Political Odds and Ends Jude Wanniski September 8, 1999

TAX BILL: It will take another few days before GOP congressional leaders decide what to do after they send the tax bill passed before the August recess to President Clinton for his veto. Senate Majority Leader Trent Lott [R-MS] is leaning away from a compromise negotiation with the Democrats, afraid a second bill would have to be terrible in order to get Clinton's signature. He would wrap up the appropriation bills, cover any remaining loose ends with a continuing resolution so the government is not shut down, and call it a day. If this is the case, I'd expect an angry rebellion against Lott's continued leadership from conservative tax-cutters who would correctly blame him for mishandling the budget issue these last two years. Sen. Don Nickles [R-OK], the Majority Whip who has grumbled about Lott's passivity, would be the beneficiary. Lott needs a second tax bill to go to the President that is acceptable to the growth wing of the party, including a cut in the capital gains tax. If the President vetoes a second bill with more bipartisan support, Lott will have re-established his leadership, with Vice President Al Gore stuck with two vetoes of tax cuts. Lott could fend off those Senators who prefer social engineering in their tax cuts to economic growth by arguing for growth insurance when Y2K hits.

Y2K: Sen. Robert Bennett [R-UT], chairman of the Senate Select Committee on Y2K and a good friend, has agreed to be the Polyconomics autumn dinner guest, probably in November. We are working on a date for the NYC annual event. We still are concerned about the global financial system, no matter how much happy talk we hear from government agencies about compliance. As we get closer to Y2K, we will see more institutions issuing statements to cover their behinds, as the Pentagon did yesterday in expressing concern for our overseas troops, and the Energy Department saying 12 electric utilities are not yet compliant. The Federal Reserve has made a show of announcing a "special credit facility" will be opened to the banks, with loans 1½ points above the funds rate to supply special Y2K liquidity needs. This is a meaningless gesture as long as the overnight funds rate remains the official target instead of gold (which is what Jack Kemp and former Vice President Dan Quayle in separate letters asked the President to call upon the Fed to do). If there is an increase in the demand for bank reserves, liquidity going out via the "facility" would be sterilized by the open-market desk to maintain the funds rate target. If there is a decline in the demand for liquidity, nobody will show up at the "facility" and the funds rate would remain constant even as the dollar gold price climbed. The national press corps seems to be asleep on the issue. The Wall Street Journal editorial page has yet to even mention the Kemp/Quayle letters and the Clinton response.

BILL BRADLEY: The former New Jersey Senator and New York Knick who today formally announced a run for the Democratic presidential nomination has not yet found a knock-out punch to deliver against Vice President Al Gore. But there are plenty out there, and if Bradley finds one, he will be the party nominee. As I said on our 9/1 conference call a week ago, I would vote for him over George W. Bush, although I would vote Bush over Gore. The country and the world simply needs more reform of its official institutions than we could get from the two establishment candidates. Bradley is clearly a tax reformer who could credibly unveil a commitment to a simplified tax system. He is not a gold/dollar advocate, but has always been closer to the fixed-rate currency school of MIT's Charles Kindleberger than to the floaters and devaluationists that run the Democrat establishment -- and own Al Gore.

QUAYLE: I spent three days last week in Phoenix with the Quayle campaign staff and Dan & Marilyn, at his request, confirming my sense that he is clearly the best candidate in the field. He simply is in need of being seen more by ordinary voters as they now begin to take the election seriously. To do that, he must soon take some of the bold steps he has been pondering, which would get sufficient attention from the electorate that the press corps would be forced to refocus on his chances. At the moment he is being counted dead by the cognescenti, but I still think he could win. Kemp -- who has become as cool to the other possibilities as I have been all year -- co-hosted one fundraiser for Quayle in Vail last month and has agreed to do a major fundraising event for him later in the fall. Kemp was offered the national chairmanship of the Quayle campaign in June as Quayle looks up to him as the GOP leader whose reforms first attracted him as a freshman congressman from Indiana in 1977. Throughout their stay in Washington, Marilyn Quayle attended Joanne Kemp's Friday prayer lunches for political wives. One interesting note: When Bradley was criticized for attending the Rev. Al Sharpton's Harlem Town Meeting a few weeks ago, both Quayle and his wife told me they would happily accept an invitation, which Rep. Charlie Rangel says he would recommend if a date could be worked out. Quayle really does not worry about polls, focus groups, or political correctness.

EAST TIMOR: We have been rooting for East Timor independence at Polyconomics, largely because former Indonesian President Suharto did such a poor job of winning over the mostly Catholic population in the quarter century since it was forcibly grafted on to the archipelago. The referendum for independence might have gone peacefully if it were not for the Asian financial crisis, which put an end to Indonesia's prosperity. That's because the largely Islamic armed forces of Indonesia and the East Timor militias earn a sizeable increment of their livelihoods in government enterprises, which come to an end with independence. The slaughter of innocents and the exodus of a third of the 600,000 people to West Timor to escape the slaughter is no doubt meant to warn other pieces of the archipelago to end their own independence movements. Insofar as the Asian financial crisis in general and Indonesia in particular were the results of the bungling by the IMF and U.S. Treasury, with the Fed's monetary deflation kicking it off, we can see how pitiful western leadership has been everywhere, not only in the Balkans. Of course, Fed Chairman Alan Greenspan would accept no responsibility for the colossal errors he made in the dollar deflation. In his weekend column, Robert Novak notes that a group of Greenspan's friends are proposing a Nobel Prize in economic "science" for the 73-year-old Fed chairman.

NEW JERSEY SENATE: Governor Christie Whitman's decision to remain as governor and not get into the race for the Senate seat opened up by the retirement of Frank Lautenberg practically gives the seat to the Democrats, especially if Bill Bradley is the Democratic presidential nominee and gets a big turnout. All over Washington and New Jersey we hear reports of people saying it is a shame Steve Forbes insists on a futile campaign for the GOP presidential nomination when he could win the seat and provide a supply-side anchor in the Senate where there is none now. Forbes' campaign manager, Bill Dal Col, argues against any suggestion that Forbes run for any office other than the top one. Dal Col, a New Yorker from the Al D'Amato school of hardball politics, no doubt thinks a repeat of the negative tv spots he conjured for Forbes against Dole in 1996 will work against Bush in 2000. Politics is such fun.