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.
Multinationals, their intellectual coverings shredded, are love-bombing labor while hunting for new fig leaves.
President George W. Bush's effort to repeal the estate tax has revealed contradictions in the nonprofit sector and confusion about what it values and where it stands.
The loudest applause during George W. Bush's first budget address to Congress--a thumping, shouting, jump-to-your-feet outpouring of enthusiasm--erupted in response to his first mention of his proposed $1.6 trillion tax cut. Coming at the end of a masterful but deceitful description, with more concealed trapdoors than a funhouse ride (they have the fun and we get taken for a ride), of how he could do everything from funding Social Security to paying down the debt and have money "still left over," Bush's proposal argued for returning that money "to the people who earned it in the first place."
The country is not buying. The latest Pew Research Center poll finds that only 19 percent of Americans think the current budget surplus should be used for a tax cut, and 79 percent believe the proposed Bush tax cut will most benefit the wealthy. Meanwhile, 60 percent want any surplus used for domestic programs as well as Social Security and Medicare.
Why, then, was the response to Bush's tax cut proposal so enthusiastic? Perhaps for the same reason that the words "campaign finance reform" never crossed Bush's lips, an omission Senator John McCain wryly noted in a CNN interview. The Wall Street Journal reported the morning after the speech that industry groups have formed a coalition to push the tax cuts in what one White House adviser described as "the largest PR campaign this party has ever conducted." The same adviser went on to say that the effort "will test if we can use the power of the White House and congressional control and the lobbying world to work our will."
With the cat thus out of the bag, Bush's budget should be pronounced dead on arrival. Now is the moment for the minority party to put forth a sensible alternative: No new tax breaks for the wealthy. An earlier, bigger check--either in the form of a tax credit or a "prosperity dividend"--for middle- and low-income earners, to jump-start the economy. Prescription drug coverage for seniors and affordable healthcare for all. Investment in schools and teachers' salaries. Investment to combat the growing shortage of affordable rental housing. Electoral reforms that will insure that every vote is counted.
In opposition, Democrats find it difficult to speak with one voice. A few have already thrown in their lot with Bush. Others are looking to deal. Still others seem stuck on paying down the debt as their prime concern. Thus it is vital that progressives in the party--and the increasingly vibrant base of the party that is central to its electoral hopes--speak out independently to force the debate. Here the Progressive Caucus has done well by pushing its prosperity dividend, which would give every American a $300 check in contrast to Bush's tax giveaway to the rich. Responsible Wealth has done remarkable work organizing the statement by about 120 of America's richest men and women against estate-tax repeal. The large coalition of groups convened to fight the tax cuts--under the leadership of progressive unions, civil rights groups and the public interest community--will help stiffen the backbone of faltering legislators. The Campaign for America's Future's plan for creating a progressive leadership organization will help define and broadcast the choice we face.
Bush has benefited, of course, from the continuing press focus on former President Clinton's tawdry unpardonables and his legacy of political timidity and tactical retreat. Now, progressives must force Democrats to shed that defensiveness. The country did not vote for the Bush agenda, and the vast majority will not benefit from it. Time to go on the attack. This is a fight that can be won.
At Brazil's "counter-Davos," democracy was in; elitism, corporations were out.
When it comes to oil politics and Alaska the Bush Administration and the environmental movement are already treading the measures of a familiar dance. President Bush is insisting on the urgency of drilling for oil in the Arctic National Wildlife Refuge. He points to a supposed oil shortage that has somehow darkened homes and businesses up and down the West Coast. The environmental movement is already ramping up its national mail campaign rallying supporters for the battle to save the Refuge.
The actual game is bigger and more sinister.
Let's start by disposing of some myths. Start with the ludicrous claim of the Bush crowd that California's energy crisis can be solved by oil drilling in Alaska. Nationwide, oil provides only 3 percent of the source fuel used to generate electricity. In California the figure is less than 1 percent.
Bush is offering California exemptions from its supposedly onerous clean-air rules, claiming that once freed from such red tape the state's utilities and power producers could build a new generation of plants powered by fossil fuels. The Wildlife Refuge's oil won't be of much help here, since government officials estimate that even on an expedited schedule, oil couldn't flow from the Refuge until the year 2015.
