Economics

Putting People On

The Pander Bear returns

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The budget deficit is the central problem of the federal government and one from which many of the country's other, most difficult problems flow. Bill Clinton and congressional Democrats were handed an unusual chance this year to deal constructively with the effect of Medicare on the deficit, and they blew it. The chance came in the form of the congressional Republican plan to balance the budget over seven years. Some other aspects of that plan deserved to be resisted, but the Republican proposal to get at the deficit partly by confronting the cost of Medicare deserved support. The Democrats, led by the president, chose instead to present themselves as Medicare's great protectors. They have shamelessly used the issue, demagogued on it, because they think that's where the votes are. If the Democrats play the Medicare card and win, they will have set back for years, for the worst political reasons, the very cause of rational government in behalf of which they profess to be behaving.

"The Real Default"
Editorial, The Washington Post, November 16, 1995

Last fall, TIME has learned, [presidential adviser Dick] Morris urged Clinton to agree to a proposed increase in premiums paid by Medicare recipients. It was a responsible position–middle-class entitlements are devouring the budget–but Clinton didn't take it. Instead he cast the G.O.P. as granny-bashing extremists and saw his popularity soar as the government closed and Gingrich got the blame.

Time, September 2, 1996

It worked. My God, it worked. The high road, the low road–is it any shock that President Clinton chose the poll road? It is some kind of testimonial both to the American political system, and to the public discussion of government policy in these United States, that the presidential campaign in 1996 is almost solely devoted to the brilliant political strategy of Clinton–even overruling his political Svengali–in bringing back his party from the edge of extinction. It is the boldness of the president, gaining relevancy by wielding the veto pen to protect our nation's meek and needy, contrasted with the unctuousness of Speaker Gingrich, having the temerity to shut the government down in a brash display of arrogant audacity, that has produced Campaign '96's conventional wisdom.

There is no question that the Republicans miscalculated the political dynamics of the famous budget showdown during the winter of 1995-96. Knowing that the mighty Ronald Reagan had been intimidated into signing bloated budgets patched together by Democratic porkmeisters, they figured there was no chance that this squishy meatball of a president, Bill Clinton, would not tremble and collapse when subjected to the same sort of blackmail. But the GOP had fallen into the president's trap; Clinton is only squishy when it comes to ideas and principles. There is not a wimpy cell in Bill Clinton's body when pressed to defend his beloved presidency. And in those formative days in late 1995, the polls indicated that registered voters wanted the president to veto the Republican budget–by over 3 to 2.

The Clinton strategy, credited to the genius of Dick Morris, was actually lifted from Political Economy 101. The simple model is called the "median voter theorem," the notion that political competition is all about snagging that voter in the middle. A little more casually, it's known as "Nixon goes to China": Steal the other team's thunder–all while trashing them as traitors who are selling national security secrets to our enemies.

But don't try this at home–some finesse is involved. The trick is to move the moderate center into your camp while keeping your core constituency from getting antsy (bolting to the other side, bailing for a third party, or just sitting home, depressed). In 1972, Nixon lucked out when the Democrats nominated a leftish George McGovern who really did believe in the wacky, far-out things that Dick Nixon may have advanced but was never foolish enough to believe in (such as guaranteed incomes and price controls).

The Medicare scare was the perfect wedge for Clinton's purposes. Medicare spending is exploding (from about $53 billion in 1983 to $177 billion in 1996), but it's mad money for the elderly middle class (the poor have much shorter lifespans, don't forget), retired and just cruising for some trouble to get into–like jumping the first whippersnapper who so much as looks at the budget line item called Medicare. Clinton's poll numbers exploded as fast as Medicare spending when he stood up to the Republican "cuts." A Clinton-Dole dead heat among men turned into a 30-point runaway among the elderly.

Of course, Clinton did not act alone. There was the press. Taking a cue from the White House, it faithfully reported that Republican plans to increase spending by 7 percent per patient per year would "cut," "slash," and "decimate" Medicare. When confronted by CNN's Wolf Blitzer at a summer press conference as to why he insisted on mislabeling increases as reductions, the president cited the press as his source of misinformation: "We got that from you. The press was saying that." The perfect circle.

