You have to hand it to Senate Majority Leader George Mitchell. The clear leader of the congressional Democrats, Mitchell was brilliant last October in badgering the White House into throwing away its winning hand on capital gains. Now, two thirds of the way through this 101st Congress, he practically has the Bush team on its hands and knees, whipped into a supplicant position at the budget summit. Somehow, the Democrats have gathered all the credit for being the responsible party on the deficit, without having proposed any tax increases, at the same time they are pushing up spending for their special interest groups. The Bush Administration, on the other hand, is seen as being responsible for the runaway costs of the S&L bailout, profligate on defense spending when we should be getting a peace dividend, and ready now to move its lips on taxes.
Wednesday's Wall Street Journal brought it all home with a report that when White House Chief of Staff John Sununu "took a thinly veiled swipe at Congress last month on taxes," the Democratic leadership reacted furiously. House Budget Committee Chairman Leon Panetta "called Budget Director Richard Darman to protest that Mr. Sununu had jeopardized fragile deficit-reduction talks." Senator Mitchell protested in a television interview that such talk, painting Democrats as pro-taxes was "untrue, unfair, and ill-timed." The concern of the Senate Democrats, the story made clear, is their fate in the November elections. They do not think it nice that the Republican President and his political party make an issue of taxes! Richard Darman's budget strategy, as we have been pointing out ad nauseam, requires that partisan politics be put aside on the tax issue. The GOP must not fire its elephant gun.
Darman has actually been brilliant in persuading the President that this supine strategy will yield a budget agreement, complete with a capital gains differential, significant spending cuts, reforms of the budget process, plus an easing of monetary policy by the Fed. Others in the White House have been equally brilliant in persuading the President that the new Clean Air Act will win him the plaudits of the greens, the new Civil Rights Act will win him the enduring affection of Benjamin Hooks, and the NAACP will convert black America to the GOP. In The Times Thursday morning, two members of the Michael Dukakis policy staff gloat, in an op-ed titled "Dukakis Triumphs...," that President Bush has "adopted verbatim" several other policy ideas laid out by the Massachusetts Governor in the 1988 Campaign.
The question arises: Suppose supplication succeeds? Suppose Darman gets a watered-down, phased-in capgains cut in exchange for a watered-down combination of excise taxes and spending cuts against a truncated Gramm-Rudman target? And hokey clean air and civil rights quota legislation gets signed into law? Will it be so bad?
In an absolute sense, it would not be the end of the world. As long as the Fed avoids deflation in the period ahead, which we are still banking on — given a decent replacement for outgoing Vice Chairman Manuel Johnson — the economy will continue to chug along in the above scenario. The shame is that the President seems content with the crumbs the Democrats might allow him to have in return for his spiking of the elephant gun. A few good blasts from him would in fact energize the GOP at every level of government, setting the stage for major political gains in Congress and in the state capitals this fall. At the moment, though, the White House seems determined to avoid ideological conflict with the Democrats, as if it's afraid of losing ground in the opinion polls. With the Republican National Committee also out of action during Lee Atwater's hospitalization, partisan politics seems suspended in Washington. Why bother with the November elections?
Because Senate Democrats are explicitly responsible for blocking capgains last fall, with debilitating effects on the U.S. economy, capgains should be the centerpiece of the GOP political campaign this fall. But it is only one of the growth issues that President Bush should be elevating. The Democrats have successfully blocked enterprise-zone legislation for nine years! The liberal agenda does not call for rapid economic growth in the inner cities; the balck community has to be tied to the Democratic Party through affirmative action, quotas, contract set-asides, and welfare -- the recipe that gave us the underclass and the liberal plantation. The White House is not allowed to mention any of this, as it might irritate George Mitchell and Benjamin Hooks.
Similarly, the GOP has been trying to remove the earnings limitation on Social Security recipients for years. Millions of senior citizens would be drawn into the work force. It would add immeasurably to their well-being as well as their incomes, and the nation's wealth. But the liberal agenda does not call for more economic activity by the younger elderly. Senior citizens have to be tied to the Democratic Party by encouraging the idea that the Bush Administration might propose freezing benefit levels in order to balance the budget. If President Bush turned the issue to his advantage and made noise about it, though, the Democrats might be annoyed. Rep. Panetta might call Mr. Darman and demand that he get the President to clam up, or he will jeopardize the budget talks.
It is flatly amazing that the congressional Republicans, including House Minority Whip Newt Gingrich, the "firebrand," are coasting along with this non-partisanship. There was a small flurry of activity last week, when Sen. Bob Kasten of Wisconsin and Sen. Connie Mack of Florida dared to introduce a 15% capital gains bill as an alternative to the Administration's phased-in 20% bill. Their bill would actually jolt the economy into higher gear, liquify capital immediately, produce a surge of revenues at every level of government, and halt the bleeding at the S&Ls. Upon announcement of the plan, which appeared in The Wall Street Journal June 4, the Dow Jones Industrial Average celebrated with a 34-point rise.
The White House response was to assure the press that this was not really serious stuff. Treasury Secretary Brady, who was once a U.S. Senator and who "gets along" with the Senate Democrats, assured his old pals that the capgains plan his Treasury team devised was still the preferred article as far as he was concerned. Any suggestion made in the last several months that Brady criticize the Senate Democrats for blocking capgains and weakening the economy is met with a standard: "Maybe somebody should be doing that, but not Secretary Brady. He wouldn't want to damage his relationships with the Senate Democrats."
Senior officials in the Administration tell me how happy they are that I am writing articles about the damage to the U.S. economy from the high capgains rate. There's little they can do, though. The President is firmly behind the kinder, gentler strategy. A large part of the reason, it's clear, is that Richard Darman does not attach as much importance to capital gains as he does to budget reform. In this regard, he is a reincarnation of David Stockman, who talked the Reagan Administration in 1981 into subordinating his electoral mandate of tax reform to spending austerity, which was not Reagan's campaign message of 1980. Darman has subordinated capgains to his own agenda of eventually paying off the national debt. It remains my genuine belief that the national electorate, which knows budget austerity is not what is called for, continues to elect Democrats to Congress to protect them from this perverse Republican impulse that traces back to Herbert Hoover.
My bullishness about the financial markets has been based on a belief that congressional Republicans would soon tire of appeasement and would inform the White House that they were going their own way. Instead, they have been schmoozed by the White House into continued docility. If they are only patient, maybe the Democrats might even agree to cut a few entitlement benefits! Even The Wall Street Journal editorial page has been schmoozed into silence, Darman dangling the idea that maybe he might be able to get a line-item veto, a Journal pet idea, out of the Democrats.
Rep. Vin Weber of Minnesota is the only member of the GOP leadership who is making any noise at all, but he doesn't have sufficient visibility to ignite the issue, as Gingrich would. In the Administration itself, HUD's Jack Kemp is the most frustrated, but is tied down by the requirement that he be a team player. Conservative leaders for the first time this week began talking among themselves about advising him to resign, not out of pique or opposition to the President, but with the rationale that he will be better able to help elect Republicans to the House and Senate this fall if he were free to swing at the Democrats.
In my 30 years of analyzing the politics of Washington, I can't recall another time as devoid of partisanship as we now observe. Now that democracy has triumphed in the Soviet Union and Eastern Europe, and we finally see a public clash of ideas there, it has somehow been suspended here. We can be sure it can't last because it's unnatural. Too much power is at stake. And power abhors a vacuum.