Coming Up, an Interesting Weekend Jude Wanniski July 29, 1993

Tonight is the night the Senate-House budget reconciliation conference has set as its deadline. If it can't come to an agreement on a $500 billion deficit reduction target, the budget is dead, at least through the August recess. My guess is that the conference will meet the deadline, because it has the relatively easy assignment of hitting the target with some combination of tax increases, spending cuts, smoke and mirrors -- all the while knowing the votes do not yet exist to enact their combination in either the House or Senate or both. Next week is all that's left before the August recess, which means the package has to be ready for a House vote by Tuesday morning at the latest. The House leaders will not permit a vote unless they are sure the President has the votes in the Senate. They will not ask House Democrats to drink from the hemlock cup unless they know the Senate is sure to follow. This means the White House will have to round up more votes than it now has in the Senate, where the President's position has been steadily deteriorating. There's a small chance the Senate will vote first, but that doesn't alter the fact that the votes are not there. A number of Republican Senators now believe next week will pass into recess without votes in either house, as they detect a growing sense among their Democratic colleagues that a vote for the budget will cost them their seats in next year's elections.

The weekend will be critical in deciding how it goes. The talk shows and newspaper commentaries will be dominated by the budget issue. All the big guns will be out in force, making final statements and appeals. The President's one remaining pitch is that there is no alternative. He appears to have definitely lost Sen. David Boren, the Oklahoma Democrat, who caved in at the last minute to allow the budget to be voted out of Senate Finance. Boren genuinely agrees with the reasoning of the completely unified Republicans that the tax-and-spend budget approach will slow, not grow the economy, and will increase, not decrease, the deficit. It's a good bet that most Democrats agree with him and that many hope he stands firm, so they might be able to avoid a suicide vote next week. There are, though, plenty of true believers. At the extreme is Sen. Bill Bradley of New Jersey, who insists that higher and higher tax rates are necessary to hit the $500 billion target because: "We've got to get this economy moving." 

Ross Perot will have two appearances on the weekend, the first Saturday on the Evans & Novak show, then on Sunday's "Meet the Press." We must remember that President Clinton shifted gears and promises after his election last November in response to Perot's 20% showing as an independent candidate. The assumption was that Perot's supporters are primarily deficit hawks, so if Mr. Clinton wanted to add that 20% of the popular vote to his 43%, he had to be hawkier. We always thought the President misread the Perot appeal, and of course the route he has taken has left him with support for his budget of exactly 43% of the people (in the latest Wall Street Journal/NBC poll). Perot has snipped and snapped throughout, mainly critical of what he's seen while awaiting a single package from Congress. What he has to say about it this weekend may make a difference. It's hard to see the Perot I knew last spring agreeing with Bill Bradley, that higher taxes will get the country moving again -- although the later Perot of summer and fall focused on the deficit rather than growth. I wonder what he thinks about the multi-billion-dollar National Service boondoggle the President is pushing side by side with his austerity budget. If there ever was a time for Perot to return to his early, popular themes, this is it. I'll be all ears.

We've also kept Perot informed about the Rangel-Wallop bipartisan initiative I've been writing about for almost two months, as an approach to the budget that combines Perot's early focus on growth through entrepreneurial capitalism and his later focus on the deficit. Rangel-Wallop has not yet been mentioned in The New York Times, even sneeringly, but it's alive and well. The National Journal's Congress Daily this morning reports of "Steps Taken Toward House Alliance," about a meeting yesterday of leaders of the Congressional Black Caucus (CBC) and of House Republicans. Congressman Rangel [D-NY] tells me he was spotted by a reporter going into the office of the House Minority Leader, where the meeting was held, and asked why in the world he was going in there. "I told him I was a minority. Isn't this where I'm supposed to be?" The meeting included Rangel, Rep. Kweisi Mfume [D-MD] and Rep. Bill Jefferson [D-LA], all of the CBC, and House Minority Whip Newt Gingrich, Rep. John Kasich [R-OH], ranking Republican on the Budget Committee, and several other GOP House leaders. According to individual accounts from several of the participants this morning, it seems the meeting could not have gone better. Hands were shaken on first steps toward a growth alliance, which involves the essence of the initiative by Rangel and Sen. Malcolm Wallop [R-WY]. The Republicans agreed to support several proposals of the CBC and the CBC agreed to advance the idea of indexing capital gains. Rangel, who chairs the tax subcommittee of Ways & Means, offered to hold a day of hearings on the economic and revenue effects of indexing when Congress returns in September. These several weeks of discussions have heightened awareness of how growth solutions can be blocked by computers programmed to ignore risk-taking, the most essential ingredient to growth.

If the President's budget fails, or even if it does not, the participants apparently agree to pursue the ideas behind the alliance. The expectation on both sides is that one way or another, it will be clear three months from now that Rangel-Wallop's time has come. It will soon be clear the economy is growing slower than had been projected by OMB and CBO, and so are revenues and job creation. Kasich told the NJCD this morning: "We're serious about this. We happen to believe as growth Republicans we can naturally be in alliance with the black caucus...The dream would be a compassionate opportunity society." Mfume said no single issue was on the table, but that "everything" was being discussed, including reconciliation.

  The Washington Post this week asked me to write an article on all this for the Sunday "Outlook" section, which I have done, circulating a draft in advance to those mentioned in the piece. It opens thus:

President Clinton is about to risk the economy, his presidency, and the Democratic Party on one roll of the dice. With no support from House or Senate Republicans, the President's budget has to succeed in expanding the economy, creating jobs, and lowering the federal deficit, or he and his party will get all the blame for the failure.

He doesn't have to take this gamble. In the spirit of bipartisan compromise, Rep. Charles Rangel [D-NY] and Sen. Malcolm Wallop [R-WY] have been working on an alternative to the high-risk deficit-reduction plan that is emerging from the Senate-House reconciliation conference. 

The material in the rest of the article is familiar to those of you who have been getting our missives. It does make it clear that if President Clinton takes up Senate Minority Leader Bob Dole's offer to work out a bipartisan compromise, Rangel-Wallop would be the first thing Dole puts on the table. He said as much last Sunday on CNN's "Newsmaker" show when asked if he expected party leaders eventually will get together: "Well, I think it depends on the President. Certainly he'd have to take the initiative. But we're prepared to do that. We've got some pretty good ideas on retroactive indexation of capital gains, to make it retroactive and prospective, do some other things that may attract even some members of the Black Caucus."

The events completely rule out a kind of leadership "summit" meeting that produced the 1990 Budget Deal. Dole and Reps. Dick Armey, Gingrich, Kasich, and other GOP leaders have essentially promised the Black Caucus that the white guys aren't going to get together this year at Andrews AFB to slice up the pie. A bipartisan compromise has to reflect the input and interests of the Black Caucus or there will not be one. 

A moment's reflection should persuade you that these are positive, healthy developments, which should have lasting effects on the nation's political economy. We're still hoping for the best, which would mean Democratic gridlock this weekend, postponement of budget decisions through the recess, and a fresh start in September. And if the President somehow defies the odds and gets Congress to go along with his high-risk gamble, it will only serve to demonstrate how futile it is to try to tax an economy to prosperity -- and Messrs. Rangel and Wallop will be in sudden demand.