He's an archconservative who thinks big and knows how to get things done.
With NAFTA as an ugly precedent, the proposed trade pact is generating serious opposition from a number of social and economic sources.
A campaign to help sick people in need of unaffordable medicines is clashing with forces in the global pharmaceutical industry.
In one of the most foolish and cruelly ironic urban public policy decisions in recent memory, New York Governor George Pataki and New York City Mayor Rudolph Giuliani are planning to shower a series of subsidies, expected to total more than $1 billion, on the high citadel of self-styled free-market global capitalism, the New York Stock Exchange.
In December the city entered into a letter of intent to assist the NYSE in constructing a new trading floor. The arrangement commits the city to acquire land for the new exchange building, and for the city and state to construct a new trading floor for the NYSE and to grant it tax and subsidized energy benefits. In exchange, the taxpayers receive $10 million in annual rent, which will never come close to reimbursing the city and state for their costs.
The sole purported rationale for this corporate welfare bonanza is to retain the NYSE in New York City. If one were to credit this claim, the gift of more than $1 billion for the purpose of retaining fewer than 6,000 jobs--while not even ostensibly creating new ones--would, even by the corrupt standards of job-retention- blackmail deals between corporations and politicians, set a high-water mark for casuistry. However, the deal is even worse than that description suggests. There is no chance that the stock exchange would leave New York City. When I went on the NYSE floor last year and asked veteran traders about the possibility of the exchange moving to New Jersey, they laughed as they dismissed it out of hand. In addition to the institutional identity and reputation of the stock exchange, its personal connections to Wall Street firms--committed to New York City by history, by the Manhattan residences of many of their principals and employees and by long-term office rental commitments, increasingly sealed by yet other city subsidies--preclude the possibility of a move across the Hudson to become the Hoboken Stock Exchange.
NYSE's New Jersey ploy is nothing more than a ruse for covering public officials using what Justice Louis Brandeis once called "other people's money." As is typical of such arrangements, the corporate-politician conspiracy to ramrod the deal is shrouded in secrecy and in contempt for democratic processes. The city refuses to make available to the public a copy of the letter of intent it signed with the NYSE to proceed with the deal. The architectural plans for the building complex--expected by preservation advocates to generate outrage--remain concealed. The governor forced legislation authorizing the deal to go forward on a super-expedited basis, leaving legislators virtually no time to review the bill. They proceeded to pass it unanimously. New York City Council members also have failed to object to the bill.
The Fourth Estate, perhaps inured to the issue by the steady drumbeat of announcements regarding New York City taxpayer subsidies for big business, has done a less than stellar job covering this boondoggle. The New York Times editorial page endorsed the scheme years ago, when it was first being floated. Recognizing "why some oppose on principle any concession to the blackmailing tactics of businesses that threaten to move unless they get public assistance," the Times concluded that New York had no choice but to succumb. "If New York City refuses to play this game, other, hungrier cities and states will take advantage of that passivity." Apparently, the corporate executives at The New York Times Co. found this argument persuasive. In February the Times and New York City completed their own corporate welfare deal--giving the Times $29 million in tax breaks and other incentives to maintain its offices in Times Square.
It would be hard to script a more brazen and shameless corporate giveaway than a billion-dollar donation to the emblem of global capitalism from a city where nearly one in three children lives in poverty, and public investment necessities go begging. But the final act of the NYSE drama has yet to play out: There is still time for the citizens of New York, and at least one of the candidates seeking to replace Giuliani when his term expires at the end of this year, to demand cancellation of this corrupt deal.
Resident Bush's budget brandishes the camouflaged conservatism that is the hallmark of this disingenuous Administration. It advertises a 4 percent increase in discretionary spending that's in reality virtually a freeze, after taking into account inflation and population growth. Since spending on the military is going up, the amount actually committed to domestic programs is cut by 4.7 percent in real per capita terms. Bush boasts an 11 percent increase in education funding, but much of that simply counts money committed in last year's budget. And the increase is offset by deep cuts in expenditures for job training and displaced workers, even as the economy slows.