Nor is the oil companies' problem in Alaska a shortage. Recall that back in 1995 British Petroleum, ARCO and Chevron entreated President Clinton to cancel the twenty-two-year ban on export of crude oil from Alaska to other countries. Congress had made such a ban a condition for permitting construction of the Alaska pipeline. The intent of the ban was to insure that Alaska's oil would help stave off any West Coast oil shortage. The companies wanted the ban lifted because they had a glut on their hands and required new markets.
Clinton dutifully assented, and the oil companies began exporting Alaskan crude forthwith to Japan, South Korea and China. The extremes to which they went in using Clinton's waiver to bilk US consumers came to light in January when The Oregonian won a Freedom of Information Act lawsuit, gaining access to 4,000 pages of documents in the Federal Trade Commission's files concerning the merger of BP-Amoco with ARCO.
An FTC economist had concluded that BP-Amoco was selling oil to Asian refineries at prices lower than it could sell to US refineries on the West Coast, in order to manufacture a US shortage. As evidence the FTC had e-mail traffic passing between BP managers who talked about "shorting the West Coast market" in order to "leverage up" the prices there. Another BP manager gloated that this scheme was a "no brainer." The FTC reckoned that this ploy allowed BP to hike prices at West Coast pumps by as much as 3 cents a gallon.
So the oil companies' strategy is to exploit the electricity crisis to seize at last a number of long-sought objectives: not just access to the Arctic National Wildlife Refuge, which would be a great symbolic victory, but also tax breaks worth billions for oil and gas extraction from wells across the country.
The big prize for the oil companies in North America isn't the Refuge but sites off the Alaska coast and the Gulf of Mexico: "Deepwater," says Geoff Kieburtz of Salomon Smith Barney, "is where the real pure exploration activity is going on in this country." Here we come to one of the lesser-known legacies of the Clinton era. Under the encouragement of Bruce Babbitt's Interior Department, deepwater drilling operations nearly doubled in the Gulf of Mexico in the year 2000 alone.
Among those roaring their protests at this activity is Governor Jeb Bush of Florida, who three days after his brother's inauguration implored the new team to place a moratorium on deepwater wells in the eastern Gulf of Mexico, saying that "Florida's economy is based upon tourism and other activities that depend on a clean and healthy environment."
Right now the Interior Department is looking at 688 lease applications that piled up in the Clinton years for new offshore oil development in the Beaufort Sea, and from the Gulf of Alaska's Copper River Delta (perhaps the greatest remaining salmon fishery in the world), the Cook Inlet (flanked by the Katmai National Park and the Kenai Peninsula), Bristol Bay and the Chukchi Sea up by Point Hope, the entire coast of Alaska is in play.
At the national level the big environmental groups are focused entirely on the Arctic National Wildlife Refuge, which is indeed in peril. But they would be advised to learn the history of that very Refuge. It was originally set aside in 1957 by President Eisenhower. In the same package Ike's Interior Secretary, Fred Seaton, opened up 20 million acres of Arctic coastline to oil development.
There are local groups--from the Gwich'in trying to save the Refuge and the National Petroleum Reserve west of Prudhoe Bay, to the Inupiat Eskimos defending their whale hunting grounds against oil derricks in the Beaufort Sea, to the Northern Alaska Environmental Center in Fairbanks--taking on the oil companies' grand plan. They understand the stakes more clearly than the national green groups, with the laudable exception of Greenpeace.
As for the Wilderness Society, National Audubon and the others, rapt in their fixation on the Refuge, they seem to be ceding without a fight the rest of the Alaska coast, the Gulf of Mexico and maybe even the Rocky Mountain front. Just listen to Deborah Williams, executive director of the lavishly funded Alaska Conservation Foundation. She recently journeyed to the Refuge with Lesley Stahl of CBS's 60 Minutes and vowed that not one oil rig would ever rise on the plains of the Refuge.
But at the same time Williams told the New York Times that she supports oil drilling in the National Petroleum Reserve, which is eight times as large and just as pristine as the Refuge, because "I drive a car and use petroleum products. We all have to be responsible and balanced." Williams, it should be added, was working for Bruce Babbitt at the Interior Department as his Alaska specialist when he OK'd test drilling in that very part of the Alaskan tundra.
His dream is an open northern border. But first, he must end southern poverty.