Bush's Missed Opportunity

...and its potential costs


President George W. Bush blew it Tuesday night. He delivered a State of the Union address that downplayed his most promising—and potentially revolutionary—domestic-policy initiatives. Earlier drafts had reportedly contained a lengthy exposition of his vision of an "ownership society," expanded and strengthened by tax changes and Social Security reform. Unfortunately, by the time Bush gave the address, his ideas were dispersed throughout a laundry list of issues, and his Social Security proposal was granted only a brief and halting mention. He spent more time talking about new federal subsidies for community college training. From a public-policy perspective the decision was disappointing; it may also prove to be politically costly.

Many Republican politicians believe that President Bush, who in some polls has the highest approval rating of any president beginning his re-election campaign since Dwight D. Eisenhower in 1956, is headed for an inevitable victory in November. With Saddam Hussein in custody, a resurgent economy, and a muddled and perhaps longer-than-expected Democratic primary, these partisans see little on the horizon to threaten the president's political prospects. They wonder only how big his margins will be, and whether they will translate into coattails in key GOP races for Senate, House, governor, and state legislatures.

This is a premature conclusion, to put it gingerly. While the sputtering, gesticulating implosion of Howard Dean and the available survey data may suggest that the Iraq campaign has subsided as a potential campaign issue, it wouldn't take much for a series of adverse events—a major terrorist incident overseas, another round of deadly attacks by insurgents in Iraq, or disclosures about intelligence failures—to change the political dynamic. Besides, given that about two-thirds of the electorate favored the war and a similar number prefer the Republican Party on issues of national defense, the Bush team probably wanted the 2004 election to present a clear divide between the president and a starkly anti-war candidate such as Dean. Now that the Iowa results have shuffled the Democratic deck, it may turn out that Bush will face a general-election foe such as John Kerry or John Edwards who voted for the war resolution but disagreed about how the policy was then carried out—a message that would muddy the very waters Karl Rove and company would prefer to keep crystal clear.

The Democratic nominee may well choose to challenge Bush on domestic issues while seeking only to neutralize the GOP advantage on foreign policy. It's worked before. That's precisely what then-Arkansas Gov. Bill Clinton did in 1992 to President Bush's father, who if anything enjoyed greater public confidence in his national-security and foreign-policy credentials but found he couldn't rely on this advantage alone to win. Even in this post-9/11 environment, domestic issues are still more important to most voters, hard as it may be for both confident hawks and embittered doves to believe. In a recent TechnoMetrica poll for Investor's Business Daily, respondents rated health care far more important an issue (with an index rating of 44.1) than was the war in Iraq (26.5). This was true both for war supporters and for war opponents.

The problem for Bush and the Republicans is that if the security issue gets muted during the 2004 campaign, a good chunk of their political base will get uncomfortable. It is difficult to overstate the extent to which the limited-government, free-market faction of their coalition—including mainstream Reagan Republicans, old-style balanced-budget moderates, and small-l libertarians—have been dismayed by Bush's dismal record on federal spending and entitlements. Non-defense discretionary spending under Bush and a Republican Congress soared by nearly 19 percent in two years, a rate not seen in decades and one making Bill Clinton look like Calvin Coolidge.

The fallout is visible. Both sitting conservative members of Congress and candidates I've talked to in North Carolina, for example, freely express their disappointment in private and often in public forums. Radio talk shows, web sites, and other institutions that serve to channel activist energy at the grassroots exhibit significant disaffection. Even such Washington-establishment groups as the Heritage Foundation haven't shied away from savaging the president and the GOP with surprisingly blunt language. "The Republican party is simply not interested in small government now," says Brian Riedl, a Heritage Foundation budget analyst who has been particularly caustic. "They're worse than the Democrats they replaced."

Some Bush supporters clearly aren't worried about this furor on the Right. After all, where do fiscal conservatives have to go, exactly? To a Democrat promising expensive new health care and education initiatives of his own, as well as at least a partial reversal of the Bush tax cuts? Besides, wasn't it enough for Bush and the Republican Congress to pass those three tax cuts in three years, slashing marginal rates and reducing the double-taxation of dividends and capital gains?

These questions demonstrate a fundamental misunderstanding of Republican-leaning fiscal conservatives, what motivates them, and why they choose to be involved in the political process at all. The Democratic coalition is a motley collection of groups bound together primarily by the prospect of getting things from the government, be they public assistance, Social Security and Medicare, free health care and education for their children, corporate welfare, quotas, protectionist regulations, or symbolic affirmation. Most of them are pragmatic about this. They know they may not get a goodie this year, but they expect to get a turn in the next. When government finances tighten, they somewhat adjust their expectations of booty. When growth fills the coffers, they bargain for a bigger payday.

