Presidential Counsel

Real ideas for "New Democrats"


Privilege and Poverty

Dear President Clinton:

I am often asked by my libertarian friends what they should expect from your administration. I sometimes jokingly say you don't have a libertarian bone in your body. Actually, on several issues—abortion, the First Amendment, and immigration—we Democrats are more libertarian than the Republicans. Furthermore, there are looming issues on which Democrats and libertarians should be in lockstep.

For example, both Democrats and libertarians are opposed to handouts for the well-to-do and powerful, especially corporate interests that thrive under government protection and subsidies. For Democrats, these arrangements stand in the way of social justice for the common guy. For libertarians, corporate welfare violates our belief in unfettered markets and our commitment to minimal government. The motives may be different, but this is surely one area of common ground.

Similarly, both Democrats and libertarians believe in empowering the poor by respecting their capacities for managing their own lives. This was the motivating spirit of the War on Poverty and the Great Society. It has also been an essential element of many libertarian tracts and tomes. Both sides have viewed the alternative, bureaucratic paternalism, as fostering dependency and undermining the basic dignity deserved by all in a free society.

These two areas of agreement provide a simple but powerful set of themes for your first term as president. In the name of balancing the budget and attacking privilege (and predominantly Republican privilege at that), you should lead a full-scale assault on the many subsidies and protections that are now viewed as pseudo-entitlements by many business executives. Under the banner of Democratic tradition and concern for the downtrodden, you should push for the elimination of social-welfare programs that primarily support bureaucrats and, as an alternative, advocate giving low-income individuals greater latitude in deciding how to use public assistance.

Under the first theme, the choices for specific targets are numerous. For starters, why not take on farm subsidies? Each year, we hand out $10 billion to $20 billion in price supports and other aid to a small and relatively affluent group of farmers. The average full-time farmer is 10 times wealthier than the average householder, with roughly $700,000 in assets. Farmers receive almost 45 cents in federal support for every dollar earned. The 30,000 largest operators receive, on an average, over $50,000 per year. And only $1.00 out of every $10 goes to needy farmers.

When the farm lobby starts to howl over your proposed cuts, just keep in mind that 63 percent of the agriculturally dependent counties voted for George Bush. There is not much political downside left.

Another area of Republican welfare is federal deposit insurance. Because of past commitments, $100 billion will be paid out of the federal treasury this year to predominantly upper-income individuals. It may be too radical to get rid of the FDIC, but why not institute a form of co-insurance so that depositors have some incentive to investigate the soundness of their financial institutions before they open an account? If only 90 cents of every dollar were insured by the government, there would be enough at stake to make many large depositors more prudent and vigilant in selecting their banks.

Empowering the poor may be a tougher goal for a Democrat to pursue than cutting business subsidies, because so many activists within our party have a vested interest in paternalism. Teachers, public-employee unions, social-service agencies, and the plethora of consultants and vendors that support our welfare bureaucracy will all be afraid of losing their jobs.

Nonetheless, there are opportunities for making significant inroads. For example, why not support the conversion of food stamps into cash? Poor families could then decide how much of their very limited resources should go to food and how much should be allocated to other needs, such as clothes, housing, and medical care. In taking this step, you would also be dismantling a huge bureaucracy in the Department of Agriculture that has become, along with the food industry, the main supporter of this cumbersome program. We already have a full complement of welfare experts at the Department of Health and Human Services. If we cash out food stamps and funnel the recipients' share of the money through HHS, there will be no reason for keeping a back-up crew on duty over at the Department of Agriculture.

You can also pursue empowerment in education. We libertarians are great fans of vouchers. For a Democrat, however, full freedom of choice in education is politically impossible right now. Vouchers are anathema to the teachers' unions, one of your strongest political supporters. They will oppose any educational choice program that allows most students to opt out of public, union-controlled schools. But why not advocate choice for poor students on the ground that it's the only way to address their specific educational needs? Under Title I of the Elementary and Secondary Education Act, schools already receive federal support based on the number of low-income students they serve. You should propose that Title I recipients have the right to use their federal grant and their local per-capita share at any accredited school. In Chicago, that would mean a stipend of more than $6,000 for every poor student. No one could accuse this plan of elitism, and middle-class parents will probably soon want the same right.

