Red Ink Update: March 12, 1996

Update for March 12, 1996.

President Clinton signed today HR3021, the Debt Limit Extension bill, passed last week by the House and Senate. This temporary measure allows the Secretary of the Treasury to continue to borrow without exceeding the debt limit to meet ongoing financing needs until March 30th. It is hoped that by this date sweeping compromise legislation can be passed that will put this controversy to rest for years (for more background information, see the Red Ink Update for February 11, 1996). Effectively, this postpones the crisis on the debt ceiling for two more weeks, though one gets the sense these days that it will be resolved. In the heat of election campaigning, it is in no ones interest to impose an artificial crisis upon the economy.

Republican presidential candidate Pat Buchanan's day in the sun (or month in the sun) has been eclipsed by the professionalism of Bob Dole, who is now assured of the Republican nomination. Apparently because of the surge in press attention, Buchanan had become a little full of himself in the campaign for the Arizona primary of February 27th, which he should have won. But instead of settling down to insure an easy victory in a very conservative state, he spent the week posing with shotguns and cowboy hats and making low-brow rambling speeches, posturing as a real yahoo for Arizona and the rest of the nation (on one occasion he pointed an unloaded shotgun at the forehead of a reporter for the Los Angeles Times). When the votes were counted, Buchanan was in third (Forbes won, though his campaign has since died out as well) and his bid for the nomination ended.

Buchanan's temporary success, though, has had a lasting impact on the campaign and deficit politics, as discussed in the Red Ink Update for February 26, 1996. He reminded everyone that fundamental economic issues and the economic insecurity that arises from the present "restructuring" of the economy, the "downsizing" of corporate America and "free trade" all might matter considerably more to the electorate than "balancing the budget." Both Republican and Democratic candidates (for all elections, not just the presidency) have taken note.

The Democrats have responded quickly and have been more adept and unified in their treatment of the new theme than have the Republicans. This shouldn't be too surprising - the Democrats have always been comfortable championing themselves as representatives of the working class against the occasional tyrannies of big business, and Buchanan may have ironically ended their recent lack of focus and handed them a common theme. Bill Clinton, whose campaign organization is running like a well-oiled sewing machine, responded immediately with a temperate and upbeat appeal for a new "growth agenda" which included, among other things, an increase in the minimum wage and a "GI Bill for America's workers" that would offer the recently unemployed a $2,600 voucher to be used for retraining. (No part of this proposal has even the most remote chance of passing, at least while Republicans control either house of the Congress). Democratic strategy has assigned the more aggressive frontal attack on big business (mostly posturing for campaign purposes - there is currently no legitimately strong sentiment to take on corporate America these days) to the second tier of the party. For example, 14th term Democrat Congressman David Obey of Wisconsin in a speech before the Center for National Policy on March 11th made a pointed attack upon corporations and certain executives by name for using cutbacks to send profits and share prices soaring while padding their own salaries, then argued that most of the new wealth created by America's restructuring is going to the rich. This "us versus the Rich" theme is familiar turf for the Democrats. The Republicans, on the other hand, are clearly less able to respond to the new populism.

This political redirection continues to push the budget into the background in Washington. Clinton, growing more confident, has even firmed up his opposition to program cuts in favored areas, such as those in education and health care, while promoting further cutbacks in Defense, angering conservatives such as Strom Thurmond, Chair of the Senate Armed Forces Committee. Meanwhile House Republicans continue to grapple for a new orientation (or a revival of an old one) without success. For example, on the weekend of March 2nd and 3rd, House Republican tacticians, most likely under the guidance of Newt Gingrich, decided to try to revive some of the stalled or forgotten features of the now moribund Contract with America by reviving environmental "reform" (largely deregulation) and tort reform on the House floor the following Monday. The effort failed so miserably that it was embarrassing to the sponsors and indicative of how disorganized the Republicans had become.

There is one strange and welcome aftereffect of this (perhaps temporary) shift in power - the bitter, withering vitriol of congressional debate seen in the last year has disappeared almost overnight! The tone of debate in committee after subcommittee has become suddenly polite and cordial, almost to the point of being maudlin. This is a very good sign because it means that the Congress, led now more by the moderate Senate, will likely craft legislation that will finally give budgetary closure to FY1996 and allow the necessary work to be done on the next fiscal year (and deadlines are already approaching for that !).

Will the cooperative (somewhat) effort to close off the 1996 budget result in a balanced budget by FY2002 (all parties, including the President, promise that it will). Probably not, though it is likely to result in continuing deficit reduction . Substantial reforms to Medicare and Medicaid are still a major stumbling block. Proposals for budget reductions in key areas are heavily loaded toward achieving the savings in the final years (especially Clinton's). Finally, much of the legislation now being promoted in this election year gives the appearance without the substance of substantial deficit reduction. A clear example is provided by the new farm bill, called the Freedom to Farm Act (HR2854), passed by the House and sent to the Senate on February 29th. A farm bill must be passed by early April to enable farmers to make their planting decisions for this year. This complicated piece of legislation, and how it somewhat evades its stated intent in an election year, will be discussed in the next Red Ink Update.

References in Red Ink to topics discussed above:

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