Much of the budget is fraudulent, knowingly so. Spending must be squelched to afford Bush's tax cut while paying down the debt. But the President isn't serious about cutting popular programs. So he calls for deep cuts in farm programs, which he knows Republican senators will block. He ends subsidies to US shipbuilders, which he knows Senate majority leader Trent Lott will reverse. Otherwise, the largest losers are environmental, renewable energy and energy conservation programs. Bush's answer to the energy crisis is to drill on every jot of federal land that might hold oil. His prescription for those concerned about global warming is presumably a little more arsenic in their water. The real military budget remains a mystery, awaiting the Defense Secretary's "strategic review." Yet, even the defense marker used in the current budget returns the military to its cold war average.
Democrats and moderate Republicans are boasting that they've already abandoned the Bush budget and are falsely declaring victory because they knocked a quarter off his tax cut. Congress will surely add money to education, restore funds to children's health and disability programs, and protect farmers (read, agribusiness). And it is likely to double the funds Bush earmarks for a prescription drug benefit in Medicare. We will witness a furious debate over these numbers, with Democrats and moderate Republicans in the Senate facing off against the remorseless Tom DeLay and his conservative majority in the House.
Lost in this scrapping is any mention of the real opportunities facing the nation. Years of economic growth have generated potential government surpluses--$5.6 trillion at the most recent estimate. Now, with the economy slowing, we have the chance to invest in making the country better and help jump-start the economy at the same time. Bush's most disingenuous claim is that his budget "takes care of our needs." In reality, it merely assumes that all needs are met and projects a continued decline in federal domestic discretionary programs to their lowest levels as a percentage of GDP in history.
Instead, we could truly address the disgraceful truth that in this rich nation one in six children is raised in poverty and deprived of the healthy, fair start vital to equal opportunity. Now we have the resources to rebuild an aging and overburdened infrastructure--witnessed daily in the power blackouts, collapsing sewers and aged water systems, overburdened airports, deferred toxic waste cleanups. Now we can redress the growing shortage of affordable housing and insure that every American has access to healthcare. We could even meet the international standard for foreign assistance and lead the world in providing real debt relief for the poor nations and in launching a humane response to the AIDS pandemic. All these are within reach--but are ruled out by a bipartisan consensus that more than half the surplus ($3 trillion over ten years) must be used for debt reduction in the name of "saving" Social Security and Medicare. Bush would consume the rest of the projected surplus (if not more) with his tax cuts, about 40 percent of which will go to the millionaires in the richest 1 percent of the nation. Democrats seem ready to declare victory if they can trim Bush's ten-year tax cut by 25 percent and spend the savings primarily on a prescription drug benefit.
We are about to witness a debate about priorities in Washington. But none of the alternatives debated will address our challenges or our opportunities. If progressives in the Democratic Party are to serve any function, it's time for them to find their voice.
When NAFTA was adopted in 1993, Chapter 11 in the trade and investment agreement was too obscure to stir controversy. Eight years later, it's the smoking gun in the intensifying argument over whether globalization trumps national sovereignty. Chapter 11 established a new system of private arbitration for foreign investors to bring injury claims against governments. As the business claims and money awards accumulate, the warnings from astute critics are confirmed--NAFTA has enabled multinational corporations to usurp the sovereign powers of government, not to mention the rights of citizens and communities.
The issue has exquisite resonance with the present moment. On April 20 thirty-four heads of state gather in Quebec City to lead cheers for a Free Trade Area for the Americas. The FTAA negotiations are designed to expand NAFTA's rules to cover the entire Western Hemisphere. The Quebec meeting should provide good theater but not much substance. Tony Clarke of the Polaris Institute, in Ottawa, says the meeting is intended to be "a face lift for the whole global agenda, by portraying free trade as democracy." Protesting citizens will be in the streets, challenging 6,000 police and Mounties, with an opposite message: Democracy is threatened by the corporate vision of globalization.
Chapter 11 of NAFTA should become a defining issue for FTAA negotiations. Many, including Clarke, vice chairman of the Council of Canadians, believe corporate governance was and is the FTAA's intent. "There is a conquering spirit at the heart of all this," he says, adding that the corporations' attitude is: "We have to get into every nook and cranny of the world and make it ours."