And Clinton had an active assist from Gingrich, a man who believes so firmly in the two-party system that when the Republicans were on the precipice of an electoral realignment of historic proportions, he rushed in to revive flagging Democratic hopes with his made-for-tabloids "Cry Baby" routine vis-a-vis his seating assignment on Air Force One.

But what Gingrich really did to help Clinton was to present the unifying threat which Democrats have lacked for generations. The 1994 elections–an embarrassing repudiation of Clintonism–allowed the president to reassert his position as the Democrats' last, best hope against the surging tide of conservative government. The desperation, the shock, the moment of terror: Democrats out of power! Where were the federal jobs, the perks, the levers, the Washington way of life? Gone with the Winds of '94? Clinton soon saw that his party faithful, many of whom privately loathed his "leadership" for plunging the party to the disaster of '94, could not–would not–bear the thought of Republican hegemony.

The acclaimed Dick Morris helped Bill Clinton craft this strategy as early as April 1995. It was standard political strategic calculation, cold-blooded, scientific. Bob Woodward recounts in The Choice that Morris had the White House divide up all the Republican agenda items–including those in the now-vilified "Contract on America"–and place them in two computerized files: "olive branch" and "fuck you." The items in the first file would be taken as Clinton's own; they included such popular Contract items as the law mandating that U.S. regulations apply to Congress and the measure ending unfunded mandates levied on the states. The second file contained those items, like Medicare reform, which the administration would denounce in the most vicious terms. Of course, the first file dwarfed the second. Clinton was able to–on paper–agree to a seven-year balanced budget and most of what the GOP was talking about, if he only retained a few weapons of democratic terror.

Again, Medicare (with minor backup from spending on education and the environment, liberal mom-and-apple-pie issues) gave him the cover to co-opt Congress on most everything else. In the end, it was a remarkable performance: Newt was demonized as "dangerous and extreme" (in the first Bill Clinton fundraising letter, written by the president himself, proclaimed in mid-1995)–even as the administration could claim to be doing most everything he was trying to do anyway. You don't want him, you don't need him. And from there it's just been politics. That is to say, a phony issue here, a photo op there–panderama '96.

Let's face it: Pandering is the Democrats' home turf. Take the minimum wage. The press has now written that episode as an embarrassing defeat for the Republicans, who were foolishly outflanked in this race to help the least among us. The irony is rich. When 40,000 middle class executives at AT&T are cut loose (albeit, with generous severance packages), all hell breaks loose. From Patrick Buchanan to the editors of The New York Times, we are bombarded with horror stories about worker anxiety and the "downsizing of America."

But where has the moral high road led us on the minimum wage? If Clinton is correct, and 10 million workers are affected by the roughly 20 percent mandated increase in wages, over 400,000 low-wage laborers will be tossed out of work. (This is implied by a study of the actual New Jersey minimum wage hike in 1993–the very episode which the Clinton Labor Department uses to "prove" that the minimum wage does not reduce employment.) These, the most vulnerable members of our labor force, are now thrown to the dogs by the same president who dubbed the minimum wage a "job killer" in 1992. And this is the brainstorm which embodies Democrats' largess! (Will these 400,000 ex-workers even say "thank you"?)

And so the competition of politics has swept the radical Republicans of 1994 into the sheepish moderates of 1996. The Republican Convention was not so much the p.r. sham that the media were distressed about–after all, Colin Powell and Susan Molinari really are (or were) Republicans holding high public office. The convention was an apology. The bona fides of the 104th Congress were neatly tucked away, out of sight of the millions of guests looking in. But what is there to be ashamed of?