Many voters in the Republican coalition exhibit some of these traits, but they are more conflicted about what they want from the government. Purists simply want to be left alone, as activist Grover Norquist would say. But many less ideological Republicans experience a cognitive dissonance: they want freer markets and smaller government in the abstract, but also a perk or two if possible. For all of these Republican-leaning voters, though, including the hypocrites, a political message of "just wait by the trough and you'll get yours directly" will never serve to inspire an effective effort to win a competitive campaign. Nor does a set of tax cuts, some consistent with sound principles but others little more than welfarism via long-form, automatically excuse profligate spending in their eyes. Republicans want to see how their leaders' fiscal policies tie into a coherent and compelling whole. Indelibly marked by the Reagan era, they want their candidates to articulate a basically restrained vision of government, of maximizing freedom and minimizing bureaucratic constraints. President Bush has actually exhibited flashes of rhetorical brilliance in this area, but this has made his unwillingness to set priorities or threaten budget vetoes all the more dispiriting for many fiscal conservatives with raised expectations.

And it is a huge mistake to think that there's nothing they can do about it. They have options. One is simply to stay home. If Karl Rove thinks it was rough for George W. Bush to have to eke out a slight Electoral College majority in 2000 because millions of social conservatives stayed home, he should consider how much less fun it was for George H.W. Bush to run for re-election in 1992 without a strong turnout by the anti-tax conservatives he had spurned. Another option is the Naderite one, that of voting for third-party candidates. While I don't think there are enough libertarian-leaning Republicans willing to vote Libertarian to turn the presidential election—though it's not inconceivable if a 2000-style photo finish recurs—the story is much different at the state level, where I think it is demonstrable that some close elections for Congress or legislature have been lost by Republican candidates because of defections to LP challengers.

It's not as though the Bush administration had to take on every unconstitutional federal program and close down every redundant federal agency or department in order to satisfy its base. Many of these voters understand that eliminating the Department of Education tomorrow isn't a politically salable notion. Americans as a whole are even more conflicted than the core Republican coalition, far less convinced that the size and scope of the federal government needs to undergo dramatic transformation. But the latter want to see some significant efforts in the right direction—at least a firm commitment not to start any new, likely-to-burgeon programs and a willingness to negotiate aggressively with pork-crazy lawmakers. To promise, as President Bush did in his address, to hold discretionary spending increases to "only" four percent is not to supply this thematic glue to hold the political coalition together. Indeed, the one time I heard Bush mention the word "veto" he did it in the context of Medicare—promising, yes, that he would block any attempt to strip the (limited) consumer-choice provisions from the law but also promising to veto any diminution of the new and highly expensive prescription-drug benefit.

There was a way for Bush to offer a more inspiring message, one calculated to ease the frustrations of fiscal conservatives and giving them the sense that any compromises on spending and entitlements in the short run would result in smaller government in the long run. That's why early reports about President Bush's State of the Union speech were so intriguing. They suggested that he might tie together his advocacy of expanded IRAs, savings-based health reform, and personal Social Security accounts to articulate a rhetorical vision of an ownership society to replace the current syndrome of dependency on government to finance the big-ticket items of life: buying a home, educating children, suffering a major illness or disability, losing a job, and retiring.

In my 2001 book Investor Politics, I wrote that conservatives and libertarians had failed to make any real headway in their fight against big government in Washington because they had wrongly seen it as an open-field battle with a willing adversary. They tended to charge, lances couched, banners flying, right into a stone wall—because the welfare state isn't an opposing army. It is a fortress. It is surrounded by high walls, deep moats, and angular bastions. It cannot be taken by a frontal attack. But perhaps it can be undermined, in the original sense of the term of creating breaches in the walls by digging underneath and using fire to collapse the tunnel. Converting transfer programs into savings accounts, even accounts sheltered or somewhat subsidized by government, would offer individuals the opportunity to take responsibility, to manage money, to shop wisely, to choose private providers of services, to plan for their future needs, and to escape the control of planners and bureaucrats. Just as homeownership tends to change the way voters behave in local elections, so the theory goes, a broader ownership of financial assets would expand the national constituency for lower taxes, less government, more freedom.

There is some evidence supporting this theory in polling and in some recent campaigns where Republican candidates advocating Social Security accounts won sizable majorities of the vote. But I admit that it is ultimately speculation. It's still worth exploring further because previous, more direct assaults on big government have failed miserably and because the retirement of the Baby Boom generation starting in the next decade will put unprecedented pressure on the federal budget, pressure that may lead to massive tax increases. President Bush has commendably kept his Social Security proposal alive despite the grave concerns expressed by Republican political "pros" about venturing out on that big, drooping limb and once again inviting Democrats to break out their saws. Apparently their advice won out this time. I see the problem differently. If Bush never dares anything big in domestic policy, if he never gives anti-tax, small-government Republicans a reason to be excited and active, if he stays clinging to the trunk of the tree, the Democrats will still have something to saw—but the president won't be able to reach another perch.