Another Clinton Comeback
Jude Wanniski
August 7, 1995


It has now become clear that President Clinton has come back from the dead, to the point that he now must be favored for re-election. In the wake of the November 8 Republican sweep, the President seemed a dead duck in '96. At the moment, he is even beginning to look good to me, compared to the current entries in the crowded GOP field of contestants. As a one-time Democrat who finally gave up on the party in 1978, part of an exiting crowd known as "neo-conservatives," I begin to see in Clinton a vehicle for the Democratic Party's long overdue reorganization. His resilience can be explained by his willingness to learn on the job, a job he almost surely did not think he would land when he threw his hat in the ring back in 1991, when President Bush seemed a cinch for re-election. His problems in his first two years in office can be chalked up to his reliance on the inexperienced crowd who helped him to his 43% win in the three-man race. He understandably misinterpreted his mandate as a national demand for socialized medicine, inasmuch as his chief handlers and his wife led him in that direction. He coupled this with a tax increase on the rich, to balance the budget, which he was led to believe was the attraction of Ross Perot.

Coming in cold, Mr. Clinton relied heavily on his pollster, Stan Greenberg, to shape his agenda, while at the same time using Franklin Roosevelt as his role model. When this mix proved calamitous on Nov. 8, the President briefly shifted to a Harry Truman mode, stressing partisan division as HST did in dealing with the Republican 80th Congress. In realizing he could not run on this track with House Speaker Newt Gingrich, the likes of whom Truman did not encounter in 1947-48, our young and versatile president decided to go with the flow. The turning point was a January exchange of compliments in the House, with Rep. Bob Torricelli [D-NJ] holding out an olive branch and Newt accepting it in a gracious inaugural speech that praised 40 years of Democratic accomplishments, particularly in civil rights. Picking up these vibes, Clinton praised Ronald Reagan in his State of the Union address, demoted the class warriors in his entourage, downgraded his pollster, and brought in Dickie Morris, an erstwhile counselor who is so attuned to the national ethos that he is comfortable talking to Republicans as well as Democrats.

As the House left town Friday for a well-earned August respite, President Clinton could pat himself on the back. He is in a winning groove, what columnist Mark Shields describes as a checks-and-balances President. This simply involves total acceptance of Speaker Gingrich as head of government, while he remains head of state, chief executive and Commander-in-chief. From this position, he will also represent the interests of his political party as best he can, but these are subordinate to his official duties. He can threaten to veto all legislation, but will have to sign most. House Minority Leader Dick Gephardt chafes under these realities, but that is his fault, not the President's. After all, Gephardt's persistence in waging class warfare led to the Nov. 8 Democratic debacle. The President is not only comfortable in his new role he is relevant. Where Newt insists the budget be balanced in 7 years, the chief executive says it can realistically only be done in 10, perhaps 9. The President must permit the Republican government to reform the school lunch program, for example, but where Newt proposes to eliminate the peanut-butter-and-jelly sandwiches, figuratively speaking, the President can save the peanut butter but not the jelly. His pleas to save the spotted owl will save the owl, but concede the spots. Abroad, he barks, but does not bite. Commander-in-chief Clinton continues to take note of Republican demands that he get tough in Bosnia and bomb the Serbs back to the stone age. The public quietly applauds his inaction, preferring indecisiveness to an Americanized war. As head of state, he rattles commercial sabers against Japan and China, but stops short of trade war.

The President implicitly concedes the 105th Congress to the Republicans in the 1996 elections, although he won't say so out loud. His message to his partisans is that this is the only way they can at least save the White House, giving the party another four years to retrofit and reorganize. A most important part of this message is that President Clinton is closing down the party's reliance on class warfare as its primary glue. In its most practical terms, this means acceptance of the GOP's position on the taxation of capital gains. A Democratic congressman close to the leadership told me last week that "the White House has crossed that threshold." He added that the House Democratic leadership assumes the White House has an understanding with the GOP leadership that will lead to a budget this fall. Other sources advise me there will probably be one veto of the budget reconciliation, permitting the President to demonstrate his relevance in the negotiating process. There will, though, be a budget enacted this year, and it will contain the 50% exclusion on capital gains. The only open question will be its effective date. House Ways & Means Chairman Bill Archer has promised to make it retroactive to January 1, but there are doubts that this will survive the reconciliation process. Newt Gingrich can put such doubts to rest with a public statement putting his pledge atop Archer's, which I expect to see before the month is out.

The President can fuss around the edges of legislation that comes to his desk, but he cannot stonewall the Republican Congress on the budget and hope to be re-elected. If he cannot come to terms with Speaker Gingrich and Majority Leader Dole on budget reconciliation, the government will be financed on continuing resolutions for the next two years, until the voters can send a Republican to the White House. The GOP rank-and-file, especially the big freshman class, expects the President to meet them half way in the closing negotiations, and we do too. Inasmuch as Wall Street has already discounted a good piece of the capgains cut and its retroactive effective date, we would have at least a 10% sell-off between now and year's end if there is gridlock in Washington. This translates into a stagnant economy in the election year. Inventories now being built to sell into the bigger economy which the stock market advance is discounting would have to unwind.

How will a stagnant economy affect Mr. Clinton's re-election chances? That depends entirely on how the country assesses the behavior of the White House and Congress this fall. The incentives are driving both toward budget and political reconciliation. The conventional wisdom that a weak economy hurts the President will not hold true in 1996 if the Republicans are held responsible for a budget impasse. The President will be blamed, though, unless he can somehow persuade the public that the GOP is being unreasonable, which will require him to revert to a strategy of confrontation and class warfare. This is why we see resolution and a continuing bull market through year's end.

In this scenario, the President can go to the voters next year with a strong economy supporting him, plus a record of defending the poor, the young, the elderly, and the minorities against the excesses of the slash-and-burn Republicans, plus a record of having extended the peace. In the campaign, he would present an agenda close enough to the GOP candidate's to satisfy the electorate's demand for fundamental reforms tax simplification, a devolution of power, a measured pace toward budget integrity. The inference will be that a Republican president and a Republican Congress cannot be trusted to manage these reforms with sensitivity and patience, but that a re-elected Clinton will be able to continue working in the right direction with Newt Gingrich and the 105th Congress.

We have here a plausible scenario for a Clinton re-election. It is one that works against the GOP front-runner, Bob Dole, who I do not believe can be sold to the national electorate as a power partner with Speaker Gingrich. Their hard edges in combination will present an unacceptable risk to those Democrats and independents who would have to abandon Clinton in turning both legislative and executive branches over to the GOP, with conservatives also holding an edge in the Supreme Court. This is why there is so much continuing interest in a Colin Powell candidacy, or the encouragement of the soft-edged Steve Forbes, or the hesitation of Gingrich in closing the door to his own candidacy. When all is said and done, the Comeback Kid may do it again.