Indeed, the most curious aspect of the 1996 campaign is that the Republicans are embarrassed to run on their record: "We told you what we were going to do in 1994, and we did it." All 10 Contract items were voted on by the House of Representatives in the first 100 days–the precise pledge the House GOP candidates had made. The only one of the 10 defeated in the House was term limits, which garnered nearly 90 percent of Republicans in Congress. Many of the Contract measures were so popular that they received a majority of Democratic votes. To be sure, Congress's anti-same-sex marriage act, the flag burning amendment, and that bill to discharge AIDS victims from the military were ugly episodes. That the GOP Congress has fled from its real accomplishments to embrace these yahoo idiocies in an election year speaks volumes about the Republicans' readiness to govern.

This GOP cowardice is a tribute to the success of the "harshness," "extremism," and "meanness" pinned on the Newtoids during their showdown with the president on Medicare. That's why, last November, the Post could feel a "shameless exploitation" coming on. What a rush! And now the third rail of American politics–middle-class entitlements–reemerges intact and once again untouchable.

In 1992, Bill Clinton ran on a campaign pledge of a middle-class tax cut, which he said was necessary because median family income had been declining in America, and a national health care reform plan to bring medical insurance to the 37 million Americans lacking it. Neither was delivered. (Median incomes are still falling, and over 40 million Americans are now uninsured. Not a lot of idle chatter about this in Chicago.) Indeed, Clinton lied about one and botched the other. The tax-cut pledge–of 10 percent, with an $800 per-child tax credit, very close to what candidate Dole peddles now–vanished nearly the instant that the electoral college had been decided. Clinton claimed he dropped the idea because the Bush administration's deficit was surprisingly large, and told the public that the tax cut was a casualty of his predecessor's fudging the figures.

This was so outrageous a tale that the president's own deputy director (later director) of the Office of Management and Budget called it a cheap shot. As Bob Woodward tells it in The Agenda, Alice Rivlin confronted Clinton spinster Paul Begala on this very issue. When Begala offered, "We have to explain why the deficit got worse and how it got worse," Rivlin shot back: "That's nonsense. Bill Clinton knew where this deficit was going." Woodward adds that Rivlin said "that they had to face the fact that the campaign fundamentally misrepresented the situation."

Begala did not take the expert analysis of Dr. Rivlin lightly: "Begala was steaming." But the clash between economic fact and political spin in the administration is–well, did you see any of the NBA playoffs last year? It's fun to watch, but there's not a lot of suspense about the final outcome. The press office has taken over full control from the Council of Economic Advisers, and the incredible boasts–unchallenged by Dole or the press–have become nothing short of phenomenal. That Clinton lowered the deficit "four years in a row for the first time since the Civil War" is now the principal economic achievement touted by the administration.

In fact, the Clinton administration has not actually seen four fiscal years; we don't know–won't know for one year, yet–what the four-year Clinton deficit amounts to. The first of the four years that the administration cites in its deficit-reduction grand slam is actually fiscal 1993–which began October 1, 1992–Bush's last year. In fiscal 1993, federal red ink declined from $290 billion (fiscal 1992) to $255 billion and the deficit was headed south. This was primarily due to four factors which have nothing to do with Bill Clinton: The business cycle ticked up (in 1992 the economy was already growing at 2.3 percent annually, just about the rate under Clinton so far); the collapse of the Soviet threat allowed military spending to decline; the savings and loan bailout ended; and the modest spending caps put in place in the infamous Bush budget compromise of 1990 (wherein he broke his "no new taxes" pledge–in exchange for these spending caps) kicked in. Of course, Clinton credits the Bush $492 billion deficit-reduction deal not at all; his 1993 $496 billion package actually undid the spending caps in place in order to rejigger them–directing credit to the new administration.

What is genuinely dastardly about the deficit-reduction boast, however, is that Clinton actually did help to bring government ledgers into balance–by being so legislatively incompetent that the administration's spending schemes were shot down one after the other. In Putting People First, Clinton's 1992 campaign manifesto, he advocated about $90 billion in "investments"–also known as government make-work–over four years. This was a key promise for the Clinton-Gore campaign, as it was the "I have a plan!" backdrop for their commitment to get the "worst economy in 50 years" moving.

