NAFTA: Labor Pains
Jude Wanniski
November 16, 1993


If NAFTA fails tomorrow evening in the scheduled House vote, it will not be because the leadership of the two political parties pulled their punches. After a late start, President Clinton may not have had a great deal of success in winning over reluctant Democrats, but he clearly has thrown his heart into the NAFTA effort. House Minority Whip Newt Gingrich may also have been tentative at first, telling freshmen members they could take a pass, but in the last two weeks he has been fanatical in pulling out all the stops. One U.S. Senator who heard Gingrich speak at the GOP Senate Steering Committee tells me he had never heard him as eloquent, passionate and committed -- pleading with Senators to call Republicans in their House delegations, while urging anti-NAFTA Senators to stay buttoned up. Nor has Senate Minority Leader Bob Dole held back, although he might have been tempted, with the Senate already safe for NAFTA. Yesterday morning he sent personal, individual letters to 20 undecided Republicans in the House, an extraordinary initiative, urging their support for NAFTA and, for all practical purposes, inviting them to call on him for political assistance whenever they need it. Senator Phil Gramm of Texas was masterful in his head-to-head debate with House Majority Leader Richard Gephardt. And on "Larry King Live" last night, Jack Kemp demolished Pat Buchanan, who offered an astonishing defense of protectionism throughout history, but who seemed to cringe as Kemp taunted him with the NAFTA endorsements of Richard Nixon and Ronald Reagan, both Buchanan heroes.

The New York Times today weighs in with a splendid editorial in support of NAFTA, pointing out that even though it will clearly benefit the New York metropolitan region -- the nation's financial and commercial center -- practically every member of Congress in the region is opposed, almost certainly out of indebtedness to organized labor. On the other hand, Abe Rosenthal, the former executive editor of the Times, in his column this morning switches from support to opposition -- specifically out of indebtedness to organized labor. Rosenthal out-and-out informs his readers that because Lane Kirkland has sided with him on his pet political causes, principally the Jewish refugees of Russia and Eastern Europe, he is now siding with Kirkland! What's more, all the good things he said about NAFTA yesterday are thrown out and we get instead: "Workers fear that NAFTA would preserve child labor, abysmal wages and government-police union-busting in Mexico. All of these are brutally unfair to Mexicans and to competing U.S. workers." So there.

Both sides continue to insist that they will win, the White House indicating there are several votes being counted in opposition which will, if necessary, come over at the last minute. I'm personally hoping that Rep. Charles Rangel of Harlem is among them, and that there are several other members of the Black Caucus who he could bring with him if their votes were needed. Rangel is one of those mentioned by the Times editorial this morning as beholden to organized labor. It's clear from lengthy private discussions I've had with him that he's torn several ways, wanting to be persuaded that NAFTA will not further damage the bleak job prospects of his constituents. It is, of course, my belief that African-Americans were hurt the worst by the Great Depression, which was triggered by the Smoot-Hawley Tariff Act, which is why they abandoned the party of Lincoln for the free-trade party of FDR's New Deal. It's also my belief that African-Americans will be hurt the worst if NAFTA fails, and that Charlie Rangel's constituents will be hit hardest.

The NAFTA vote is about a lot of things, which is why there is so much agony surrounding it. It has really been just in the last three weeks that I began to realize the full dimensions of its importance, almost as if these are the labor pains of a nation trying to be reborn. The New York Times/CBS New Poll this morning indicates the country is as evenly divided as is the Congress, on a knife edge between old and new. Federal Reserve Chairman Alan Greenspan, who in many ways has been responsible for finally getting the Clinton Administration fired up, says quietly: "It's not about Mexico at all."

The great majority of ordinary Americans are standing aside, watching informed opinion grapple with what may be the most important vote of the post-cold war era. It does not seem possible that, having come this far in a drive to be reborn, the vote will be one of retreat. Yet it also seems fitting that the vote will be as close as possible, which thereby elevates the obligations of the winners to address the concerns of the losers. Abe Rosenthal and Charlie Rangel, who may be switching in different directions, are not really thinking what they're thinking because they are paying off old debts. They have in their heads cyclones of thoughts of where they've been and where they and the country are going. They've embodied the old New Deal coalition, which linked organized labor, the Jewish community, and black and Hispanic minorities -- a coalition that is being pulled asunder in this NAFTA vote.

NAFTA would have been an easy vote if the U.S. economy were expanding, but who said historic change should be easy? It was nice to see President Salinas wryly acknowledge last week that one of the important lessons he has learned from all this is that you should not try to get a trade agreement passed during a recession -- a point I'd warned him about in my meeting with him in Mexico last year. Still, it was because the Salinas government had to protect Mexico against the possibility that NAFTA would fail in the U.S. Congress that the budget announced yesterday in Mexico City was so dynamically supply-side: It eliminated the capital gains tax for real estate and most productive assets, and slashed income-tax rates in the lower incomes. If NAFTA passes, the citizens of Mexico will get a double-barrelled energizing.

If the concerns of workers here are to be addressed, the Clinton Administration is not going to be able to stand pat. Treasury Secretary Lloyd Bentsen last night was asked repeatedly on the PBS Nightly Business Report if there were any plans to get the U.S. economy into higher gear, and each time he insisted everything was just dandy. An economy growing at 3% a year would not be inflationary, he said, sounding more and more like Nick Brady. The passage of NAFTA itself would not produce enough energy on this side of the border to kick the economy into a higher gear. If they wish to capitalize on the concerns of the workers, the Republicans will soon have to start goading the Administration toward a more aggressive growth agenda. At the same time they will have to fend off Hillary Clinton's plans for a health care program that would shut down entrepreneurial capitalism.

It has been a torrid political year, hasn't it? Our elected representatives have been through the wringer again and again, and they need a breather. The next six weeks, through December, will be a time of introspection, meditation and contemplation by the two political parties and by Ross Perot. On our assumption that NAFTA will pass, this spirituality will be upbeat, leading to possibilities that are now impossible to predict, but which will begin to reflect the fact of a nation reborn. There will be new combinations, new alliances, new coalitions, new objectives, new horizons. What seems impossible today will seem possible tomorrow.

PUERTO RICO VOTE: The people of Puerto Rico did not reject statehood Sunday as much as they did the strategy of the statehood advocates -- a strategy designed not by Governor Pedro Rosselló, but by my old friend, former Governor Carlos Romero Bárcelo, the resident commissioner in Washington, D.C., who still dominates the statehood party. Carlos rejected the idea that Puerto Rico's economy would suffer if its 35% income tax rate were added to the federal rate of 38%, because Puerto Ricans would be eligible for the earned income tax credit. The combination would make Puerto Rico a permanent welfare state, however, and the voters were smart enough to see that. In addition, Puerto Rico will never be a state unless the District of Columbia becomes one as well. The powerful Black Caucus would join with the Republicans in preventing two Democratic Senators who are Hispanic from taking seats with no statehood for D.C. The only answer is to turn Puerto Rico into a capital-rich economy, a la Hong Kong/Singapore, which has been my fantasy. Such an economy would produce two Republican senators who could come in with the two Democrats of the District. With the Romero-Barcelo strategy failed, perhaps Governor Rosselló can now try the alternative.