Notes on the Revolution II
Jude Wanniski
January 10, 1995


DEMOCRATS: President Clinton’s selection of Sen. Christopher Dodd [D-CT] to be chairman of the Democratic National Committee represents a victory for the oldline liberal Democratic Establishment. It’s business as usual, which suggests continued estrangement of the “party of the people” from the people. White House Deputy Chief of Staff Harold Ickes, in charge of the recruitment process for the DNC job, is a dyed-in-the-wool New Deal class warrior, whose daddy was FDR’s Interior Secretary. Dodd’s daddy was a Connecticut Senator of New Deal vintage. Vice President Albert Gore, whose daddy was an Tennessee Senator of New Deal vintage, weighed in heavily on behalf of Dodd’s candidacy. Note that all of these Democrats more or less inherited their political positions, watered-down products of the organization. The defeated candidate was Rep. Robert Torricelli [D-NJ], a brilliant young leader of the nascent enterprise wing of the Democratic Party, which has been invisible since the assassination of John Kennedy. The Old Guard lefties wanted Dodd, who will not upset their control of Bill and Hillary. Torricelli would have begun the process of recasting the Democratic Party, throwing out the old class warriors from positions of power and setting up a serious attempt to hold the White House in ‘96 with a candidate in the JFK mold. Torricelli is close to former Rep. David McCurdy [D-OK], another JFK “growth liberal” who now chairs the Progressive Policy Institute and has been mentioned as a possible challenger to Clinton in ‘96. (You can see why Torricelli did not get the job.) The New Jersey Democrat, who I think is developing into presidential timber himself, will be our guest at our March 2-5 conference in Boca Raton.

MINIMUM WAGE: While President Clinton hunts ducks, the congressional Democratic leaders are flailing about, desperately trying to grab hold of something that will stop their slide. Last week, they had the empty idea of trying to embarrass the Republicans on campaign reform, playing the old class warfare themes. House Minority Leader Richard Gephardt and Minority Whip David Bonior only managed to show their desperation, and when the tactic failed, their usual supporters in the media chastised them for pettiness. Their trial balloon of increasing the minimum wage by $1 an hour, the proverbial snowball in hell in this Congress, further demonstrates the bankruptcy of these old New Dealers. When the topic came up on Meet the Press Sunday, House Majority Leader Dick Armey read from Friday’s White House Bulletin, quoting an unnamed administration official: “There are few of us who actually think it is good economic policy, but more than a few who think it might be good politics. Those in economic circles are being told to hold their noses.” Armey then looked across at Gephardt, fixed him with a baleful stare, and said quietly: “I will not hold my nose. I will not hold my nose and vote for something that will be injurious to the least-advantaged people in our labor force, tear the bottom rungs of the occupational ladder away from these people and never allow them to have the dignity of work.” Gephardt, who is the perfect leader for destroying the last remnants of the New Deal, insisted there is no evidence that government minimum wage mandates inhibit growth. His objective, though, is not to increase the minimum wage, but to keep hitting buttons until he finds one that stops the Democratic slide. 

ARMEY: In a note to Newt Gingrich yesterday morning, I told him that after watching Meet the Press I concluded the Democrats are even more afraid of Dick Armey than they are of him. “Fear” is the only word that describes the condition of Democrats qua Democrats. They don’t know what hit them November 8, they don’t understand their continuing slide, and they are afraid they don’t know how far their party has to fall before it hits bottom. These, after all, are the children of New Dealers. They seem to see Gingrich as a bully of a brother, whom they can handle if they gang up on him. Armey does not wave his arms or bluster or make more than the smallest of errors. More than any Republican in either house, he has intellectual command of the supply-side economic agenda, at least as it relates to fiscal policy. Like fellow Texan Sen. Phil Gramm, he has a Ph.D. in economics, but Armey’s ability to defend the Reagan revolution in human terms is especially intimidating to liberal Democrats, who can deal with Gramm’s flintiness and technical arguments, but not with Armey’s genuine affinity for ordinary people. After Gingrich and Armey met with the President last week, in a session that they regarded as productive, the President used the Gephardt-Bonior spin that “There was an acknowledgment by members of both parties, they made a mistake in 1981 by giving us trickle-down economics.” On Meet the Press, Armey kept himself under control, but he clearly was furious at the Democrats and ready to declare war: “That did not happen, and I have to tell you, I resent that statement. That did not happen...What are you supposed to do? You go in and you have a long meeting with the President at his invitation, everybody’s congenial, everybody has a good congenial meeting. You walk out and then you find the president putting a pejorative spin on the meeting regarding who you are and what you stand for that has no connection with reality. How can we reach out when, in fact, we make our best effort and we come out and we run into a thing like this?...I have to tell you, this is not a very productive way to build a new partnership between the Democratic president and the Republican Congress...This is not acceptable. We cannot have discourses if we, after the fact, will be misrepresented that way.” At the next White House meeting, we would be surprised if Armey does not take Bill Clinton to the woodshed over this. Armey is something else. He simply will not be cowed.

