To this point in the budget impasse the 73 freshmen House Republicans have been bearing the brunt of the public opprobrium for the government shutdown. To all informed observers, however, it is clear the hard core liberal Democrats in the House and Vice President Al Gore have been wielding control. Led by House Minority Leader Dick Gephardt, they have been using all their skills to prevent the President from making any kind of deal with the GOP. They would prefer a stock market crash and a recession. Even the First Lady, a skilled Wall Street investor, surely understands what would occur if the visceral liberals are successful in wrecking the talks. When President Clinton popped into the White House press room yesterday afternoon for a quickie press conference to take some cheap shots at the GOP, the DJIA fell 20 points in a few minutes. It rebounded briefly on reports of progress, but the slide this afternoon reflects the sober assessment that for the moment the liberals have the upper hand. NASDAQ continues its sickening slide, with the market for fast-growing enterprise anticipating a dribbling away of relief on capital gains even if there is a deal somewhere down the line.
If the President is determined to have an agreement instead of a recession, we will get one. This morning’s editorial in The New York Times, “The Budget Scrum,” is a clear indication that the Democratic Establishment wants an agreement. The editorial takes a perfunctory potshot at the GOP freshmen, but the core of its commentary is a warning to Bill Clinton: “Mr. Clinton’s skill in gaining political advantage from the current situation has been impressive. But his tactics leave even his allies confused on how much he really does want a compromise balanced budget, as opposed to an impasse on which he can run for re-election while defending longstanding Democratic principles.... Mr. Clinton needs to emerge as a President who can remain resolute in the face of opposition; but at a certain point the chief executive of a Government that cannot open for business will look weak.... Right now, Mr. Clinton may have more to gain by holding out on the budget while insisting he wants to reopen the Government. But there is clearly a deal within reach, and the public will remember who walks out of the wreckage with it.”
President Clinton needs this kind of pressure from the Democratic center to keep the process moving toward the deal. Pressure from the Republican center is working against a deal. Just as we warned on December 18 [“Budget’s Weak Link: Bob Dole?”], the Senate Majority Leader this week chimed in with the GOP Senate “moderates” in painting the 73 House GOP freshmen as the bad guys standing in the way of a deal. (The Times, bless its editorial heart, even chided Clinton for taking his eye off the deal in order to exploit this GOP rift.) Instead of caving, in order to demonstrate how much more reasonable he is than Newt Gingrich, Dole should have been developing the “character issue” by demanding the President keep his word -- which is the chief complaint against Clinton by the House Republicans. Weeks ago, Dole the Weathervane, swung around to support the dispatch of the U.S. troops to Bosnia, so that President Clinton could keep his word to the Europeans. This year Dole swings around so Clinton can break his word to him, as well as to the House GOP leaders and the American people. All the House Republicans want is assurance they no longer have to negotiate with themselves -- which is what Clinton’s November 19 promise was all about.
We still have little doubt that there will be a deal, but the Senate-House split is causing new doubts about the shape of the capital gains provision that survives. The visceral liberals may be successful in playing for a stalemate that can only be broken by watering down the provision until it has lost its punch. The only protection is Dick Armey’s understanding of how important capgains is to the economy and his willingness to give in on other issues in order to preserve as much as possible on capgains. The House Republicans remain a bulwark against a general cave-in, with only three defectors in yesterday’s vote on the Dole retreat. There are also plenty of Democrats wary of the no-deal goal of the hard core liberals. The combination is enough, we think, to give Gingrich and Armey the clout they need to negotiate until they are sure the President is bound to a firm track. We will hear tonight of a new Gingrich initiative to force the President’s hand.
If there is no deal by the weekend, we may then see a House recess, a walkout to January 23, when the President delivers his State of the Union message. The gridlock becomes preposterous when the President has to submit a budget for fiscal 1997 when the government remains shut down for fiscal 1996. How will Mr. Clinton show the budget balance over seven years to which he has agreed? There also remains the question of the debt limit, which still hangs over the negotiations and the financial markets. The administration says it will run out of all possible resources at the end of January in order to meet debt obligations and pay any portion of the government expenses. As much as we would like to be able to make rational sense out of the myriad variables that confront the participants, our final analysis can only rest on an intuitive sense, a feeling, that a muddled compromise will somehow emerge. The agents of change will finally topple the agents of reaction.
Some of this intuitive confidence is based on the fact that there are two separate issues here, which seem impossible to resolve when merged, but can be resolved when separated. To be sure, Dole’s initiative was to cave on re-opening the government, on the grounds that we can trust the President to negotiate in good faith even though the House Republicans insist we can’t. Having gotten himself out on this limb, Dole is at least in a position to extract some concessions from the President in order to give Gingrich something to take to his troops. As the Times put it this morning: “It is also time for the White House to resolve the budget impasse by sketching more details of the President’s own thinking on how to achieve a balanced budget in seven years, as House Republicans demand.” In this light, it was helpful to see this afternoon that the budgeteers have scheduled a meeting while the meeting of the principals was postponed.
In calculating odds, it is useful to note that the hard core liberals represent the last gasps of the obsolete New Deal agenda. Their force was clearly spent in 1994 when the Gingrich kids swept into Washington, with white hats and a banner of fundamental change. Like a drowning man coming up for the last time, they will do or say anything to stay alive. They will even take recession over agreement, cheering a stock market decline on the grounds that it will make the rich poorer like everyone else. When you are going under, promises mean nothing, truth is beside the point. Keeping an idea alive is all that counts, no matter the wreckage. Bill Clinton may sympathize with this wrecking crew, but we don’t think he wants to go down with them.