Iowa and Other Items
Jude Wanniski
January 24, 2000


IOWA CAUCUSES: The only thing I think we might learn from Iowa tonight is the fate of Steve Forbes' campaign for the GOP presidential nomination. He is being counted as a sure loser in the race for the presidential nomination, but if George W. Bush doesn't do as well as the pundits expect and Forbes gets all his people to the caucus places, Forbes will enjoy a brief period in which his chances of staying the distance as "the conservative candidate" will be taken more seriously. His appearances on "Meet the Press" and CNN's "Sunday Edition" yesterday were his best of the season to date and he definitely is not allowing himself to be intimidated by the polls or the pundits. Once Iowa is behind him, he should not feel he has to spend so much time on the abortion issue as he has, he can concentrate on supply-side tax and monetary policies -- which he and only he can deliver as President. On CNN's "Evans&Novak" over the weekend, Bush was asked why he did not have a capital-gains tax cut in his tax program. His answer was essentially that it was too expensive and was deleted in setting priorities! So much for entrepreneurial capitalism. Bush is clearly a much more polished and attractive candidate than he was a year ago, but his inexperience at bigtime politics still shines through. Forbes thinks Bush may even come in third in New Hampshire, where the anti-Establishment Republican voters were never kind to his father. With John McCain leading with his chin in New Hampshire by vowing to Tax the Rich, you can see how the Forbes game plan suddenly could ripen. In terms of national and international economic policymaking, from our standpoint there is of course no doubt that Forbes would make the best President.

RUSSIA: The Wall Street Journal today denounces Russia's acting president, Vladimir Putin, for making a deal with the "Communist Party" in organizing the Duma. As is increasingly the case, the WSJ editorial page is knee-jerk and misinformed on issues involving old Cold War leaders. It refuses to see that the so-called "liberal reformers" have been the source of Russia's economic difficulties and that there are really no communists in the Communist Party. It was the old CP members who fought the "shock therapy" designed by the Harvard boys, including our Treasury Secretary Larry Summers. Marxism-Leninism is as dead in Moscow as it is in Beijing. The reason the Russian stock market advanced so smartly on the news is because investors recognize the potential of this new political combination. Putin actually was chosen by Boris Yeltsin because he has a widespread reputation for honesty. One of the reasons Yeltsin has clung to his office is worry about his family being cut out of the action. Putin promised to take care of Yeltsin's daughter in exchange for her resignation from her powerful political post under her father. A recent Putin speech on Russia in the new millennium is as good as I've seen from any Russian leader in the last decade. It would not take much in the way of economic policy changes for Russia to grow even faster than China -- say 15% annually.

OIL: It is a good thing the winter has been as warm as it has so far, or crude oil would have climbed to $35. The main source of the difficulty was the blunder at the International Energy Agency in Paris overestimating world supply when the Fed's monetary deflation sent crude crashing to under $10 in 1998. OPEC is blamed for holding back output, but the truth is OPEC has about run out of near-term output. At the same time, producers are wary of major investments in production even at these prices, fearing another price collapse. At bottom, this is of course one of the hidden costs of a floating dollar and a floating Fed Chairman.