These two themes—eliminating rich people's welfare and empowering the poor—are politically potent for a "New Democrat" who wants to find a new path for his party. In the hands of an experienced politician who likes to sell policy, these themes could be electoral gold. To accomplish this agenda, however, you will need more than popular support. The workings of our political process make bold changes in policy almost impossible. Your friends in Congress may seem supportive now. But if you have any hope of making substantive changes in these two areas, you will find a hostile crowd on the Hill determined to protect the special interests that depend on government.

To overcome that resistance, you will need new tools. The best means for overcoming legislative intransigence is the line-item veto. Libertarians ought to be avid supporters of this procedural reform, because it can be used only to stop government spending. If you hope to reduce the budget deficit or tackle any other big challenge, you should make this issue a priority during the early days of your term. Without this lever to force change, you could spend the next four years facing thousands of small fights and never get the chance to address the major problems facing our country.

So libertarians and Democrats do have something in common. We may differ in our views on the positive uses of government. But we share some fundamental values about the misuse of government and public resources. Defunding Republican voters and unshackling Democratic constituents is both good politics and good government.

Richard J. Dennis, a trustee of the Reason Foundation, is a managing trustee of the Democratic National Committee.

Humble Homes

The Clinton administration will be under strong pressure to revive the federal housing policy that prevailed before the Reagan administration: subsidizing new construction and renovation of rental complexes for the poor. Advocates of this policy argue that the withdrawal of federal subsidies during the 1980s created an "affordable housing crisis" that exacerbated homelessness. This mantra is a recipe for Democratic frustration. Because of the profound constraints imposed by the federal deficit and public doubts about the manageability of housing complexes for the poor (which make finding sites nearly impossible), a new era of federally subsidized housing construction is unlikely.

Are we then stuck in a housing gridlock, with Democrats clinging to a vision that cannot be realized and the poor consigned to deteriorating public housing or worse? Not necessarily. There is an alternative that combines the traditional Democratic goal of housing the poor with the Republican emphasis on property ownership: private construction of modest, new homes—either small, single-family residences or multifamily houses with two to four units—in poor neighborhoods. These areas include large amounts of publicly owned land that can provide a costless subsidy for builders, drawing them into the lower end of the housing market.

This proposal, examples of which are already working in a number of cities, is not simply a different means of producing affordable housing. It also holds out the possibility of repairing the social structure in poor neighborhoods while avoiding long-term public subsidy and management. It can build on Jack Kemp's tenant-ownership experiments with public housing, with which Secretary of Housing and Urban Development Henry Cisneros is said to be sympathetic. And it offers Cisneros a chance to "reinvent" HUD without expensive new initiatives.

The "small houses in poor neighborhoods" notion comes from history. In the pre-New Deal era, private builders housed the poor. The conventional discussion of that period has emphasized the low quality of the housing that poor people could then afford—for example, the tenements of New York's Lower East Side. Housing reformers drew dire conclusions: They asserted that half to two-thirds of all families could not afford what the market could build. In reality, private builders devised a wide range of housing forms tailored to those of modest means. Often they were owner-occupied multifamily housing: brick "four-plexes" in Chicago, "three-deckers" in Boston, walk-ups in Brooklyn, row homes in Philadephia and Baltimore, bungalows in California. Traditionally, one bought or rented a small home, often in a multifamily building, and worked one's way up to neighborhoods of larger homes on larger lots.

The growth of public and subsidized housing, along with regulations (parking and lot-size requirements, for instance), undermined the options that builders provided for the poor. Tenants who might have rented one floor of a two-family house were offered what seemed at first to be the better accommodations of housing projects. Small landlords could not compete. By the time the problems of public housing became clear, the small builder had been driven out of poorer neighborhoods.

But now it's possible to lure the small builder back and provide a new generation of poor home buyers a chance to climb the housing ladder by providing rungs they can reach. The way has already been shown by organizations such as the New York City Housing Partnership, which acquires vacant lots in the Bronx and Brooklyn at no cost from the city and arranges for private builders to erect two-and three-family homes on them. The partnership has been midwife to the construction of 4,500 units since 1986, with 8,500 more planned. Two-family homes sell for $140,000—affordable, by New York standards. With modest interest-rate subsidies from the state, they are within the reach of families earning as little as $30,000 a year.