Chapter 11 provides a model of how this might be accomplished. The operative principle is that foreign capital investing in Canada, Mexico and the United States may demand compensation if the profit-making potential of their ventures has been injured by government decisions--"tantamount to expropriation." Thus, foreign-based companies are given more rights than domestic businesses operating in their home country. For example:
§ California banned a methanol-based gasoline additive, MTBE, after the EPA reported potential cancer risks and at least 10,000 groundwater sites were found polluted by the substance. Methanex of Vancouver, British Columbia, the world's largest methanol producer, filed a $970 million claim against the United States. If the NAFTA panel rules for the company, many similar complaints are expected, since at least ten other states followed California's lead. The federal government would have to pay the awards. California State Senator Sheila Kuehl and others have asked the US Trade Representative to explain how this squares with a state's sovereign right to protect health and the environment.
§ In Mexico, a US waste-disposal company, Metalclad, was awarded $16.7 million in damages after the state of San Luis Potosí blocked its waste site in the village of Guadalcazar. Local residents complained that the Mexican government was not enforcing environmental standards and that the project threatened their water supply. Metalclad's victory established that NAFTA's dispute mechanism reaches to subnational governments, including municipalities.
§ In Canada, the government banned another gasoline additive, MMT, as a suspected health hazard and one that damages catalytic converters, according to auto makers. The Ethyl Corporation of Virginia, producer of MMT, filed a $250 million claim but settled for $13 million after Canada agreed to withdraw its ban and apologize.
§ The Loewen Group Inc., a Canadian operator of far-flung funeral homes, lodged a $750 million complaint against the United States, claiming that a Biloxi, Mississippi, jury made an excessive award of $500 million when it found Loewen liable for contract fraud against a small local competitor.
§ Sunbelt Water Inc. of California has filed the largest and most audacious claim--seeking $10.5 billion from Canada for revoking its license to export water by supertanker from British Columbia to water-scarce areas of the United States.
§ Canada's Mondev International is claiming $50 million from the United States because the City of Boston canceled a sales contract for an office building with a shopping mall. Boston invoked sovereign immunity against such lawsuits and was upheld by a local judge and the Massachusetts Supreme Court. The US Supreme Court declined to hear the appeal. So the company turned to NAFTA for relief.
"When just the threat of a Chapter 11 action may suffice to wrest a financial settlement from a government, investors have unprecedented leverage against states," Lydia Lazar, a Chicago attorney who has worked in global commerce, wrote in Global Financial Markets magazine. Mexico, Canada and the United States effectively waived the doctrine of sovereign immunity, she explained, when they signed NAFTA.
As many as fifteen cases have been launched to date, but no one can be sure of the number, since there's no requirement to inform the public. The contesting parties choose the judges who will arbitrate, choose which issues and legal principles are to apply and also decide whether the public has any access to the proceedings. The design follows the format for private arbitration cases between contesting business interests. With the same arrogance that designed the WTO and other international trade forums, it is assumed that these disputes are none of the public's business--even though public laws are under attack and taxpayers' money will pay the fines. The core legal issue is described as damage to an investor's property--property in the form of anticipated profits. The NAFTA logic thus establishes the "regulatory takings" doctrine the right has promoted unsuccessfully for two decades--a retrograde version of property rights designed to cripple or even dismantle the administrative state's regulatory powers. "NAFTA is really an end run around the Constitution," says Lazar.
The fundamental difference in Chapter 11, unlike other trade agreements, is that the global corporations are free to litigate on their own without having to ask national governments to act on their behalf in global forums. Clearly, some of the business complaints so far are more exotic than anyone probably anticipated. These initial cases will set precedents, however, that major global firms can apply later. If nobody stops this process, the national identity of multinationals will become even weaker and less relevant, Lazar points out, since they have status to challenge government as "an open class of 'legal equals.'"
In Canada a private lawsuit was filed recently challenging the constitutionality of Chapter 11, since Canada's Constitution states that the government cannot delegate justice to other bodies. The Canadian government, itself embarrassed by the cases against it, expressed doubt that Chapter 11 should be included in the hemispheric agreement, though it appears to be backing away from outright opposition. In US localities, the cases are beginning to stir questions, but lawmakers and jurists are only beginning to learn the implications.
Does George W. Bush understand what he is proposing for the Americas? Did Bill Clinton and Bush the elder understand the fundamental shift in legal foundations buried in NAFTA's fine print? They knew this is what business and finance wanted. As the public learns more, the smoking gun should become a focal point in this year's trade debate, confronting politicians with embarrassing questions about global governance. Who voted to shoot down national sovereignty? Who crowned the corporate investors the new monarchs of public values?
