Carter and Crisis Jude Wanniski February 1, 1980

Executive Summary: President Carter's discovery that the Russians may not be as nice as he thought they were, following their march into Afghanistan, is celebrated by the electorate. His stunning victory over Kennedy in the Iowa caucuses reveals a revived militancy on foreign policy among the citizenry, the vote being a referendum on his grain embargo. This militancy also has been revealed to the Soviets, who no doubt miscalculated the reaction that their "unprecedented" operation provoked in the United States and the Third World. As long as Carter remains assertive, and does not slide back to his innate pacifism, bipartisanship will moot foreign policy as a central issue of the presidential campaign. The GOP, however, can potshot the defense budget on the grounds that it does not reflect Carter's militant rhetoric.

Carter remains extremely vulnerable on his management of the domestic economy, but because George Bush has no theoretical differences with Carter on either monetary or fiscal policy, it remains for Ronald Reagan to illuminate his differences with both in New Hampshire.

Carter and Crisis

"The primary job of a President is not to manage crises moderately well. It is to prevent crises from occurring." The observation was Donald Rumsfeld's, former chief of staff of the White House and Defense Secretary in the Ford administration, ruminating on the crisis in South­west Asia.

Any one of Jimmy Carter's political competitors, Democratic and Republican, can appreciate the thought. Rumsfeld is also fond of saying that weakness can be provocative, and in the first three years of his administration, President Carter became progressively more provocative in his pacific attitude toward the Soviet Union. It's tempting to say he invited crisis. And four months ago, on the assumption that he would remain supine in his rationalizations of Soviet behavior, I wrote that his "pacifist response to reports of a combat brigade in Cuba has effectively ended his presidency, drawn Senator Kennedy into the race for 1980, and ended the framework of detente."

Yet he has been doing a moderately good job of managing the crisis that his own feeble posture helped engender, and as a result has won back the broad support of the American people. The Soviet thrust into Afghanistan on Christmas Eve genuinely shocked Carter, even though former U.S. Ambassador to Moscow Malcolm Toon warned all last year that such a move was brewing. The national frustration with Carter was punctured when, at last, he could publicly admit that he had learned more about the Russians as a result of the Afghan move than he had in the previous three years. His dramatic rise in the public-opinion polls and his decisive victory over Senator Kennedy in the January 21 Iowa caucuses is solid evidence that the electorate does not brood over the past once you have learned your lesson. In a real sense, President Carter's newly acquired hard-nosed realism in contemplating the Russians repre­sents a public investment in him. There are suspicions that he will maneuver to keep the crisis simmering through November, win re-election as a born-again cold warrior, and resume his pacifist posture in response to a predictable Soviet "peace offensive." What counts in the here and now, though, is that Carter—and the rest of the world—has discovered that militancy is politically popular in the United States.

This was the most important aspect of the Iowa caucuses, a signal not only to the Soviets, but also to American allies, that the American people would enthusiastically support the grain embargo against the Soviet Union that Carter announced on January 4. Had Senator Kennedy defeated Carter or even come close, the global capitals of allies and adversaries would have concluded that the Soviet adventure in Afghanistan had not really roused the slumbering citizenry. The fact that the question was put in the grain state of Iowa magnifies the significance of the answer. Carter now has the moral authority, fortified by lowans, to press the case against the Soviets in diplomatic circles, making the grain embargo something more than a symbolic gesture and broadening the international community's willingness to shame Moscow via a boycott of the Olympics.

But beyond that, the Soviets now will have to calculate that the 1980 elections in the U.S. will be fought around an assertiveness in foreign and defense policy that was not foreseen even a few weeks ago. Even as the embargo was announced, there was speculation among the Carter strategists as well as political analysts generally that lowans would not stand still for having the burden of foreign policy paid by the American farmer, and that the move would benefit Kennedy. All of the leading Republican contenders came to the same conclusion and found varied rationales for criticizing the move—the most common being that the Soviets would somehow make up the shortfall elsewhere in the world grain markets and that it would be the U.S. economy that would suffer.

Whatever Carter's political calculations, the important thing is that his crisis management revealed a militancy among Americans that most of the world had guessed was no longer possible. It is not going too far to suggest that the collapse in the price of gold on January 22 reflected global appreciation of what Carter's victory in Iowa implies for the future of the strategic balance. President Carter may still lose re-election, either through bungling the continuing crisis in Asia or, more likely, continued mismanagement of the domestic economy. Far more important than Carter's election possibilities is the revelation of national resolve at the grass roots, and a President who at least appears to have lost his naivete about the Russians.

It has taken long enough. Richard Perle, a foreign-policy aide to Sen. Henry Jackson, put it cogently in a Washington Post essay on October 7, 1979:

Having come to office with virtually no experience in foreign affairs, President-elect Carter drew around him a small circle of senior officials whose faith in the efficacy of arms control is exceeded only by their abhorrence of military power and their dread of confrontation with the Soviet Union.

In the 1976 campaign against President Ford, Carter left an impression that he would be somewhat firmer than Ford. He was, after all, an Annapolis graduate and a protege of Admiral Hyman Rickover. And on the central foreign-policy issue of the campaign, the Panama Canal treaties, he promised he " would never give up complete or partial control of the Panama Canal Zone." Yet after inauguration he did just that, waving aside the strategic importance of the Canal and using Third World arguments against U.S. imperialism. He spoke at Notre Dame about "inordinate fear" of Communism, and dispatched Andrew Young to Africa to discover new rationales for Cuban troop deployments there. He spoke dreamily of eliminating nuclear weapons from the face of the earth and began with cuts in the defense budget that President Ford had left behind. Donald Rumsfeld reviewed that record several weeks ago:

In January 1977 the U.S. defense effort included:
Programs to procure 244 B-l follow-on manned bombers scheduled to begin operational deployment this year;
An accelerated MX with initial operational deployment scheduled for 1983;
Cruise missile programs with land and sea deployment scheduled for next year and deployment of air-launched cruise missiles on some 200 B-57s beginning in 1981;
Expectations of one and a half Tridents each year, beginning this year; and,
An open Minuteman II ICBM production line available to address the even-then real problem of the Soviets gaining a window of vulnerability on U.S. land-based ICBMS.
The situation today is vastly different. Over the past 1,000 days, U.S. unilateral actions have included cancellation of the B-l with no quid pro quo, a significant delay of the MX and some delays in cruise missiles to accommodate SALT, technical delays in the Trident II missile, and reductions in shipbuilding, to mention but a few of the more damaging actions.

