September Songs
Jude Wanniski
September 10, 1991


ROCK AROUND RECOVERY: We continue to hear that the White House is increasingly nervous about the anemic economic recovery and will soon "step up the rhetoric" about a growth package. White House chief of staff John Sununu on "Meet the Press" Sunday sang the same old song, however: The Administration's domestic program (the Budget Agreement) is bearing fruit; the recovery is underway and the economy will continue to improve, especially if the Federal Reserve lowers interest rates some more. Asked by The Wall Street Journal's Washington bureau chief Al Hunt why President Bush has barely mentioned the capital gains tax cut proposal in recent months, Sununu insisted the President mentions it in "every other speech." This is true, but there have been almost no domestic speeches since spring, and the "mentions" have been pro forma. The one important breakthrough came when Sununu said there are the votes in the House and Senate to pass a capgains cut, but that a vote has been been blocked on procedural grounds. The next step is for the President to argue that economic growth would now be robust if Senate Majority Leader George Mitchell hadn't blocked the capgains vote two years ago. The President keeps finding reasons not to do so, in the interest of getting some other important legislation through Congress, as with the "fast track" trade authorization in June. Now, the Clarence Thomas Supreme Court confirmation will keep the White House from giving serious attention to the economy for another several weeks.

BOND MARKET BOOGIE: We're delighted to see a little bond market rally after suggesting the potential of a big-time rally over the next few months. We must remind you again and again that it is the way the Fed signals its intentions which is critical. At $350 gold, plus or minus, the long bond seems to belong at about 8% flat. To make its way to 7.5% and below, the 30-year bond has to get a little 30-year philosophy from Alan Greenspan & Co., built around signs of price-level targeting of critical commodities.

MARIO STATUS CUOMO: The Governor has just about persuaded the political community that he is absolutely, positively not going to run for the Democratic presidential nomination, now describing himself as "an old crocodile." None of the several dwarves who have expressed interest could mount a serious campaign against the President, I'm afraid, and the country desperately needs a spirited contest of ideas. Former California Governor Jerry Brown, who has just formed an "exploratory committee," is the most interesting political figure to surface in this desert, a small potted palm. Brown contacted me several weeks ago and since then we've had several extended telephone conversations about history and economic and political philosophy. His bent is definitely populist, as opposed to elitist, and he's energetically entrepreneurial, almost anti-establishment. I actually campaigned for his father, Pat Brown, in 1958, when I was in my Democrat phase, a student at UCLA. And I admired Jerry Brown's 1976 run for the Democratic nomination, when he defeated Jimmy Carter in five of the last primaries after a late start. I tried to interest him in supply-side in 1978-79, and he remembers having The Way the World Works on his desk in Sacramento. But he got sidetracked on an environmental moonbeam instead. Chicago Tribune columnist Mike Royko dubbed him "Governor Moonbeam," not disparagingly, as most people think, but admiringly. You will be tempted to smile when you think of a Jerry Brown versus George Bush campaign, but we would surely get a spirited contest of ideas. Brown, 53, considers Cuomo "the best of the old breed." Both, incidentally, were raised Catholic, with Jesuit training. Pat Caddell, who was Gary Hart's jockey in '88, is in the saddle for this ride. As usual, my counsel is available, pro bono, to all candidates of both parties. As they say, the best things in life are free.

LATIN RHYTHMS: We have given up on Peru for the time being, after spending more than 50 man-days in three separate visits to Lima. There have been great expressions of interest from the government and business community, which is why we went down in the first place, but no serious interest in financing a Peru Project. I've had to cut our losses, however. We have an empty office/apartment rented in Lima if any of you would like a little vacation in the land of Shining Path and cholera. We seem to be having better luck in Puerto Rico, where the Government Development Bank and business community are interested in a Puerto Rico 2004 Project, eager to get rapid growth rates keyed to hosting the Olympic Games in San Juan that year. The Games have never been located in the Caribbean. The prime mover is Richard Carrion, president of Banco Popular and probably the most influential businessman on the island, a member of the International Olympic Committee as well. We are keeping an eye on Brazil, too, since our old friend Marcilio Marquez Moreira was named Economics Minister a few months ago. He's made some of the right economic reform moves, in a small way, but we're afraid he may get tangled up in difficult structural reforms that should be shelved until the economy is on a fast growth track again. The central bank of Nicaragua finally has the cordoba anchored to the dollar and is seeing a nice buildup of dollar reserves, all this against the advice of the IMF, of course. We are being asked to do a small study on tariffs and regulation. Meanwhile, we continue to push ahead on the region's pacesetter, Mexico, with a press conference yesterday in Mexico City to present our newest paper on Mexico's infrastructure needs. See the nice splash on P.I of yesterday's Journal of Commerce. By the way, when we first advised in 1989 Mexico would be the fastest growing economy in the hemisphere for the balance of the century, the market capitalization on the Bolsa was a mere $8 billion. That's now up to $50 billion, up 107% just since January 1, still a long way to go to hit $1 trillion early in the new century, if it doesn't get cold feet along the way. Arriba!