In the clash over tax cuts and social programs, much of what progressives need to do is defensive. But it would be a mistake not to float new ideas, too.
In recent months, as a newly elected senator, I have had to decide whether to join the Democratic Leadership Council. I have chosen not to because while I shared its founding purpose, which was to frame a successful response to President Reagan's efforts to portray Democrats as the party of "tax and spend," social engineering and failed personal responsibility, I believe that purpose has been largely accomplished.
Today, I believe that it is vital for Democrats to stand up for a sharply defined progressive agenda--one that is committed to fighting for practical and progressive policies for working families and America's middle class--even when that means challenging powerful interests and the status quo. I am absolutely convinced that, standing on the foundation of fiscal stability that Democrats have built and to which the DLC contributed, we now have to fight for our convictions. If we begin to negotiate from the middle, the end result inevitably takes us to the right of where I believe our nation should be.
Nothing is more relevant to this point than today's debate over the Bush tax cut proposal. Democrats must remain firmly opposed to this budget-busting plan, which provides disproportionate benefits for the richest 1 percent of our population. It is relevant and essential to our argument that this tax cut is not only unfocused and poorly timed but also unfair. In fact, if we yield on fairness before the debate begins, we forfeit our fundamental ground. That is one reason I have proposed a tax cut that gives an immediate break to everyone equally and is targeted toward working families.
Moreover, the DLC has not convinced me that we should turn away from advocating an activist government--one that, for example, sees healthcare as a basic right for all Americans. And while compromise is an acceptable end, too much of it too soon has led to a paralysis on fundamental concerns such as healthcare, gun safety, the environment and educational opportunity.
The critical point to be made by progressives in our national debate is this: While there are programs that have failed and should be reformed or eliminated, proactive government has often succeeded. An activist government was a driving force in the prosperity of the 1990s, as well as in providing our historic safety net, including Social Security, Medicare and Head Start. An activist government invested in the development of the Internet and the space program and spurred today's technological revolution. It was government investment that built our highways, air transit system and much of our communications network. And the list goes on. Without progressive leadership, would segregation have been outlawed? Would women have achieved as much access as they now have to equal rights? The pressure for advancement came from grassroots progressives. That said, reform and progress required our government to respond and lead. We're still far from the ideal, as racial profiling and unequal incomes for women and minorities attest. There are no African-American or Latino senators, but at least there are thirteen women senators--surely not enough, but more than there have ever been before. The lesson of history is clear: Equal rights for all depend on public action and so do equal pay, worker safety and retirement security. The barriers to opportunity for all don't just fall on their own.
Today, the progressive agenda must address the great unfinished challenges--for women, for middle-class families, for minorities and the poor. It's a hopeful agenda rooted in ideas and our ideals. As I put it in my Senate campaign, "Everyone ought to have the same access to the American promise I've had." America must be a society of equal opportunity and equal protection before the law. So I believe the progressive agenda of our party is more important than ever. And the principle that should guide us is clear: While we can't achieve equal outcomes, we can and must assure equal opportunity.
We also have to articulate the truth that advancing social and economic justice advances everyone's prosperity. We need to challenge the special interests that would limit the rights of labor and the opportunities of women and minorities, because we need all the talents of all our people to achieve maximum productivity and growth. We need to challenge the health insurance industry and finally win the battle for universal access to healthcare, because it is morally right and economically rational. Just because conservatives have demonized the term "universal healthcare" we should not walk away from that battle for the sake of a calculated centrism that splits the difference between right and wrong.
When I was a candidate, the polls said that the majority of New Jersey voters disagreed with my opposition to the death penalty. I'm grateful the voters respected that I said what I believed even when it wasn't popular. As progressives, we must be ready to do that. Most of the progressive agenda--healthcare, the environment, gun safety, a progressive tax policy-- reflects the values and the ideals of the majority of our people. They will vote for our agenda if we present it in practical terms and fight for it.
So while I respect the contribution of the DLC and while I respect its leaders, I'm not ready to join. The answer to "compassionate conservatism" isn't timid progressivism. It's a real commitment to equal opportunity, to fiscal responsibility and a fair society. We can and must be a party with the courage to stand tall for our beliefs because that's how we will be able to win as the party of the people.
