Welfare Politics
Jude Wanniski
July 31, 1996


President Clinton already has vetoed two welfare bills sent him from the 104th Republican Congress. He has now agreed to sign the third version, on the grounds it addresses some of the concerns he voiced regarding earlier efforts to end welfare as we know it. If I were Clinton, I would have been inclined to veto it, on the grounds that the economy is not strong enough to absorb experiments in ending welfare dependency, should they fail. I've agreed with New York Sen. Pat Moynihan for nearly all of the last 30 years that he has been decrying the evils of our welfare system and I agree with him now that it is much too risky to throw the dice the way the GOP reformers recommend. Their position is built upon a best-case scenario patterned after the work of Gov. John Engler of Michigan. Not only is Engler an exceptional man, but he also enjoyed unusual circumstances in carrying out his welfare reforms. His economic policies, after all, were lifting the state economy at the very time his welfare reforms were unfolding. He is a Republican chief executive who has had a GOP legislature in Lansing.

The legislation the President will now sign does not have the advantage of economic growth policies at the national level. Part of the blame for this has been the failure of Senator Moynihan, who is the most powerful Democrat on the Senate Finance Committee, to pull his party in the direction of economic growth. The cross the Senator has carried throughout his Senate career has been his unwillingness to upset the Robin Hood editorialists at The New York Times on matters of tax policy. If the economy continues to contract as it has for the last 30 years, with the exception of the few good years we got from the dreaded Ronald Reagan, the welfare experiments will be the equivalent of rearranging the deck chairs on the Titanic. When the few lifeboats are filled, Moynihan assures us the women and children will not be first.

President Clinton's dilemma on welfare has been that his campaign re-election strategy all along had been assuming that the Republicans would retain control of Congress. For a President who appeared to be a dead duck in the wake of the 1994 elections, Clinton now appears to be headed for a re-election of landslide proportions, at least in the electoral college. He owes this turnabout to the mistakes of the GOP leadership and the skills of his chief political advisor, Dick Morris, who succeeded in getting the President to sign the welfare bill. He had to take on the opposing political argument that if turnout is very low, out of disgust with the available choices in a three-way Clinton-Dole-Perot race, there is always the chance the Republicans will lose one or both houses of Congress. To the liberal Democrats who are extremely unhappy with the shape of the welfare reforms, the President's 20-point lead on Dole in the polls was the chief argument they used on behalf of a veto. Why compromise with the Republicans on welfare at this stage of the game, they said, when better legislation can be written next year when the Democrats have more leverage in Congress? Morris urged the President to sign on the grounds that he has to provide evidence he is capable of working with Republicans on these matters. If he vetoed yet another welfare bill, he will be open to GOP charges that he is simply a front man for Teddy Kennedy, the real power in the Clinton Administration. Republicans would be able to make the charge that even if Dole is unable to make a comeback, the voters should not trust the President with a Democratic House or Senate. This argument becomes more powerful when the campaign issue involves tax cuts. If the President is putty in Kennedy's hands on welfare, how can voters trust him to work with the GOP next year on a growth-oriented tax plan? The White House now is nervously awaiting the Dole plan on taxes which is expected to surface next week, perhaps on Monday. Dick Morris may have warned the President that in signing the welfare bill he gains credibility in being seen as a New Democrat who will work with the Congress on taxes. We can be sure he also is reminding the President that he cannot continue to count on Dole making mistakes without a pause. In The New Yorker this week, Michael Kelly argues that the President's big lead could crack if Dole gave the electorate even a minimal reason for changing horses at this point although Kelly doesn't see Dole getting close to a minimum.

So we have wheels within wheels within wheels. When the two candidates are driven chiefly by a quest for power, with no core system anchoring either, game theory has to replace traditional political analysis. If he were anchored on traditional Democratic principles, the President should have vetoed the welfare reform bill. To get re-elected with a mandate to work with the Republicans, Morris gave the sounder advice.

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PEROT: The results of the Reform Party's straw poll gave Ross Perot an easy victory over former Colorado Gov. Richard Lamm, 64% to 28%, which was no surprise. What is most interesting was the tiny turnout only 5% of eligible voters sent in their ballots. This tends to confirm Perot's contention all along that the nominating process was not set up to rig the election in his favor but that he really did want to build an independent Field of Dreams which would draw other candidates. If Jack Kemp had allowed his name to go forward in the straw poll, as Perot and Party chairman Russ Verney offered, it's likely the attention would have more than doubled the size of the turnout. It is also possible that Perot would not have explicitly declared a formal candidacy if Kemp had agreed to be included. It remains my belief that Perot all but guaranteed Kemp his party's nomination, but Kemp was warned away by GOP friends that Perot was setting him up ~ and that he would only damage GOP chances in November. The turnout numbers now suggest there was no set up. If I were Perot, I would invite Kemp to address the Reform Party convention in Long Beach, to share his views on economic and social policies as director of Empower America. Why not? Kemp has not been invited to address the GOP convention in San Diego.

RUMSFELD AS VEEP? Up until now, the guessing game on Dole's running mate has been a useless exercise, but it is close enough  now to speculate that Donald Rumsfeld, who is in charge of the Dole policy unit of the campaign,  will be in the final cut. "Rummy," as his friends call him, served in the House with Dole back in the 1960s. He is a youthful 65, has enormous experience in Government, and could easily be President if Dole became incapacitated.  Dole is said to be comfortable with him and to be impressed with the success Rumsfeld achieved in the business world. Problems? Rumsfeld was one of the original "downsizers" at  G.D. Searle in the late 1970s, a  staff and budget slasher who would tend to come across as a reminder of Newt. He never has been a spellbinder on the stump,
which is another minus.

FED WATCH: The headline is bearish on today's P.2 Fed story in the WSJournal, "Wages Rise, Adding to Pressures on Fed," but the article itself is excellent in making it clear that Fed Chairman Greenspan has been trying to "distinguish between desirable and undesirable wage increases." My guess is that Greenspan found a way to encourage the Journal to underscore this point, as a means of signaling the markets that he prefers this reading of his Humphrey-Hawkins testimony to the bearish interpretation. The Journal story today was far superior to the original report on the testimony to which the story refers.