Also in New York, a nonprofit consortium of inner-city churches has financed construction of 2,300 Nehemiah Plan Homes—small, single-family row houses. These homes, 600 of which have gone up in the South Bronx, cost a mere $59,000—within reach of families earning $20,000 a year. Similar efforts, on a smaller scale, have been undertaken in Houston, New Haven, Albany, and Orange, New Jersey.

The magic of these projects lies not only in producing inexpensive units with little or no public construction subsidy and no public operating costs. Although these homes will not house the very poorest, they will indirectly open up space for them. Virtually all buyers of Nehemiah homes and most buyers of New York City Partnership homes come directly from public housing. Thus public-housing units now occupied by blue-collar families are made available to those most in need. Housing for the poor is in effect created, without hard-to-pass federal expenditures. Instead, the existing tax deduction for mortgage interest and property taxes, passed directly on to lower-income homeowners, acts as a catalyst.

The virtues of small houses in poor neighborhoods go beyond the construction of housing itself. Owner-occupied multifamily housing promises a restoration of the social structure of poor neighborhoods: Small landlords will carefully select tenants, enforcing social standards in ways that housing authorities do not. At the same time, lower-income homeowners will accumulate equity and climb up the socioeconomic ladder. Tenants will see the value of ownership and aspire to it themselves. It is true that upward mobility will not occur without employment. But because a large part of net worth reflects the value of property, it is much harder for the working poor to make their way toward the middle class without owning the homes in which they live.

Some hidden assumptions should be made plain. First, although there is a great deal of open land in many older inner-city neighborhoods, encouraging new construction in poor areas may require some demolition of abandoned or dilapidated homes under eminent-domain powers. Second, we must continue to search for ways to make public housing manageable, especially as the most ambitious tenants are drawn into home ownership. Tenant ownership, coupled with management by private contractors, is one promising approach. At the same time, cities should encourage new, private housing forms for those at public-housing income levels, such as the single-room occupancy hotels of San Diego and Atlanta. These SROs benefit from a modest mortgage-insurance program devised by Kemp while he was at HUD.

The vision of a housing ladder reflects another important assumption: that neighborhoods will inevitably be stratified along income lines. This contrasts with the belief that public policy can somehow disperse the poor among more-affluent neighborhoods, thereby improving the life prospects of the poor and eliminating ghettos at the same time. This idea has essentially gone nowhere, even in the one state (New Jersey) where a court decision has blessed it. We must accept that residence in either a more—or less—affluent neighborhood is part of the incentive structure by which individuals lead their lives in a free-market system. (We should still seek to ensure that key public goods, such as education, are available to the poor as well as the affluent.)

Expanded home ownership among the working class will also require a new kind of HUD. Rather than being a source of subsidies, the new HUD can be a source of ideas—identifying successful housing designs and financing schemes in one city and letting other cities know about them; identifying regulatory barriers to construction in low-income neighborhoods and suggesting alternative approaches; using its bully pulpit to advocate home ownership for poorer families. Housing reform—the substitution of government-owned or significantly subsidized housing for the efforts of private builders—has reached a dead end. It is time for "unreform," an era in which government helps pave the way to private ownership rather than trying to take its place.

Howard Husock, a registered Democrat, is director of the Case Program at Harvard University's John F. Kennedy School of Government.

Establish Justice

Thanks to the criminal-justice policies of the Reagan-Bush years, 20-year-old Charisse Richardson will spend nearly 10 years in federal prison. Her crime? Telling a confidential informant where he could find her boyfriend so the two could complete an LSD sale. She was 18 years old at the time of the offense and a senior in high school. Her boyfriend, who was also arrested, squealed on everybody he knew and got only a four-year sentence. Are Americans truly safer because Charisse Richardson is behind bars?

Ronald Reagan, George Bush, and members of Congress seem to think so. Since 1980, the number of inmates in federal prisons has gone up by 400 percent. Today, nearly 60 percent of federal inmates are serving time for drug offenses, up from 25 percent in 1980. Most of these inmates are nonviolent first offenders like Charisse who will lose 5, 10, or 20 years of their lives. It's time for a change in sentencing policies.