BALANCED-BUDGET AMENDMENT: I’ve never been a fan of the BBA and I still don’t think it will be ratified by three-quarters of the states. But I would now vote for it in order to get it to the states, as it does in fact help frame the current broad debate over the country’s direction. It will pass the House easily, but may get hung up a bit in the Senate with its provision requiring a super majority to raise taxes. The question does in fact force the Congress to decide what kind of country we are going to be in the 21st Century. The Democrats have been insisting on having the GOP spell out the cuts required to meet the constitutional requirement in seven years. Dick Armey’s comment that this can’t be done, or that it would ensure the defeat of the proposal, caused Democrats to leap at what seemed a tactical error. Armey, though, was merely defining the terms of debate and being bold about it, as now is his prerogative, not theirs. They can squawk all they want, but the GOP has the mandate and will have the votes. If the government cannot raise taxes, cannot borrow and cannot mandate costs to state and local governments, it will have no choice but to enact fundamental reforms. The easiest way to pick up $1 trillion over seven years, as we have been pointing out, is to re-commit to a gold dollar, which would save about that amount in debt service as the $5 trillion national debt is refinanced. 

1996: Sen. Gramm is in the news with his big victory in the straw poll at the Louisiana State GOP convention, with 72% naming him as their choice for ‘96. Where Bob Dole is still considered “frontrunner” at the national level, Gramm is now considered the more likely nominee by the political sages, because he seems to want to be president more than anyone else and is going about it more methodically. As the Republican revolution gathers momentum, Dole appears to be relatively motionless, but he is not going to be rushed along just because the conventional wisdom of the Beltway crowd insists he will be left behind. Similarly, Jack Kemp has been counted out because he has not conformed to the conventional schedules. He will have a private dinner Thursday night in the Capitol with five of his closest friends in politics: Newt Gingrich, Dick Armey, Senate Majority Whip Trent Lott, Sen. Connie Mack of Florida, and former Rep. Vin Weber. In Bob Novak’s syndicated column Monday, Weber is said to be pushing a Gingrich candidacy for ‘96. The column indicates Kemp is also talking to John Sears, who masterminded Ronald Reagan’s nomination in 1980. Sears, 54, a prosperous Washington lawyer with an international clientele, has not run a campaign since, but if he joins a Kemp effort, it will be for the chance to do Reagan Redux. Kemp’s next scheduled appearance on national TV will be on Meet the Press on Super Bowl Sunday. 

MEXICO: In a report today to our Global 2000 subscribers, we are pointing out the continuing errors being made by the Zedillo government in its attempt to stabilize the peso. In a grotesque parallel to the Fed’s “treadmill” experience of 1994, the Bank of Mexico has been raising the price of credit instead of draining pesos from the banking system. It gets the worst of both worlds. Interest rates have climbed back to where they were in 1988, prior to Salinastroika, about 50% on three-month cetes, the Bolsa is crashing as equities reflect a major recession ahead, and the peso is falling instead of recovering. Now, the International Monetary Fund has arrived with its poisonous advice, urging an income-tax increase on the rich! The 34% income tax bracket, which had been encountered by Mexico “tycoons” at the level of $7,000 equivalent, now hits the “rich” under the current devaluation at $4,000 annual incomes. Dr. Darth Vader, head of the IMF team, makes $4,000 in a two-week IMF pay period, tax free! California, here we come.