The President-elect's naming of Rep. Jack Kemp as Secretary of Housing and Urban Development ends any question we have that this will be a growth administration. The team in place thusfar is determined to avoid a recession and will almost certainly negotiate a budget settlement with Congress that will not impede economic growth. Kemp will have a seat at the administration's economic councils and be able to express his views on monetary policy, supporting the pro-growth members of the Federal Reserve led by Vice Chairman Manuel Johnson. Kemp almost certainly will try to keep alive the Bush mandate for a cut in the capital gains tax, which Democrats are trying to kill as a 1989 issue.
The team is already far more supply-side in orientation than one would think from reading the newspapers. At the Kemp dinner in Washington 12-1, James Baker HI told the 1,000 luminaries at the black-tie affair, including RR and GB, that he was not a believer in supply-side economics at the outset, but he's had "to eat crow," that "voodoo economics has turned out to be can-do economics." JBIII advised me at the dinner that he's fully committed to a growth agenda as Secretary of State. Richard Darman, gearing up to be OMB Director, is more knowledgeable and supportive of supply-side concepts than any member of the Reagan cabinet of the last eight years! The new CEA Chairman, Michael Boskin, is more Reaganaut than any of his three predecessors. The members of the team will fortify each other in the struggles with Congress, which is surely coming to see that there is more coherence and determination in this Bush team than they had been reading about.
Only the Brady Bunch at Treasury is intellectually biased in favor of a demand-side policy mix, but Brady has yet to fill out his top subcabinet slots. Meanwhile, Treasury continues to bash Taiwan and South Korea on exchange rates, a prescription that flows from its policy mix. Carla Hills, the new USTR, is pure eastern establishment, a Trilateralist, but free trade is the one economic issue that outlook is positive on. We don't know for sure, but assume she'd lean toward Treasury's position on exchange rates, at least at the outset.
Kemp's HUD job offers the administration its best political opportunities with black and Hispanic America, Kemp designated as the spearhead of a "progressive conservative war on poverty" via enterprise zones and urban homesteading ideas. Kemp will no doubt be scored on his ability to get this legislation enacted. His appointment has been hailed publicly and privately by liberal black leadership, including the NAACP's Ben Hooks. John Sununu, who will be White House chief of staff, was a prime mover in selling the transition team on Kemp for this reason. Lee Atwater, RNC chairman and another Reaganaut, is also eager to make inroads in the black community through development of black, entrepreneurial capitalism — as opposed to quota capitalism. Along the way, Kemp will be trying to sell the capital-gains cut as an element of new, black wealth creation.
The most important signal on the Kemp appointment is what it says about George Bush. The big concern about Kemp within the transition team was that he would use a Cabinet post to play an independent role, setting his own agenda, interfering with turf at State and Treasury and even Defense. Bush, who has only chosen people he knows he will be comfortable with, is saying he will be comfortable with Kemp and Kemp's viewpoints. I'm certain Kemp will be seen, fairly soon, as far more of a Bush loyalist than is now being imagined, but also that the administration will be far stronger in its commitment to non-inflationary growth via supply-side concepts than had been expected, even here.