The Vision Thing Jude Wanniski March 23, 1990

For three days in Washington this week I spent much of my time visiting with people in the Bush Administration in and around the White House and executive departments. Although there were bright spots here and there, I came away relatively dismayed, with the same kind of assessment I made routinely after visits to the Ford Administration: The senior players are energetically working long hours moving pieces around in a jigsaw puzzle, knowing there is a picture of the world to be assembled, but not having much of an idea of what it will look like. (I recalled that the Ford White House hired James Reichley of Fortune magazine to come in as counselor, and President Ford actually told the press that it was Reichley's task to come up with some vision.)

I told several senior officials, who know I admire them personally, that I sensed an absence of vitality in this second year of the administration. The response from one, which merely confirmed my assessment, was that "the budget process" was holding things up, assuring me that once this logjam is broken I would get a sense of renewed vitality. Nuts and bolts. In and out baskets. No, I thought, the problem is "the vision thing." The people around the President who have a capacity for viewing the world from a lofty perspective are operating at a foxhole level. They seem trapped in minutiae, micro-managing affairs of state at an absurdly low level. My visit to one official in the West Wing was interrupted by a lengthy telephone call from a senator that clearly involved a matter which should have been handled by a congressional liaison.

My concern that the capgains proposal will once again come to an inconclusive end, unless the President campaigns for it as necessary to economic vitality, was brusquely rejected. "This will be won in the end game," was the argument. "We have the votes to pass it in both houses. It is just the Democratic leadership that can block it through procedure. There is nothing the President can tell the nation that can change those minds." I observed that the White House seems to be thinking of Capitol Hill as a maze of corridors of power, while I think of it as a tea kettle. The power is with the people. Why not try to sell capgains to blacks and minorities? The President could capitalize on his popularity with these groups. "You and Jack Kemp can talk about that, but it would be a waste of time. There are too many layers between the people and the problems we have on the Hill."

With a few notable exceptions, I found an insensitivity toward Japan bordering on racism. My thesis that the administration's trade threats have brought the deep slide in the Tokyo financial markets did not get much resistance. The mildest argument I heard, at the State Department, was that what we are doing will be good for the Japanese people. The harshest argument I heard, at the White House, is that it's time, now, to break open the Japanese markets, whatever might seem to be the short-term costs. The Japanese leaders are viewed as being arrogant for resisting our demands.

A number of times I argued vigorously that Japan is a democracy, that we actually wrote its constitution, and it is not our business to insist that unless they change their domestic policies we will punish them with trade sanctions. It is not up to us to decide the Japanese consumers will be better off importing rice rather than subsidizing it, I argued. It is not up to us to decide Japan must decimate its mom-and-pop stores and reward big shopping centers, just so American exporters can deal with fewer people. Imagine what would happen, I asked, if we told France we would close off our market unless it shut down the 50,000 small shops in Paris and opened malls instead? The difference, I suggested, was that France could retaliate, and all of Europe would come to its defense. Japan can't retaliate because we are its only open market.

These discussions led me to believe there is less chance than I'd hoped for a settlement in the talks with Japan, more likelihood that the administration will exert the power it enjoys in this instance. Might makes right. Clearly this is a bipartisan power play, with no voices above a whisper in all of Washington questioning the wisdom of this harsh muscling of one of our closest allies and trading partners. From the loftiest perspective, we might simply have to accept the idea that the Western family of nations just can't have one of its members getting as rich and powerful as fast as it has, and is pulling Japan down in a kind of global egalitarian power play.

Another point I raised in my discussions was a concern that the growth agenda of the Reagan-Bush years, as enormously successful as it has been, is not being advanced in the rest of the world. I've been warning for years that when Eastern Europe and the USSR were ready to import democratic capitalism, we would most likely send them the Keynesian ideas and advisors of the Carter-Mondale-Dukakis team. This is exactly what has happened in Poland and the rest of Eastern Europe, which have been welcomed to the West with open arms and a bottle of IMF austerity that is poisoning all of them. The sole exception is East Germany, welcomed by West Germany's Chancellor Helmut Kohl with a monetary union that will avoid the austerity route. Kohl rejected the advice of all his economists with this brilliant stroke. So far, Kohl is man of the year.

In Latin America, democracy is getting a bad name in Argentina, Peru and now Brazil. The Sao Paulo stock market greeted the grotesque economic program of the new president, Fernando Collor de Mello, with a 12.1% drop Monday, 20.9% plunge Tuesday, 22.9% crash Wednesday, and a 7% slide yesterday. I stopped by the Brazilian embassy and asked which Ivy League economists were advising President Collor. The answer: His economists are Brazilians who studied at MIT. Why, I asked the Bush people, are we not sharing our wisdom with these good people? Why isn't the President celebrating our success, sending bottles of this growth wine to Eastern Europe and Latin and South America? After all the trouble we went to in Panama and Nicaragua, not a finger has been lifted by the U.S. Treasury team of David Mulford and Charles Dallara to assist in getting growth ideas into these countries. They are still trying to get Mexico to devalue the peso, when they are not yelling at Japan. An IMF team has visited Managua recently peddling austerity. Violeta Chamorro's closest economic advisors, I'm told, went to Yale.

I had thought that as Secretary of State, Jim Baker would be energetic in pushing international economic policies. But he has left the field completely to Treasury, Commerce and the Special Trade Representative. Third world diplomats tell me they had looked to the State Department as an ally during the Reagan years, with the rest of the government agencies tending to push them around in reflection of the vested commercial interests in the United States. But not with the Baker State Department. JBIII has been enormously successful in his geopolitical role at State, but there's been almost a total vacuum in economics at Foggy Bottom's fudge factory.

The one bright spot I found in my Washington trip this week was a sense that this may be changing. For the first time in a year I found general dismay over the state of economic policymaking in several of the Latin nations and confessions that not enough has been done to stamp out IMF austerity. Vice President Quayle's trip earlier this month to Argentina, Paraguay, Brazil and Nicaragua turned up persistent complaints about IMF pressures to raise taxes and devalue, and Quayle is stirring up discussion about this among the in-and-out baskets in the administration.Worry about Nicaragua after Violeta's inauguration April 25 is gnawing away at consciences. The zaniness in Brazil may be a blessing in disguise. I told the folks at the Brazilian embassy that Collor at least is not subjecting the economy to a slow death, but is killing it quickly. Poland's miseries, as designed at Harvard, should have the same effect in Eastern Europe, raising serious questions about the prescriptions being offered by Western economists. The upper echelons of the State Department are showing signs of life in these matters.

For the most part, though, the Bush Administration seems settled into a relaxed, low-risk, Beltway posture. It's probably not quite fair to compare it to the Ford Administration, although it is the closest in my direct experience. A friend in Washington who has been around longer thinks the low-risk Eisenhower Administration is a better parallel. Then again, I was there this week on the last day of winter and only the first day of spring. There are fewer signs of vitality than I'd like to see, but perhaps part of that is seasonal.