Our first reaction to a NAFTA debate between Vice President Gore and Ross Perot was negative, for the simple reason that we do not have much confidence in the Veep's forensic skills. It is too easy to imagine Perot cutting him to pieces, wiping out any chance NAFTA could pick up momentum as the November 17 vote approached. After pondering the situation over the weekend's talk shows and newspapers, we have to acknowledge there may be some method to this madness. The most important is the President's willingness to raise the stakes in this political wager, at a moment when it seemed only enormous effort on the part of the Republican leadership could save him. In a sense, the Gore-Perot debate is not as important as the fact that it ends any doubt that Bill Clinton is fully committing what little political capital he has to the trade agreement. The gamble has finally pushed Hillary and health care off the table.
It was also encouraging to learn that it was the Vice President's idea; he wasn't simply drafted by the President's clever political handlers after one of their brainstorms. This tells us Mr. Gore himself weighed the risks and understands he can handle the job. It even suggests to some people I've talked to in Washington that Gore knows there are more Democratic votes available for NAFTA than the Administration has been letting on, and this is not quite the desperation gamble the White House has been advertising. Perot, after all, has been a broken record on NAFTA and is likely to seem shrill. Gore doesn't have to win the debate, outpointing Perot on this parry and that thrust. He needs to only do better than expected. This should not be too hard, especially since we now see the White House drawing larger circles around the argument. It is correctly making NAFTA a foreign-policy issue, not merely an economic one. This puts America's global leadership on the line in a way that can strike a responsive chord even with those who might have doubts about the economic cost/benefit arguments: If the United States is going to lead by example, now and into the 21st century, it cannot begin by retreating on NAFTA. If Gore succeeds in making this argument, it's not hard to imagine sentiment shifting overnight toward the trade agreement. It's not like he's arguing a case for troop deployments in Bosnia, Somalia or Haiti. At bottom, NAFTA is a tax cut, which should not be that hard a sell, even for Mr. Gore.
If this analysis is correct, we would see a nice stock market rally later this week. First, Gore would be seen as having helped the cause, with even GOP leaders applauding his performance and announcing Perot the loser, then the Administration would announce several key House Democrats switching to support of NAFTA -- on the basis of Gore's performance and the rosy feedback from the grass roots. The stock market, of course, likes tax and tariff cuts, which promise a bigger economy ahead. A market advance would be accompanied by a bond market rally as well, as expectations would improve in a positive direction about the Fed's need to tighten or even "tilt" in the direction of tightening. (It remains amazing to us how the financial press continues to report bonds weakening with expectations of a stronger economy even as it reports stocks weakening with expectations of a weaker economy.) If this analysis is wrong, NAFTA is doomed, stocks and bonds will be hammered, the President and Congress will look absolutely awful, and Ross Perot will be riding higher than ever. I hope I'm right.