President Clinton and the new Congress can bring this senseless incarceration of American citizens to a halt by repealing mandatory minimum sentences. This bold move would draw rapid fire from Republican drug warriors and cowardly Democrats, who would rather feed the public hysteria about drugs than face the reality of failed drug policies. The president must be ready to fight with an arsenal of statistics, reason, and guts.

He can start by citing the irrational manner in which mandatory sentences were established. Congress created a Sentencing Commission in 1984 to establish sentencing guidelines for all crimes. Two years later, Congress blatantly ignored the commission and decided that only Congress could be trusted to determine the appropriate sentences for drug offenders. What followed was a congressional betting war to see which members could be toughest. Much like a poker game, members of Congress upped the ante until drug sentences exceeded those for most other crimes. As one congressman later noted, if someone had suggested the death penalty, another member would have tried to top it.

Clinton must stress that mandatory sentences undermine a traditional principle of justice in this country—that the punishment should fit the crime. These mandatory sentences, based solely on the type of drug and its weight, have left justice out of the equation altogether. Usually trusted to give an appropriate sentence to each defendant, judges are forced in federal drug cases to rely on a chart and deliver the disproportionate sentences that Congress has dictated. The legislators who in effect impose the sentence never meet the defendant and know nothing about his case, background, or likelihood of rehabilitation.

The president can call on federal judges, including conservatives appointed by Reagan and Bush, to explain what it's like to send a nonviolent, 81-year-old man to prison for eight years, without parole, for a first offense. Because of mandatory minimums, judges can no longer even discriminate between real drug kingpins and minor players. Indeed, since "cooperating" is the only way to get your sentence reduced under the current law, kingpins actually have an advantage: They have more information to offer. A major smuggler or distributor can cut a deal with the prosecutor and do less time than a low-level mule.

Clinton can also trot out the victims of mandatory minimum sentences to give the law's consequences a human face. Thousands of ordinary citizens like Charisse Richardson are sitting in prison cells, wasting their skills, their potential, and their lives. Clinton may even be able to provide Congress with some examples of not-so-ordinary citizens who faced mandatory minimum sentences. In two separate cases, the sons of Rep. James Clyburn (D–S.C.) and Secretary of Education Dick Riley were recently arrested on drug charges.

The president can also play the race card. It is difficult for Congress to prove that mandatory minimum sentences are not racially discriminatory. Sentences for crack cocaine, used disproportionately by blacks, are 100 times greater than those for cocaine powder, used mainly by whites. In Minnesota, where the state Supreme Court found a similar disparity in state law unconstitutional in 1991, testimony indicated that 97 percent of defendants charged with crack possession were black, while 80 percent of defendants charged with possession of cocaine hydrochloride were white.

Moreover, the U.S. Sentencing Commission found that mandatory minimum sentences have resulted in longer prison terms for black and Hispanic defendants than for whites who commit comparable crimes. This increased racial disparity in sentencing is the opposite of what Congress intended when it passed these laws.

Clinton can also score points with a solid economic argument against mandatory sentences. The 42,000 federal inmates serving time for drug offenses cost taxpayers about $840 million per year to house, clothe, and feed. Add to that the lost tax revenue from former taxpaying citizens who are now incarcerated and the cost of supporting inmates' families who now receive public assistance. The president should also remember to factor in the cost of building the new prisons that are necessary to keep up with the skyrocketing prison population. The National Institute of Justice predicted that in 1992 the United States would need to spend $5.2 billion on prison construction to keep up with the current rate of incarceration. Since the prison population is expected to double within the next decade, we'll be throwing money into a black hole for many years to come. All told, the repeal of mandatory sentences will allow Clinton to slash several billion dollars from the budget deficit.

Getting rid of mandatory minimum sentences is a tall order for the new president, but he's the right person for the job. Bill Clinton's half-brother, Roger, spent 15 months in federal prison 10 years ago for a cocaine conviction. Under today's laws, Roger would have spent at least five years behind bars, and possibly as long as eight years, depending on his plea agreement. It's doubtful that the president believes his brother would have benefited from an additional four to seven years behind bars. The time has come for President Clinton, with his unique personal perspective on sentencing, to build a coalition for sentencing reform.