Many compared it to marching through a dream.
After seven years under siege by 70,000 Mexican Army troops in the
jungles and highlands of Chiapas, the Zapatista National Liberation
Army (EZLN) sent twenty-four delegates, including its pipe-smoking
writer-spokesman Subcomandante Marcos, on a triumphant two-week
motorcade that landed in Mexico City on March 11.
believe that in any place, in any space in this world--and I have the
memory of my own revolution twenty-six years ago--I don't remember a
more moving moment than I lived yesterday," declared the
septuagenarian Portuguese Nobel Prize-winning author José
Saramago the next morning.
The US press coverage of the
march, limited though it was, hinted at such an apotheosis: the
cheering multitudes that greeted the Zapatistas from the roadsides
and at mass rallies in twelve states along the route, the flowery
words of peace and civil rights coming to Mexico's mythical newfound
democracy. But for the Zapatistas and Mexico's indigenous movement,
the struggle now turns into a battle to codify the movement's
progress into law.
The caravan came to demand
constitutional recognition for Mexico's 10 million indigenous
citizens, subjected to generations of repression, poverty, racism and
exploitation of their lands and labor. As Mexico's President Vicente
Fox passed his hundredth day in office, he reiterated calls to the
Zapatistas to negotiate a peace. Not until the government fulfills
the promises it has already made, answered the rebels: release of
Zapatista political prisoners, closure of seven of the 259 military
bases in Chiapas, and congressional passage of the law that would
ratify the 1996 San Andrés peace agreements signed by the
government [see Jerry W. Sanders, "Two Mexicos and Fox's Quandary,"
The geographical advance was accompanied by a
steady rise in the popularity of Marcos and the Zapatistas in opinion
polls, an average gain of two percentage points per day, with over 50
percent in support. The implementation of the San Andrés
Accords is now the sticking point. Marcos and the Zapatistas, with
more than 1,000 delegates from the Indigenous National Congress,
encamped at the base of Mexico City's Cuicuilco pyramid--a circular,
370-foot-diameter stone monument that has survived at least 2,600
years of lava flows, earthquakes and urban
Underscoring their credo, "We will not sign a false
peace," the Zapatistas caused a fierce uproar when, as the caravan
was launched from San Cristóbal, Chiapas, they named architect
Fernando Yáñez Muñoz as their representative to
the federal Congress. Mexican police agencies have long claimed that
Yáñez is Comandante Germán, the feared national
guerrilla leader of the 1970s and '80s who, they say, helped found
the Zapatista army in the jungle in 1983, a charge that
Yáñez has denied. The Zapatistas have also, for the
first time, called upon other guerrilla movements to protect their
journey and remain alert, implying that if the state doesn't keep its
word, an armed guerrilla response could explode
María Luisa Tomasini, 78, a Chiapas
native designated by Marcos as the "grandmother of all the
Zapatistas," analyzed his call to the other insurgent groupsas she
was returning from the March 7 Zapatista rally in Iguala, Guerrero, a
state with at least sixteen armed clandestine guerrilla
organizations. "Clearly," she said, "it was a threat to the
government that it had better comply."
The powerful sectors
that have always gotten their way in Mexico--bankers, chambers of
commerce chiefs, right-wing clergy, the TV networks and key
legislators--are working furiously to sabotage the road to a genuine
peace. Fox's party, the PAN, teamed up with the former ruling party,
the PRI, against the left-wing PRD party to propose that the
Zapatistas meet with twenty congressional leaders instead of the
entire Congress. Marcos, noting that the indigenous of Mexico have
always been hidden "in the kitchen, on the back porch," rejected the
offer, arguing that the Zapatistas and the Indigenous National
Congress deserve to address the whole Congress. Hard-liners continue
to seek any roadblock to passage of the full indigenous rights bill
with hysterical claims that autonomy would fracture the nation, and
they vow radical surgery to the initiative.
On March 19 the
Zapatistas announced they will return to the jungle, citing the
"close minded" attitude of "cavemen politicians," saying, "Nothing
will be able to stop the popular mobilization" that stems from the
Congress's failure to act. "We will return with everyone who we are."
