On December 26, 1975, I wrote the lead editorial for The Wall Street Journal, entitled "A Major Presidential Mistake." President Ford had just stunned his conservative supporters by signing the energy bill, extending energy price controls: "Giving the President the benefit of every doubt, it is difficult for us to see how he can recover the confidence of those who must believe he means what he says if they are to support him. In signing the energy bill, he has brought that confidence down to a low point, making a mistake as big as the presidency itself." That one decision, prompted by the energy bureaucrats and some of the big oil companies led by Mobil Oil, more than anything else ended the Ford presidency. Ronald Reagan, who had been a peripheral nuisance, instantly leaped ahead as the standard bearer for the free market, coming within a few delegates of taking the nomination from Ford the following summer. In the fall campaign, Jimmy Carter promised the governors of the oil states — and the tens of thousands of little oil people and farmers who had leased their land to them — he would repeal the Ford decision. Carter won the election (and promptly broke his campaign promise).
President Bush has now, with finality, made a mistake of similar proportions. By continuing to embrace the advice of the economic incompetents around him, announcing in the Oval Office yesterday that the cancer eating away at the nation is merely a PR problem, Mr. Bush has made it all but impossible to "recover the confidence of those who must believe he means what he says if they are to support him." The deflation we are seeing in the financial markets has far more to do with this cold realization than with any specific piece of bungling by the White House. If he were able to rise above the collective ineptitude of his economic team, as The Wall Street Journal editorialized yesterday, there would be hope for the national economy and the world economy as well. As it is, the President has decided to sit things out and hope that prosperity is indeed just around the corner, without his having to lift a finger to get there. This morning's Journal report, "Bush, Sensing Only a Public Relations Problem, Will Delay Any New Economic Plans Until 1992," p. A22, might as well be etched into his political tombstone.
According to Budget Director Richard Darman: "I think that we have not yet done as good a job as we should have in communicating effectively what it is we're really for and why it really does make sense." Within hours of Darman making this statement to reporters, White House chief of staff John Sununu carried the administration's message on capital gains to the MacNeil-Lehrer evening newscast. Since rich people have most of the money, he said, they have to have incentives to invest it, and we should not get upset if they become richer. To Mr. "Trickle Down" Sununu, who has an IQ of 180, we award a tall, conical hat and a stool in the corner, joining Treasury Secretary Nick Brady. (Psst, John: Rich people invest in tax free bonds and hoard gold bars; a capgains cut rewards the $2 bettor for risking his after-tax earnings on a long-shot enterprise.)
The White House has essentially adopted the strategy we recommended to Darman two years ago: Blame the Democrats, especially George Mitchell, for blocking a Senate vote on capital gains, and send Vice President Quayle out on a speaking tour to stir up the grass roots on this issue. That was the strategy appropriate for '89. The voters are aware from coast to coast that the White House and Treasury have bet all the chips on Balancing the Budget in the intervening two years. On the Sunday talk shows, Quayle sounded like an old phonograph record, dusted off to blare about "The Mitchell Recession." The reality is that the economy is being strangled by a scarcity of capital that can only be relieved by a capgains cut. The American people have only come to steadily see Bush watching the strangulation from the back of a golf cart, muttering about public relations, and how everything would be okay if folks would just go out and buy some new cars and houses and, er, yachts.
Housing Secretary Jack Kemp still thinks he has some leverage to get something accomplished. There will be an Economic Policy Committee meeting this week at the White House, to kick things around some more. The only thing Kemp can do to rescue the President is to get him to reverse himself on the do-nothing strategy, and negotiate with the Democrats for a growth package, which is the strategy I offered Darman two months ago -- suggesting the President offer a fourth bracket on million-dollar incomes in exchange for a 15% capgains tax. To do this, the President would have to bring the Congress back into session after Thanksgiving. They would all have to give up their December vacations, for goodness sakes. And the President would have to overrule Brady, Darman, Boskin and Sununu, which is why it will not happen.
George Bush is no Ronald Reagan, who at various times fired his closest friends at a moment's notice when it became plain to him they were clogging up his chessboard. Not George Bush. He needs his economic team to perform a heart transplant and they only know how to do foot-in-mouth transplants. Several GOP congressmen suggested to me the other day that he only needs to order his team to change direction and they will do so. Not so. They might scrub up for a heart transplant, I said, but when they get into the operating room they will go for the feet.
As in 1976, it seems highly likely the only alternative will be on the Democratic side. The Democrats will, I predict, nominate a genuine, growth-oriented candidate who will campaign for the elimination of the tax on capital gains and for a new capitalism, a bottom-up capitalism instead of the top-down capitalism of this White House. A straw in the wind: On the David Brinkley show Sunday, during an on-camera discussion of capital gains, Brinkley off-camera was heard to mutter that it is an absurd tax that should be eliminated altogether.
Jack Kemp should really quit the Cabinet and challenge the President. If he decides to do so, and tells the President, he might even force a change of personnel and policy, obviating the need to leave. But unless he's actually prepared to enter the political battle directly, his inside maneuvers will have no appreciable effect. With Pat Buchanan and David Duke as GOP primary alternatives in New Hampshire, I would absolutely change my New Jersey voter registration back to the Democratic Party, the way it was from 1957 to 1978.1 would not be alone.