The legislative vehicle is already waiting for him. Last year, Rep. Don Edwards (D–Calif.) introduced a bill to repeal all mandatory minimum sentences. Key Democratic members of the House Judiciary Committee have made it clear they won't touch this bill unless the president leads the way.

During the campaign, Clinton told the American Bar Association that "we need to make sure that people who belong in prison are sent there and that people who do not need to be there are not taking up expensive space." Now is his chance to make that happen.

Julie Stewart is president of Families Against Mandatory Minimums in Washington, D.C.

Green Guidelines

The Clinton administration came to power on the promise of long-term economic revitalization. During the campaign, the press reported ad nauseum the slogan displayed on the wall of Clinton's headquarters: "It's the economy, stupid." Throughout the presidential race, the economy outweighed all other concerns, including the environment. To counterbalance the economic thrust of the debate and mollify his critics, Clinton chose Sen. Albert Gore, a darling of the environmental movement, as his running mate. These two individuals, President Clinton and Vice President Gore, represent two competing forces that have yet to be harmonized.

The political and popular response has been to deny that the tension exists. President Clinton and others have simply asserted that the conflict between jobs and the environment is "a false choice." But there are very real differences between Clinton's economic pragmatism and Gore's apocalyptic environmentalism.

In his popular book Earth in the Balance, Gore concludes: "I have come to believe that we must take bold and unequivocal action: we must make the rescue of the environment the central organizing principle for civilization." Among other things, this bold action requires a reassessment of individual rights: "The emphasis on the rights of the individual must be accompanied by a deeper understanding of the responsibilities to the community that every individual must accept if the community is to have an organizing principle at all."

Gore draws an analogy between the global environmental crisis and the 20th century's hot and cold wars with Nazi Germany and communist totalitarianism. Both crises are characterized by the "real enemy" of "dysfunctional thinking." Then the thinking was totalitarianism; today it is "ravenous, insatiable consumption, its dogma, and the mechanisms by which ever more resources are obtained." For the United States, Gore calls for nothing short of a reinterpretation under the Constitution of "the meaning of freedom…in the context of new knowledge, changed circumstances, and accumulated experience."

The global crisis calls for a collaborative effort like that undertaken to contain communist totalitarianism, only bigger: "a Global Marshall Plan." The Gore Plan, to be funded by the United States, Britain, Japan, Europe, and the wealthy, oil-producing states, has five strategic goals: 1) stabilization of the world population; 2) rapid creation in the developed world of "environmentally appropriate technologies" for quick transfer to all nations; 3) a new system of national accounts that "assigns appropriate values to the ecological consequences of…choices in the marketplace"; 4) a new set of international agreements; and 5) global environmental education. An additional goal is "establishment of…social and political conditions most conducive to the emergence of sustainable societies—social justice…human rights…and greater political freedom, participation, and accountability."

The environmental-technology centerpiece of the Gore Plan is a grand, government-led "Strategic Environment Initiative" to "phase out these older inappropriate technologies and at the same time develop and disseminate a new generation of sophisticated and environmentally benign substitutes." In effect, Gore advocates a transition from the "military-industrial complex" to the "environmental-industrial complex." The SEI would concentrate on agriculture, forestry, energy conservation, waste reduction, and recycling. The policies to address these areas would include: taxes, research and development, government purchasing, "the promise of large profits," technology assessment procedures, export controls, and intellectual-property protection.

Beyond Gore's environmental vision and Clinton's subordination of environmental concerns to economic concerns, the new administration has not articulated an integrated economic and environmental policy. Merely repeating the popular mantras is not enough, and treating the Constitution and our history of individual rights lightly is dangerous and shortsighted. The administration should remember that the United States has sustained its development under the common law and a Constitution that created three co-equal branches of government, including a strong, independent judiciary that protects individual rights.