Immediately, thirteen national peasant-farmer groups pledged
nationwide marches, students plotted direct action and five major
indigenous groups in Oaxaca vowed to close the Pan American Highway
until Congress passes the accords. Congressional leaders begged the
Zapatistas to stay, Fox urged the Congress to meet with the rebels
and the drama now moves in unpredictable directions.
guiding principle of the San Andrés Accords is autonomy. The
word has galvanized many beyond Mexico's indigenous populations. The
battered Mexican left--peasant farmers, urban workers and especially
the nation's youth--view themselves, too, under the banner of
autonomy. Indeed, the popularity of the Zapatista struggle around the
world derives at least in part from the coherent language of
opposition to globalized and savage capitalism that they have
constructed. French sociologist Alain Torraine, who accompanied the
caravan, praised the Zapatistas during a March 12 discussion with
Marcos and the comandantes in Mexico City, marveling, "The entire
world, and we are speaking of the left, is looking for a new
language." Comandante David, a Tzotzil delegate who was a chief
negotiator and architect of the San Andrés Accords,
acknowledges that the demand for autonomy goes far beyond indigenous
rights. "We are going to explain directly to the indigenous and
nonindigenous brothers of the country that indigenous rights are for
the good of all the peoples," he said while preparing to leave on the
Autonomy--what might be called "home rule" in
other parts of the world--includes local control of land use, a sore
point for big business in Mexico, its eyes on natural
Beyond Mexico, US investors and corporate
interests, with expectations that Fox will be the most effective
deliveryman yet of Mexican resources under NAFTA, are stoking the
subterfuge. Former US Ambassador to Mexico James Jones, now a
railroad baron and rainmaker for the Manat, Phelps and Phillips law
and lobbying firm in Washington, is on the board of directors of TV
Azteca, the most notorious manipulator of public opinion among all
the Mexican media. TV Azteca joined the other broadcasting giant,
Televisa, to present a March 3 Concert for Peace live from Aztec
Stadium, featuring a laser light show, a Woodstock-style logo and the
usual condescension toward "our indigenous brothers." The prepackaged
video aired with the concert didn't mention autonomy, or indigenous
political prisoners, or 500 years of conquest--certainly not justice
in connection with the 1997 massacre of unarmed indigenous peasants
at Acteal. The only proposed solution was to send aid to the poor,
barefoot indigenous communities, an approach known in Mexican
politics as "clientism." Many analysts saw Fox's fingerprints on the
TV peace show, as both stations rely on state permission to broadcast
in Mexico. Indeed, one of the demands of the San Andrés
Accords is the right of indigenous peoples to break that control by
forming their own media, including the use of radio and television
The question of indigenous autonomy also has
consequences for the US-imposed "war on drugs." The San Andrés
Accords would restore indigenous rights to the use of currently
illicit sacred plants and codify the pre-eminence of ancient forms of
community justice. Luciano, a spokesman for the Zapatista community
of Polho, explained to me in 1998 how the autonomous system works
without constructing a single prison cell: "If a young man grows
marijuana, he goes before a municipal judge to be disciplined and
oriented so that he won't ever do it again. If the youth does it
again, there is no response whatsoever: He cannot be pardoned a
second time. He would then be expelled from the
That the Zapatista communities have had far
more success in driving out the narcotraffickers and preventing drug
and alcohol abuse than any other region of the Americas is of little
concern to the big talkers of law and order. Opponents charge that
autonomy in matters of criminal justice would "balkanize" the country
and subvert the "rule of law."
Indigenous and social
movements across Latin America--in Ecuador, Colombia, Bolivia, Peru,
Panama, Brazil and other nations--had representatives quietly
observing the caravan. In spite of the powers stacked against them,
the Zapatistas, newly strengthened, their national support deepened,
have many cards yet to play in forcing legislative victory. In the
latest of the ironies under NAFTA, autonomy may thus, and soon,
become Mexico's leading export product.