The first installment, even pared back to a $16 billion "stimulus package" (not to be confused with Dick Morris's less extravagant, if better targeted, $200 per hour private–sector stimulus package), was filibustered by Dole in the Senate; the "investment" program was nevermore. The fate of the Clinton health plan, a similar budget-busting spending spree, is well known. By producing such colossal political failures on the spending side, Clinton did help further the goal of budget balance.

Indeed, the ultimate political catastrophe of the Clinton administration–its failure to hold Congress in the 1994 elections–finally brought real constraints on the spending side. Remember, please, that the administration was perfectly willing to budget $200 billion annual deficits in 1996 and far beyond–until thwarted by the "extremist" Republican Congress. The result was a decline in the 1996 deficit to only about $120 billion–over $70 billion less than what the administration forecast in February 1995. But let's face it: If Clinton can't steal the credit from this "dangerous" and "radical" set of criminals, whom can he steal from?

The excitement in Chicago was that Clinton had indeed committed the perfect crime. Mario Cuomo, relegated to not-ready-for-primetime status along with the rest of the old–line liberal Politburo (including Jesse Jackson), gave the one speech which actually laid it all out (he even dared to recount Clinton's run at a national health care system!). Rather than simply demonizing his Republican opponents, the ex-governor sought to identify the source of Clinton's contribution, a contribution that needed some explaining in light of the president's signing of the welfare bill and other ostensible dissents from Democratic orthodoxy.

It has been noted that Cuomo's rationale for re-electing the president–i.e., only Clinton can fix a welfare bill which is so terrible that no reasonable person would ever have signed it, unless he had to for raw political advantage–is deliciously cynical. But Cuomo's real insight was in describing what Bill Clinton had done for the Democratic Party. "President Clinton," he said, was "erasing the stigmas that had been branded upon our reputation over the years. Who will say today that Democrats are in love with big government, and big spending, after Bill Clinton has cut the federal government dramatically and brought the deficit down by 60 percent?"

And this new, unburdened Democratic Party can go on to achieve wonders. "The president was lifting the albatross from around the neck of this great Democratic Party so that now with all those stigmas virtually erased, we are free once again to be Democrats, progressive, constructive Democrats. And we are ready now to continue the work of restoring the American dream that was invented by Democrats six decades ago." So the greatness these "new" Democrats want to achieve, flushed with the success of Clinton, is the New Deal. Rejoice, my beloved Party. We are "free once again to be Democrats." Real Democrats–not budget-cutters, not welfare-enders, not pseudo-Republicans–but bona fide "progressive, constructive Democrats." Glory be to Clinton.

As Joe Klein, using his real name, wrote in Newsweek, "The era of big government may be over, but the party of big government remains–and remains stubbornly devoted to a thick, dull, uninspired system that seems to exist for the benefit of its employees, not the public." Klein was specifically talking about public schools and the teachers' unions that love them so jealously that they are quite willing to deny millions of poor children any reasonable means of escape. It was to Bob Dole's credit that he seized on the issue of bureaucratic control of the public schools as a campaign issue of substance and symbolism. It actually does constitute an act of political bravery, for it has already unleashed a firestorm from government operatives posing as teachers, using America's school kids as hostages.

Is Cuomo's vision Bill Clinton's? Is the co-optation of Republican policies just a trick to set up the Democrats for yet another new era of big government? Clinton on the fly could spin it: "I said that the 'era of big government is over.' That was the old era. This is the new era. And it's not big government. It's progressive government. It's constructive government. It's reinvented government. It's an investment in our future. It's government that cares about people." C'mon, you can even hear the hillbilly twang.

Looking forward, it is impossible to predict what a second term President Clinton would do. Take the president's forthright statement, made on 60 Minutes in August: "I pledge that I have no intention of raising taxes in my second term." How perfectly splendid to twist the future tense pledge into the present tense of intent. And still, to make it sound like a firm and intelligible commitment. And, of course, to really believe it. That is the genius of William Jefferson Clinton: He believes everything he tells us. And he tells us everything.