Given the common-law tradition and a Constitution constructed to protect individual rights, how can the twin objectives of economic recovery and environmental protection be met? First of all, the Clinton administration should eschew an open-ended, unchecked, and unbalanced list of environmental imperatives. Human, financial, and natural resources are all limited, and it makes no sense to waste any of them. These resources go together; environmental concerns do not trump everything else. The president should renounce the "precautionary principle," the idea that action should be taken to curb alleged environmental threats despite scientific uncertainty. Most importantly, the Clinton administration should institutionalize the use of risk assessment, including cost-benefit analysis, to set environmental priorities.

For more than two decades, Congress and the president have launched ambitious environmental programs without weighing costs against benefits. For example, the hazardous-waste remediation programs (including Superfund), created in the emotional aftermath of the Love Canal evacuation, are expected to cost between $440 billion and $1 trillion (in 1990 dollars) during the next 20 to 30 years. Here is a debacle that could dwarf the savings-and-loan scandal by a factor of two or three or more. Clinton's proposed $31-billion economic stimulus package is chump change by comparison. How do the dubious benefits of Superfund measure up against other possible uses, public or private, for all that money?

We cannot afford to continue moving from one overblown "crisis" to another. Congress has to stop legislating on the basis of the nightly news. Under current laws, the annual burden of fully implementing environmental regulations will increase by more than 60 percent during the 1990s, to $185 billion in 1990 dollars, or more than 2 percent of GNP. These regulations include measures, such as the 1990 air-toxin provisions of the Clean Air Act, whose costs clearly outweigh their benefits.

Means assessment is just as important as goal assessment. Despite a large and growing body of research showing the advantages of a more flexible, market-based approach, legislators and activists continue to favor command-and-control regulation. The ideal of efficiency may not be inspiring, but the means chosen to achieve environmental goals say a lot about our willingness to squander human, financial, and natural resources in the attempt to appear green.

Environmental groups maintain membership and revenues by focusing public attention on emotionally charged problems and simple solutions. This leads them to ignore scientific uncertainty (for example, regarding links between cancer and toxic emissions, acid rain and dead trees, carbon dioxide and climate change) and to emphasize mandates for specific technologies (for example, scrubbers for coal-fired power plants, catalytic converters for cars). They are fond of bans and quotas (such as "a 10-million-ton reduction by the year 2000"). Market-based instruments are more complicated and therefore harder to communicate. Worst of all, they make trade-offs explicit, and they internalize costs, thereby allaying the guilt that drives a good cause.

But the Clinton administration has more room to maneuver than the environmental groups do. It should consider all available means, whether private or government, market-based or command-and-control, to achieve goals at the lowest possible cost. Such means include: improvement of tort and nuisance law; removal of government subsidies for commodities; use of allowance trading programs; taxes, investment tax credits, fees and rebates, or deposits and refunds; and, as a last resort, government-set technology standards.

Candidate Clinton favored market-based incentives over bureaucratic, command-and-control methods to achieve environmental goals. He supported an "expanding entrepreneurial economy." If President Clinton respects the needs and the responsibilities of the business community with more than empty platitudes, he should commit his administration to decentralized and efficient means of attaining scientifically sound environmental goals. As he has said, "There is not a program in government for every problem. And if we really want to use government to help people, we've got to make it work again."

Lynn L. Schloesser was counsel to the Senate Environment Committee and an adviser to the Clinton campaign.

Johnson or Jefferson?

Like most American presidencies, the Clinton administration is a coalition government. Blending the various strains of Democrats was essential for victory, first at the New York convention and then in November. The future of the administration will depend upon which elements of the party win the upcoming struggle for power.

For those who care about individual rights and capitalism, the stakes in this battle cannot be underestimated. The conflict now brewing in Washington touches on the very purposes and nature of government policy. It will decide whether the Democratic Party returns to its Jeffersonian roots or continues its 50-year infatuation with social democracy.

Although their interest in governmental solutions is not likely to sit well with libertarians, key neo-Jeffersonian "New Democrats" such as David Osborne, Elaine Kamarck, and Alice Rivlin think the central government's role is to lead individuals and communities to ever greater self-reliance. The New Democrats, clustered largely at the Democratic Leadership Conference's Progressive Policy Institute, prefer market-based solutions and greater discretion for local government. As chairman of the DLC, the umbrella organization that opposes the social-democratic wing of the party, Clinton initially appeared to back much of the neo-Jeffersonian agenda—welfare reform, public-school choice, the Mexico Free Trade Agreement.