Twenty years ago this season, when another new Republican President arrived in Washington to push for massive income-tax reductions, I was having breakfast every other Saturday morning with David Stockman, the brainy young budget director, and collecting his insider account of the Reagan revolution. Stockman was the enfant terrible who implemented the supply-side agenda and promised to achieve the improbable--reduce taxes dramatically and double defense spending, while cutting other federal programs sufficiently to produce a balanced budget. It didn't work out that way. Ronald Reagan's great legislative triumph of 1981 destabilized federal fiscal policy for nearly two decades, creating the massive structural deficits that were not finally extinguished until a few years ago. Washington seems about to replay history as farce, albeit on a less threatening scale. It prompts me to reflect on what, if anything, was learned from the revolution.
My private sessions with Stockman stretched over nine months and led to a controversial magazine article, "The Education of David Stockman," in which I disclosed the contradictions and internal swordplay behind Reaganomics, but the real sensation was Stockman's own growing doubts and disillusionment with the doctrine. Both of us were excoriated in the aftermath. The Gipper likened me to his would-be assassin John Hinckley. Stockman was roasted for duplicity and cynical manipulations; for concealing the truth about the looming deficits while Congress plunged forward in fateful error. Stockman was guileful, yes, but it was his intellectual honesty that shocked Washington. That brief moment of truth-telling resonates with the current delusions and deceptions. A lot of what he said twenty years ago seems painfully relevant.
"None of us really understands what's going on with all these numbers," the budget director confided during intense budget-cutting battles in the spring of 1981. That admission should be engraved over the door at the Treasury, the Capitol and the White House. Projections of fabulous budget surpluses that provide the premise for this year's political action are no less airy-fairy. Nonetheless, official fantasy becomes the operating truth, so long as everyone bows to it. Stockman's wishful forecasts on economic growth were nicknamed Rosy Scenario by his colleagues, but now the Congressional Budget Office has matched his rosiness. The economy is expanding this year by 2.4 percent and faster next year, according to the CBO. Actually, right now it's headed into the zero-minus territory known as recession.
Stockman's boldest accounting gimmick--reporting $40 billion in budget cuts but declining to identify them--was dubbed by insiders "the magic asterisk." Bush has already topped him with his "magic blueprint" and the miraculous "trillion-dollar reserve" he saves and spends at the same time. The new President has not actually issued a real budget, only a "blueprint" that leaves out the grisly, painful details of what spending will get whacked. Dubya sounds like the Queen of Hearts: Tax cuts first, punishment later! Congressional nerds protest, but Bush intends to ram through his tax cuts before anyone has been given an honest picture of the fiscal consequences.
"Do you realize the greed that came to the forefront?" Stockman exclaimed to me twenty years ago. "The hogs were really feeding." As the Reagan White House lost control of the action, Democrats and Republicans engaged in a furious bidding war to see which party could deliver more tax breaks and other boodle to the special-interest hogs (Republicans won, but the Dems gave it a good try). The Bushies recognize this danger and are trying to wall off the usual business greedheads from exploiting the same opening this year. The deal-making may still begin, however, if the White House is a few votes shy and needs to seduce a few hungry senators with special favors. As Stockman learned, if you buy one senator, you might have to buy them all.
Another of Stockman's vivid metaphors is the centerpiece for 2001--the "Trojan horse" approach to rewarding the rich. Giving everyone the same percentage rate cut sounds fair, but actually delivers most of the money to the very wealthy, who pay the top rate. Supply-side doctrine "was always a Trojan horse to bring down the top rate," Stockman revealed. "It's kind of hard to sell trickle-down economics, so the supply-side formula was the only way to get a tax policy that was really trickle down." This year's new wrinkle is a Keynesian twist. Instead of talking about rich investors who need a little encouragement to invest in America, Bush talks about the waitresses who need a little cash to pay off their credit-card debts.
The most disturbing difference I see in 2001 is political--the role reversal between the two major parties. What Republicans learned from the revolution is this: Deficit spending doesn't really count for that much in politics--not among average voters--and a party will not be punished for creating fiscal disorder as long as other good things seem to happen. Democrats used to understand this as a visceral matter but have forgotten the street-smarts their party knew in olden days. On fiscal discipline, the two have swapped positions. Republicans, once the scolds, are now the reckless feel-good party, willing to risk big deficits in order to deliver goodies to main constituencies. Democrats, perhaps wishing for respectability, have become the party of rectitude, preaching forbearance of pleasure. Republicans want voters to have a little fun. Democrats sound like nervous bookkeepers.
