Straws in the Wind
Jude Wanniski
June 28, 1994


DOLLAR/FED: On the weekend talk shows, Jack Kemp stuck his neck out by arguing a position on monetary policy similar to ours, i.e., the Fed should not be raising interest rates further, but instead should be targeting the gold price directly. The Wall Street Journal, which has editorialized in favor of a gold target on and off for years, barely mentioned Kemp's stance this morning in a windy, confused, column-length commentary on "Clinton's Dollar Crisis." The Journal devotes most of its critique to a fussing about the nation's trade and official investment accounts, which have absolutely nothing to do with the fact that the Greenspan Fed has been adding liquidity to the banking system at a record rate. It also concludes with the argument that the nation's exchange rate in the foreign currency market is the best guide to future inflation, a departure from its argument that gold is the primary signal. It makes a difference. Still, Kemp's eagerness to make the gold argument, doing it correctly, is being carefully watched in GOP circles and with curiosity at the White House. Greenspan would love to target gold, but needs political cover from serious players to move in that direction. He and Kemp have been friendly for years. Kemp's stance at least adds more weight against the likelihood of another interest-rate increase at next week's FOMC meeting, but the gold argument will not advance further unless a heavyweight like Senate Minority Leader Bob Dole would join with Kemp -- which is unlikely, given the conventional wisdom that Kemp's advocacy of a gold dollar in the 1988 campaign was the reason he lost to Bush. Kemp, whose two weekend TV appearances were his most effective in several years, disagrees, and thinks money will be central to the 1996 presidential run. He's right.

WHITE HOUSE SHAKEUP: My initial reaction to the musical chairs is that Leon Panetta as White House chief of staff will not be good for the President's political fortunes. This is primarily because he is so fanatical on budget issues, which will tilt policy in a direction that will do little good at the grass roots, but also because he is not trained to be a chief of staff. It may not make much of a difference, though, as the President will probably continue to operate as he has in the past, loosey-goosey, making decisions on the run. David Gergen's posting as a foreign-policy advisor is being discounted, but I think he can make an important contribution there, as he understands better than most Henry Kissinger's warning against making foreign policy based on where the CNN crews aim their cameras. 

HEALTH CARE: The fate of health care seems to be in Bob Dole's hands. He will present a GOP bill later this week. Response to it will give better indication of whether he will go for some minimum compromise with the President, or seek a referendum in the polls. The conceptual outline of a plan that will be more than a laundry list is taking shape under Dole's direct involvement, as he seems eager to present a coherent program that has a philosophical appeal that can keep Republicans united. Tax deductions for individual-based insurance provide the glue.