Whether Clinton will pursue this agenda, however, has become open to question in recent months, especially during the appointment process. Powerful opposing forces—including traditional "Beltway bandits," Wall Street corporatists, and a growing cluster of organizations anxious to secure special rights for a wide range of groups—have gained the president's ear. Although they differ in priorities, all these forces favor centralized solutions and want to expand government, often along European social-democratic lines, to protect their interests. They seek not an entrepreneurial economy based on individual responsibility but a restoration of the Great Society, often with economic and social-engineering ambitions so broad they would make Lyndon Johnson blush.

The policy priorities of these groups would be particularly damaging to smaller companies. Secretary of Labor Robert Reich's fanciful notion of imposing training mandates on employers, at a cost of roughly 1.5 percent of payroll, makes sense only in a classroom at Harvard. It would rob innovative firms of the essential flexibility to make choices about how and when to train their employees. Similar ideas about using government to shape business to the liking of Harvard dons promise a raft of new taxes and regulations on everything from quotas to health care.

Still, there are reasons to believe that the neo-Jeffersonians may yet prevail. For one thing, a large number of business owners, many of them entrepreneurs, have rallied around the Clinton presidency. Furthermore, as a former governor of a small, largely non-union Southern state, Clinton—perhaps more than any Democratic official in this century—recognizes that jobs and wealth come from the private sector. As a politician, he also understands that there are more small-business owners than union members.

The emerging entrepreneurial constituency within the Democratic Party already likes parts of Clinton's program, such as investment tax credits, reductions in the capital-gains tax for small and new companies, and a higher priority on opening world markets for American exporters. The entrepreneurs can become a powerful force pushing for an emphasis on new capital and new markets rather than bureaucratic training schemes, new regulatory regimes, or group rights for minorities.

At the same time, the neo-Jeffersonian wing has developed connections with some minorities and other urban interests excited by elements of the president's program—notably, welfare reform and support for community-based banks and microentrepreneurs—that break down, instead of prolonging, welfare dependence. These allies include a new generation of African-Americans and Latinos, most of whom oppose quotas and understand that welfarism simply hasn't worked.

Despite his unseemly pandering to the likes of Rep. Maxine Waters, Clinton probably realizes that the poverty warlords have no interest in empowering their constituents, since this would diminish their own power. And it's significant that Clinton won election without the active support of Jesse Jackson. For the first time since Kennedy, the Democrats have a president who can appeal to urban and minority constituencies without appealing first to the professional brokers who are likely to stand in the way of substantive reform.

Admittedly, the neo-Jeffersonians have only a few links to the White House—notably White House staffer Bill Galston, Secretary of Agriculture Mike Espy, and deputy budget director Alice Rivlin. "The only DLCer with power in the administration," notes one top PPI official, "is the president himself, and we don't know if he can even stand up to Hillary, much less all the other vultures out there."

Yet herein lies the hope. As a savvy politician, the new president recognizes that he was not elected to transfer money from the middle class to the underclass. He understands that there is nothing close to a majority constituency behind group rights or massive spending for such loony projects as highspeed rail and fiber-optic networks. And no matter how much he might personally admire Germany's welfare state, Clinton is bright enough to understand he was elected president, not chancellor of a greater Reich.

For those of us who are both Democrats and believers in individual rights, the next few months will present a major test. As the cabinet process showed, the forces seeking a Great Society restoration are powerful, and Clinton cannot be trusted to act without significant pressure. Our role should be to engage the centralizers, both within the administration and in the court of public opinion.

We probably will not like the administration's early efforts. But the essential reasonableness of New Democrat ideology, bolstered by both budget constraints and the basic instincts of the electorate, remains at the core of Clinton's true mandate. His desire for re-election, if nothing else, may lead him back to the neo-Jeffersonians before 1996.

Joel Kotkin is author of Tribes: How Race, Religion and Identity Determine Success in the New Global Economy (Random House). He is a senior fellow with the Center for the New West in Denver and the Progressive Policy Institute.