Yes, President Bush is fired up, sleeping with a picture of Harry Truman under his pillow and waking up to eat nails for breakfast. He might even pile enough muck on "Slick Willie" to eke out an Electoral College victory in November. But as the GOP convention closed in Houston last night, even the most optimistic GOP scenarios anticipate the return of a dominant Democratic Congress. We'd have another four years of divided government as the electorate is forced to defend against the budget-balancing proclivities of the Country Clubbers who remain firmly in control of the Republican Party.
The Times headline this morning reports "BUSH PROMISES ACROSS-THE-BOARD TAX CUT AND AN ECONOMIC REVIVAL IN A SECOND TERM." The President's acceptance speech, though, didn't really promise to do anything but "propose" to reduce taxes "provided we pay for these cuts with specific spending reductions that I consider appropriate, so that we do not increase the deficit." This is the old time religion of Hoover Republicans, putting the budget ahead of economic growth. The President sort of apologized for the 1990 budget deal, for breaking his read-my-lips campaign promise. The budget deal remains firmly in place, however. These most critical lines of the speech were probably dictated by Budget Director Richard Darman.
"I will also continue to fight to increase the personal exemption and to create jobs by winning a cut in capital gains taxes," the President noted as an afterthought. His campaign managers have clearly decided to downplay capgains. My guess is that even though the President barely lifted a finger for capgains, he's weary of the subject, which he identifies with HUD Secretary Jack Kemp and the "supply-side zealots," as the Times refers to us this morning. In the next two weeks, the Bush team will see how far they can go in closing the gap with Governor Clinton, by hammering on "spending cuts" and "family values." If Clinton is adroit in hammering back, keeping his edge by putting the economy ahead of the budget, the President will have to try something new by Labor Day -- which his handlers reckon is the last chance they'd have to try a new theme.
I'd still think it possible they could index capgains by executive order. The idea now seems deader than a doornail, not really because the lawyers say it would be risky, but because the campaign team doesn't want to be distracted from the themes it has developed. My sense is that the direction of the President's speech was already cast in bronze by the time Jim Baker and Bob Zoellick showed up, although I'm shocked that he would permit the truly stupid gimmick of having taxpayer's "assign" 10% of their income tax to debt reduction remain in the speech. JBIII is the only person who could alter the campaign's direction, which could result in revival of indexing. The fact that Congress is now unlikely to produce a tax bill the President could sign, given his determination to run against Congress a la Truman, would provide an obvious opening to try executive action. I'm afraid the polls will provide just enough encouragement to keep the campaign on this track. As you can be sure not a moment's thought has been given to providing winning issues to House and Senate GOP candidates, the best we could expect with a Bush victory is the same old gridlock. If Clinton were to now embrace a flat tax, which the Times today continues to push, we'd probably break out of the gridlock.