supply-side Indian scout. It would be nice to see Wayne Angell there too. Forget about Colin Powell as your running mate, Bob. He would be a lapdog as Veep, an enormous asset as Secretary of State. Kemp’s your man. He would get you to the promised land. You have a while to think about that one, though. Next week, Bob, do capital gains, and we will have our first clue on which road you intend to travel.