Fred Barnes on the Washington Turnaround
by Michael Finley
Exclusive to Financial Planning News
Copyright © 1993 by Michael Finley. All rights reserved.
Conservative political analyst Fred Barnes will speak at the Conference for Advanced Planning May 20-22 in Washington, DC. Barnes is a familiar figure , appearing regularly as senior editor of The New Republic, as a panel member of The McLaughlin Group, and a frequent guest on CNN's Crossfire. He has been described as "a trendsetter who without slitting a single throat or having to change his hat size, has quietly become one of Washington's prominent pundits." We took a moment to chat with Mr. Barnes about his upcoming talk.
During the initial budget discussions, Budget Director Leon Panetta was billed as the spending hawk and Treasury Secretary Lloyd Bentsen as the advocate of increased saving. Which of the two won?
Both were losers. One of Bentsen's pet obsessions has been IRAs for everyone, and at least in the current plan he's failed miserably. This is testimony not to his influence over the economic program, but his lack of influence. It's something that would have been good for the economy, good for individuals, good for the savings rate -- and he didn't get it. It got thrown out along with Clinton's own middle class tax cut.
Panetta had some very serious spending cut ideas, including cost of living adjustment for Social Security. But that was thrown out by the political people. What we ended up with was a package bearing neither man's stamp. The plan is very political. The IRA issue is not perceived as appealing to Democratic constituency groups -- it is seen as a middle and upper middle class program.
What will you be talking about at the Conference for Advanced Planning in May?
I'm going to talk about Bill Clinton. Is he a "new Democrat"? He campaigned as a moderate, favoring entrepreneurial and free-market solutions, abhorring bureaucracy and traditional Democratic remedies like price controls and excessive spending. So, is he fitting that new mold? Based on his economic program, no. It's a very conventional tax-and-spend program that stands no chance, I don't think, of actually reducing the deficit.
Second, can Clinton create a durable new coalition, as Nixon did for the Republicans? The opportunity is there, if he can get the 19 million Perot voters. Clinton is going after them by talking about the deficit, by saying the word over and over again, like a mantra. But when you think of the Perot voter demographics, the IRA is something that might appeal to them.
You don't think Clinton's plan will work. Why not?
It relies too heavily on taxes, which will have a depressing effect on the economy. When you reduce growth, you reduce tax revenues, and the spending cuts are largely illusory. They are either unspecified things like administration savings, or gimmicks that don't produce savings, like cost controls on Medicare -- administrations have yapped about them for years without success.
Is Clinton dissembling, or is he trying to do the impossible?
I think a politically tolerable plan is possible. The deficit will go down some naturally. Economic growth will be better than during the Bush years, no matter what, and the bubble of S&L bailout costs will eventually pass through the system. Clinton sincerely wants to reduce the deficit. It would be good for him politically, and for the country economically. The problem is, he's not restraining spending.
On the plus side, Clinton has challenged Congress to come up with cuts of their own. We are in a very interesting climate now. The American people are more receptive to spending cuts than they have been in the last ten years. I hope Republicans in particular take up Clinton's challenge. There is a lot that can be cut. Much spending is so narrowly focused -- farm subsidies, the Sea Wolf submarine, the Davis-Bacon Act -- that it can be cut without causing pain to the larger economy. The time is right to make some real changes.
Will we make them?
The evidence of previous years is that we probably won't. But it is a funny time. Reagan was elected without much talk about tax cuts, but as soon as he came in he focused on that, and they passed. The speed surprised even David Stockman, Reagan's budget director. We have a similar situation now, created in part by Ross Perot.
If Congress comes back to Clinton with new spending cuts, I think he will welcome them. That is why we are in a rare situation. Clinton wants the deficit to go down, but he doesn't wants to propose something that won't pass, and will get them into political trouble, like a cut in Social Security. But if Congress decides, on its own, to make a move, the people at the White House and Office of the Budget will be very receptive.
So why is this moment upon us? Is it real, or just another political obsession?
Something happened last year. It was a lackluster campaign until Perot got it. I have never seen average Americans more interested in what's going on in Washington, with people calling in, with "talk show democracy" and "dial-in democracy." Voter turnout rose from 50% to 56%. Audiences for the debates grew each time.
People feel that Washington is out of control, and deficit spending, with all its insider deals, with the bill passed on to future generations, is a prime example of that.
You criticize Clinton for new spending, and yet that is what he was elected to do. Isn't he just keeping his campaign promises?
If he comes to the American people and says, "Look, this deficit is much worse than I thought it was. I'm going to have to get rid of the middle class tax cut. And I can't do some of things I want to."
If he can't cut taxes for the middle class, why does he have to provide a slush fund for mayors? He doesn't have to eliminate all of it, but it's $170 billion. Spend half that instead of all of it, and you have put a serious dent in the deficit.
Michael Finley is a St. Paul-based writer specializing in issues of management, technology, and quality.