Leaving aside economic consequences, Democrats have dealt themselves a very weak position, even though they're largely right about the budget accounting. Most Americans are not fiscal experts and cannot be expected to absorb all the fine-print arguments about cause and effect. Think of the old Far Side cartoon with a dog listening to his master. All the dog hears is: "Fido, blah, blah, blah, Fido, blah, blah, blah." What voters hear from Republicans is: "Want to cut your taxes, blah, blah, blah, want to cut your taxes, blah, blah, blah." What voters hear from Democrats is: "Must pay down the debt first, blah, blah, blah, must pay down the debt first, blah, blah, blah." For skeptical voters with already low expectations of government, this is not a tough choice.
The great accomplishment of Reagan and the supply-siders was to persuade the old-guard Republican Party that its root- canal approach to fiscal policy was a loser--and that recklessness can be a win-win proposition for their side. If the Trojan horse approach succeeds in winning regressive tax-cuts, the GOP delivers huge rewards to its favorite clients. If this also creates a big hole in the federal budget, that's OK too, since runaway deficits will throw another collar around the size of the federal government and provide yet another reason to slash the liberals' social spending. With clever marketing, the GOP may even persuade voters it was spendthrift Democrats who created the red ink. Even recession is OK if the timing is as lucky as the Gipper's. When this recession ends, Bush will credit his tax cuts for the recovery and claim vindication in time for re-election.
Democrats, meanwhile, are the "responsibles," telling the people to save their allowance for a rainy day. They were led into this cul-de-sac by the champion of artful deception, Bill Clinton. Two years ago, when the prospect of burgeoning federal surpluses arose, Clinton devised a very clever ploy to hold off Republican tax-cutters. We will not spend the extra trillions, he announced, we will pay off the national debt. Democrats felt exceedingly virtuous about this position, although they understood that the subtext was quite different: The surpluses would allow government to do big things again for people--someday, but not yet. A different kind of leader might have recognized that politics doesn't wait for ten-year budget projections. If Democrats wished to accomplish big things like universal healthcare or helping debt-soaked families, they should have gone for it right then while the resources were available. Instead, Clinton's stratagem actually adopted the old-time religion that Reagan had shed--a loss of nerve that is the opposite of activist government. Some Dems are agitating to change that, proposing a genuine commitment to healthcare reform and other measures, but others have internalized the bookkeeper politics and are preaching hair-shirt economics: Cancel any tax cuts if a severe recession wipes out our sacred surplus. That's a righteous recipe for more pain.
One more point: Both parties are playing with a phony deck of cards. No matter what unfolds this season, the government is not going to reduce the "national debt." On the contrary, the government's total indebtedness is going to keep growing steadily, from $5.6 trillion right now to $6.7 trillion by 2011. Despite what you read in the newspapers, that occurs with or without tax cuts and even if all the outstanding Treasury bonds are paid off (if you still don't believe it, check the CBO's latest budget forecast with its chart on page 17). The awkward fact neither party brings up is that federal financing has depended crucially on collecting more money than it needs from working people since 1983, when both parties collaborated in a great crime of bait and switch. After Reagan cut taxes for the wealthy and business in 1981, he turned around two years later and raised Social Security payroll taxes dramatically on workers (earnings above $76,000 are exempted from Social Security taxes). Ever since, workers have been paying in extra money toward their future retirement--trillions more than needed now by Social Security--and the government simply borrows the surplus revenue to spend on other things: upper-income tax cuts or paying off Treasury bonds or reducing the fiscal damage from deficits in the operating budget.
Taxing one class of citizens--the broad ranks of working people--so government can devote the money to other people and purposes is not only wrong but profoundly deceptive, bait and switch on a grand scale. Government still owes workers the money, of course, and someday will have to find the borrowed trillions somewhere, either by raising taxes or borrowing the money or possibly by cutting Social Security benefits. When FICA taxes were raised in 1983, Reagan at first objected and reminded aides that he was opposed to raising taxes--of any kind. David Stockman reassured him. If the rising payroll-tax burden was imposed on young working people, they would eventually revolt and Social Security would self-destruct of its own weight. The Gipper liked that and gave his OK. The same objective, now called privatization, shows up again this year on George W. Bush's agenda. He proposes to "save" Social Security by destroying it.