The Next Two Years Jude Wanniski October 31, 1990

To judge by the telephone calls in the last few days, the despair among Polyconomics' clients about the next two years of the Bush Administration is so complete that what remains of my patented optimism seems almost perverse. The dominant school of thought, which includes many of the Reaganauts in Washington's political and intellectual circles, is that the real George Bush has revealed himself in the last several weeks as a man without vision or solid beliefs, that he doesn't even realize how thoroughly he has been humiliated by the Democrat brain-trust, that he isn't going to change, that we are stuck with him, and should dig in for the duration; it is utterly hopeless to expect him to repair his presidency in any meaningful way. A smaller, less abject school assumes there will be serious soul-searching by the President and his family and friends after next Tuesday's elections. GOP congressional leadership will chip in with gloves-off advice. So will the Cabinet. And as a result, changes will be made in people and policies. It only takes a few people in key posts to screw up an entire government. It only takes a few changes to get things humming again. At this point, though, it takes an unusual degree of optimism to believe the President will know what changes to make.

If we stand back for a moment, we can begin to rebuild our confidence about the future with the simple realization that even successful political revolutions have to expect to surmount counterrevolutionary forces. As mighty as they may seem, the Democrats are not an especially interesting force. The class-warfare themes they've been playing lately are so moth-eaten that the Democrat leaders are rightly astonished that they've worked at all. The Gipper would have shredded that stratagem, as he often did when they would dust it off.

No, the really interesting political party remains the GOP. What we've seen this year was certainly messy, but it may have been the Last Hurrah of the Old Guard. When three out of four House Republicans voted with Rep. Newt Gingrich against the White House budget deal with the Democrats, it should have been clear the party's base is solidly with its growth wing. These backbenchers, who for the most part were originally attracted to the banner of growth and opportunity Rep. Jack Kemp ran up in 1976, are getting stronger each year, not weaker. If President Bush is to win re-election in 1992, he will have to accommodate his party's future, not its past.

In 1980, the Reagan Revolution wrested power away from the austerity forces that had dominated the Republican agenda for half a century. George Bush, of course, had come out of that tradition, but in the Reagan years, as Vice President, he seemed swept up by the success of the revolutionary economic ideas at their center. In his New Orleans "read my lips" acceptance speech, he seemed converted, but in politics, conversions are rarely complete. The idea that deficits are immoral has been the curse of the GOP from Hoover to Dewey, Goldwater, Nixon and Ford, a guilt trip the Democrats have gleefully encouraged.

The Old Guard in the Bush Cabinet, as exemplified by Treasury Secretary Nick Brady, has always been vulnerable to the assertion that the Reagan growth years were bought by credit-card deficits. In 1981, the Old Guard captured David Stockman at the budget bureau with the immorality argument, spawning the nation's worst recession since the 1930s. In 1990, Richard Darman, arch-enemy of "now-nowism," became the budget moralist in his quest for a deal at any price. Until the very last moment, the growth forces had pinned their hopes on White House chief of staff John Sununu, who had promised there would be no deal without a capital-gains tax cut to offset the contractionary elements of the summit deal. When Sununu, who was wedged between Brady and Darman, caved in, the rout within the administration was complete.

In blocking the first deal, Newt Gingrich performed an incredibly important service to his Republican Party. Without his leadership, the growth wing of the GOP would have been without a leader, Housing Secretary Jack Kemp being inside the Cabinet, bound hand and foot. Had Gingrich not elevated the opposition, we could not now be contemplating a vigorous reassertion of the GOP's growth wing next year. It would be scattered and demoralized. The White House is putting out the word that Gingrich forced them to agree to a worse deal, in order to get Democrats to pass what Republicans would not. The argument itself displays a certain intellectual vacuity that is the hallmark of the unprincipled pragmatist. To the naked eye, both junk piles that Gingrich tried to sweep from the House floor were of equal height. The stir he made thrilled the growth forces in the GOP. The battle was lost, but the banner is still being carried in strategic retreat.

Regrouping for 1991 and beyond will be most successful if it does not assume that President Bush will come 'round automatically. Gingrich cannot expect in January, when the Democrats put forward their latest plan to tax the rich with a millionaire surtax, that the Bush administration will be any more successful in countering this political theatre than they were this year. House and Senate Republicans will be advancing their own growth agenda in January, not out of any inflated idea that the Democrat Congress will lie down and adopt it. They will have to prepare for 1992 and the Republican platform, and a Presidential race with or without George Bush at the top of the ticket.

Unless the President makes some critical changes in his economic and political team, he will continue to find himself floundering with a divided and dispirited party, sinking in the polls. As the GOP cannot be united under an austerity banner, the only alternative is a return to growth. The President's tendency of course, will be to reach down into his bag of old acquaintances even in putting together a White House reorganization. It is already in the breeze that an "economic post" will go to retiring Rep. Bill Frenzel of Minnesota, who the President knows from his days on House Ways and Means in 1967-70. Frenzel is dyed-in-the-wool, the ranking Republican on the House Budget Committee, whose chief economist is Martha Phillips, wife of Kevin Phillips, who has been among the most relentless foes of the Reagan Revolution.

Among the most important posts to be filled is a political one, the chairmanship of the Republican National Committee. From the earliest days of the Bush Administration, RNC Chairman Lee Atwater has been incapacitated by a malignant brain tumor. Because he is one of the few political operatives who enjoys the confidence of the President, Atwater's absence as an active player this year left Darman and Sununu in complete charge of the political scene. Robert Teeter, the President's pollster, had been counseling a growth strategy from the beginning of the year. But all critics of the Darman budget strategy have been muffled on the grounds that he is in charge, and that's that. Atwater at full strength, could have broken through the palace guard. Other GOP operatives like Ed Rollins of the House Campaign Committee were alarmed at the process throughout, but could not get a hearing.

Clearly the best choice for RNC Chairman would be Jack Kemp, at least at this point --  with the GOP having been successfully recast by the Democrats as The Party of the Rich. More than any other Republican, Kemp is identified with the poor, the homeless, the minorities, economic growth and entrepreneurial capitalism. Kemp at the RNC would send the strongest signal that the Bush Administration is getting back on that track. At the RNC, especially with the President contemplating 1992, Kemp would be a player to be reckoned with in economic policymaking, not the outsider he has been to date. The GOP would recoup the youth vote and make deep inroads in black and Hispanic America. Kemp would have two dozen African-Americans recruited to run for Congress by '92. One would instantly have to bet on Bush's re-election if he appointed Kemp. Who, though, is the front-runner for the RNC? I'm told that it is the President's loyal friend Robert Mosbacher, Secretary of Commerce, yachtsman, polo player, and one of the wealthiest men in the Cabinet.

Sununu as chief of staff would have been exemplary, but for his excessive confidence in and unalloyed support of Darman. Even now, Sununu is taking most of the heat for the budget debacle, demonstrating the ability of Darman to deflect criticism from himself. It's at least possible to imagine Sununu recovering and functioning well in the next two years of a growth administration. It's hard to imagine Darman hanging around, however. Now that he has bagged his $490 billion Deal, he would simply be pushing around peanuts, and he will never again enjoy the confidence in his skills that the President and Sununu placed in him. One would hope that Treasury Secretary Nicholas Brady would resign after more than two hapless years on his beat. There are any number of younger growth-oriented Wall Streeters who the President knows from the Yale Alumni Club who could quickly get Treasury in shape. I will send the names if asked. I'd really love to be bullish on Bush again.