The polling data look like a solid endorsement of that genius, but the race is not over. Bob Dole, a grumpy old war horse, is appealing to some Americans as the "anti-Clinton." Dole is not a principled opponent of the status quo, or a dedicated tax cutter, or even an ardent champion of reducing the size of government. But he has been a man of what passes for honor in our government, and it is stunning that both Democrats and Republicans unanimously believe just exactly what they hear from Dole–that is, when they can decipher it into English. Whatever.

The most dramatic difference between these two candidates for president: There are some things (even those which rate 62 percent approval in the latest CNN/USA Today poll) that Bob Dole just won't say. One thing he will say every day from now to the election is that he wants a 15 percent across-the-board tax cut. The Clinton camp will press its charge that such a scheme would "bust the budget" and parade its phony deficit-reduction bona fides. That is not a bad place for the Dole-Kemp ticket to be. Dole, having been hammered for his effort to actually reduce the deficit to zero in the seven-year budget plan which led to the government shutdown, is saying to Clinton: "You want the balanced budget as your issue–fine, you take it." The budget plan put forth by Dole is easily legit by Clinton's own rules of budget politics, and an able, articulate defense is put forward by economist John Taylor of Stanford University.

There is no doubt that Bill Clinton's stars have lined up perfectly on the business cycle and that–constrained by Congress, public opinion, and a nervous bond market–he has been saved from actually implementing the now-buried "New Covenant." But the massive Clinton polling edge among seniors indicates the rising economic tide does not lift all votes equally. "Shameless exploitation" of Medicare has provided lift-off for the president's re-election bid. Yet Bob Dole has at least succeeded in spinning Clinton around on the deficit. Instead of allowing his opponent to sell the glitzy model home (i.e., Medicare benefits), Dole has opened up a plush new tract of his own (tax cuts), and will let Clinton sell the vacant lots (future benefits in the form of lower deficits). That is a much tougher sell; we have yet to see if anyone really cares about the unimproved property called a "budget deficit." Many economists think not–which is why we get deficits about 29 years out of 30.

Pundits have written off Dole since springtime polls showed no closing of the 10-20 point gap opened by Clinton's "Mediscare" demagoguery last winter. But it has always been a race–which is just why Clinton has been running so hard. It may still be one. Do not forget that Clinton detests being so far out in front. He feels titillated "on the edge," as Elizabeth Drew called her compelling account of the first two years of the Clinton administration. Example: In spring 1996, sailing in the polls, Clinton pauses to ad lib during a fundraising dinner in Connecticut about the frozen Inca virgin, Juanita, discovered in the Andes and put on display at National Geographic. I quote our president: "Did you see the mummy? If I were a single man, I think I'd ask her out. That's a good-lookin' mummy. I bet I'll hear about that before this is all over."

Now, suppose you were even a junior political adviser to the president. Would you really have to perform complex analysis, or convene even one focus group, before telling your boss: "Sir, please don't go there. Jokes about dating teen-aged virgins, even if dead for 500 years–no, no. And, sir, please do not begin a sentence with, 'If I were a single man?'" Not a tough call, as shown by Bill Clinton's instant analysis about what would follow. But the president knew exactly where he was going: He was heading straight to the edge of the electoral cliff. Dole hopes that Clinton goes there once too often to dare the gods–and that something makes his knees knock.

If not, then Clinton, having repudiated his entire 1992 platform and presenting a picture of fiscal austerity which Steven Spielberg would admire for its special effects, will succeed in vanquishing a lifelong advocate of fiscal austerity–on the grounds that "plain-speaking" Bob Dole cannot deliver what he promises. This would be a sensational event in the history of the republic, and the magic that is America will surely be complete. For it will show that literally anything that can be produced can be sold, if only people believe the president of the United States of America. God bless us all.

Contributing Editor Thomas W. Hazlett (hazlett@primal.ucdavis.edu) teaches economics and finance at the University of California at Davis.