Scattered Thoughts Jude Wanniski April 8, 1997

TRENT LOTT: As much as the mild-mannered Mississippian tried to avoid budget gridlock and preserve bipartisanship, the same political forces that brought the 104th Congress to a standstill are grinding the 105th to a halt. The Senate Majority Leader’s distress yesterday at the failure of the GOP congressional and the Democratic White House teams to make progress on Medicare spending cuts  threw more cold water on Wall Street this morning. Lott is a potentially powerful piece on the chessboard, but given the constraints of his position, he is not the chessplayer we’d hoped he might be. He can’t budge in his negotiations because the troops behind him have each insisted they will not budge. If there is a single step that could be taken to break the logjam and move the budget process ahead, it would be a GOP decision to drop the $500 kiddie credit. This has been the millstone around the party’s neck since Newt Gingrich promised the Christian right-wing lobby that he would deliver this new entitlement program for them. As long as Senator Lott carries this burden, he has to try to find savings in Medicare, which is the minefield that destroyed Newt last time around. 

NEWT GINGRICH: At his GOPAC speech last night, Newt finally said something that could be fruitful, as opposed to his recent intellectual meanderings in Asia and at home. The House Speaker challenged Federal Reserve Chairman Alan Greenspan to make recommendations to the Congress and White House on how the U.S. economy might grow at 5% per year for an entire generation, without inflation. This is something that Newt should have done before writing his “Contract With America,” with its $500 kiddie credit and watered-down capital gains tax cut. If Newt were to pursue this line and exert what is left of his political energy and capital, the newlywed Fed chairman could be able to swing gridlocked political forces in a positive direction. Greenspan might say it could not be done, but he knows it could be done with a scenario that included a gold fix at $350 and a simplified tax system that excepted capital gains. In a speech last week in Atlanta, Newt talked about growth so rapid that we could be paying down the national debt. His remarks were filled with economic formulations that indicated he still does not know much about public or private finance, but there at least remains a spark of life in him. 

ALBERT GORE: I was pleased to see Joe Klein’s assessment of the Vice President’s trip to China in the April 7 New Yorker, as it was about the only thing written that comported with my assessment: Under extremely difficult circumstances, Gore impressed me with his discipline, running a Confucian gauntlet that he knew in advance would have the political right and left trying to cut him to pieces. Why? Because he represents what is basically a sound position by President Clinton toward Beijing. The maniacal coalition that has formed across party lines to hammer China on trade, human rights, and national security had a field day making fun of Gore. He held himself together by keeping his mouth shut as much as possible. I’ve never met Gore, although I knew his father a bit when I wrote about Senate politics in the late 1960s, but I had been greatly underwhelmed by him until very recently. The Dick Morris book shed some light on talents and intellectual resources I had discounted. His performance in China shed some more.

BILL CLINTON: The President has a 56% approval rating, and although there is much he could be doing to please me more, at the moment I would have to count myself as having more positive thoughts about the man than negative. He would be a much better President if he had an effective Republican leader to push against, but it is very hard to move the country without bipartisan agreement on direction and pace. It has been the breakdown of Republican leadership that holds Clinton back. As long as Republicans are fractured in their priorities and objectives, there’s no prospect for serious negotiations with the President and the Democrats. 

TAX ‘SUMMIT’: The GOP leadership will sponsor a “Summit on Tax Rate Reduction” on April 15, organized by Jack Kemp and Empower America. Lott, Gingrich, and other GOP congressional leaders will gather to “reaffirm their commitment to lower tax rates and an end to the IRS as we know it,” as it was put in a press release. The summit will be a waste of time unless it cuts loose from the $500 kiddie credit and announces it will produce a tax bill to be sent to the President before a budget reconciliation later this year. The country is tired of media events and photo-ops.

BONDS: There were reliable weekend reports that the White House “gave” Alan Greenspan the interest-rate hike two weeks ago, for old times’ sake, although it did not agree with the Fed’s decision. The inference is that the administration will openly denounce a rate hike if one should be in the works at the time of the May meeting of the FOMC. If you had not noticed, there is now practically unanimous agreement among Democrats and Republicans, liberals and conservatives, in Washington that the Fed should not be raising interest rates. And yet Wall Street continues to assume there will be another 50-basis points tacked on to fed funds before the squeeze ends. 

MIDDLE EAST: The Israeli government of Benjamin Netanyahu needs heavy pressure from the United States in order to face down its own belligerents in the Likud Party. President Clinton doesn’t seem to think he can apply that pressure unless Republicans join him in condemnation of the Israeli government’s new housing construction in East Jerusalem. Republicans are as fractured on foreign policy as on domestic. Netanyahu thus gets away with the idea that the Palestinians are responsible for terrorist violence when he is only responsible for building houses. That is sophistry, inasmuch as the Palestinians argue that the property upon which the Israeli houses are being built belongs to them. It is a point at issue, to be negotiated. When official justice fails, vigilantes take over. There can be no justification for terrorism, but it is ridiculous to think that Netanyahu is up to anything but undoing the peace process begun by the late Yitzhak Rabin, assassinated by a Jewish terrorist. No country has stepped forward to defend Israel, including the United States, although Clinton ordered the UN resolution chastising Israel vetoed. There are no obvious options, absent U.S. leadership. There is no leadership from Clinton in cutting the baby in half at the UN.

CHINA, MFN: There may be some private initiatives in the works to ease political tensions between Congress and the Beijing government that are related to China’s treatment of religious worship. The central problem is the absence of diplomatic relations between the Vatican and Beijing. Twenty-nine countries -- almost all of them Catholic -- recognize the Republic of China on Taiwan, not Beijing. Catholics can worship in China and receive sacraments that Rome assures them are valid, but the government will not permit services at those churches that refuse to register with the government and declare they are not tied to Rome. That is, if Rome will not accept the sovereignty of the Chinese government, China will not recognize the sovereignty of the Vatican. Catholic priests are not oppressed for saying mass, but for not registering in the prescribed manner. There are some minor issues that exist between the Holy See and Beijing, but with any kind of determined effort, it does not appear the problem is insurmountable. Sino-American relations would improve by leaps and bounds.