Soviet combat troops in Cuba, meanwhile, were not sufficient cause for shelving SALT (Strategic Arms Limitation Talks). And we had to understand Soviet fear of China to appreciate her enormous arms buildup.

It is useful and prudent exercise for any American president to try to see the world from the Soviet point of view. But it was Carter's tendency to conduct U.S. defense policy from that vantage point which became provocative. Secretary of State Cyrus Vance and his chief adviser on Soviet policy, Marshall Shulman of Columbia University, could always be counted upon to see the Soviet point of view before the Soviets themselves would see it. The Soviet Union could come to believe that it would get away with the thrust into Afghanistan; that its motives would be understood and appreciated in the Carter administration. Hasn't Afghanistan been more or less within the Soviet sphere of influence for more than 30 years, since the British departed the area? Arthur Schlesinger, Jr., had the script down precisely, in a Wall Street Journal essay of January 18:

Maybe there are other conceivable interpretations of the Soviet motive in invading Afghanistan.

One can imagine a meeting in the Kremlin some weeks back. A comrade says gloomily, "look fellows, everything is going against us these days. The Chinese are getting into bed with the Americans. I don't know whom you can count on in Eastern Europe any more. The Americans are bringing their new nukes into Western Europe. SALT II is down the drain. We're getting nowhere in Africa, and Lord Carrington has dished us in Rhodesia, and Somalia is offering bases to the Americans. We can't feed our own people or get them consumer goods. We're in trouble all over. And now that mess in Afghanistan! We can't trust that fellow we have in Kabul, Amin. He won't take orders. He may not even beat the guerrillas."

The trouble with this scenario is that it is probably true, but so what? The Soviets have always had trouble feeding their people. They're always paranoid about the Chinese. Allegiances in Eastern Europe are always worrisome. And Communism as an ideological force around the world is spent, of absolutely no interest to any nonaligned nation anywhere.

Schlesinger's point is that it is not necessarily so that Afghanistan "is the first step in the unfolding of a giant Soviet scheme to encircle Iran, dominate Pakistan, establish bases on the Arabian Sea and begin the conquest of the oil fields." But whether or not a single Soviet official has such a master plan in mind is irrelevant if at least one U.S. official can imagine it. As soon as the Russians take the first step with ease they are bound to think of the next one.

Marshall Shulman's analysis is that the Soviets badly miscalculated the military difficulties of the Afghan operation as well as the reaction it provoked in the United States and much of the world. The first part of his analysis is most likely wrong, although it was quickly embraced by The New York Times. The poor Russians are stuck in Afghanistan, their Vietnam, we are supposed to believe.

The idea that the Russians miscalculated the response of the Carter administration and the rest of the world is probably right. President Carter himself might have been talked into a wait-and-see approach by the State Department softliners, and it did take a few days before he took his hard, public line, but it was long enough for him to see the public's alarm at the Afghan operation and see potential political support. Nor was there any idea at the State Department that the Third World nations would walk away from the Soviets at the United Nations, which voted 104-to-18 to call for the removal of troops from Afghanistan. Moscow seemed to have forgotten that it has been able to get along so well with the Third World for only two reasons, i.e., nobody owes the Soviet Union any money, because it hasn't had any to lend out, and up until now the Russians have not deployed combat troops outside of the Warsaw Pact, which passes for "imperialism." Now, one of those reasons is gone. President Carter himself singled out this "unprecedented" nature of the Soviet foray as being critical to his change of heart about the Soviets. (Soviet troops did march into Outer Mongolia in 1921, and in 1940 marched over Latvia, Estonia and Lithuania.)

Will the Soviets now get out of Afghanistan? Probably not. Will the U.S. participate in the summer Olympics? Probably not. Will the Soviets move into Iran? Not unless they are given a pretext, which suggests Carter will have to continue a policy of appeasement in Iran while hoping Iranian nationalism asserts itself following the January 25 presidential elections. Having miscalculated in withholding support from Carter on the grain embargo, Senator Kennedy and the GOP presidential contenders may give President Carter a bipartisan foreign policy for awhile, at least as long as he continues to have an assertive foreign policy.

There remains for the Republicans plenty of room to potshot Carter on defense policy, however. The rhetoric of the President's State of the Union speech on January 23 was music to the defense establishment, a call to arms and preparedness. But on close examination, there was very little concrete; the defense budget remains the same as it was before Afghanistan. The problem, then, is that Carter's militant rhetoric must be somewhat discounted by the Soviet military establishment as much as it is by ours. His threat to repel "by any means necessary, including military force" a Soviet grab at the Persian Gulf region was especially disturbing to those who are aware that the U.S. does not now have the capability to follow through on this threat, short of nuclear war, given the logistics involved.

London bookmakers are now making Jimmy Carter the odds-on favorite to win re-election. This seems about right until you recall that only a few months ago he was setting record lows in the public-opinion polls. Disenchantment with Carter reflected his abysmal management of the domestic economy, and even while national attention remains focused on Iran and Afghanistan, Carter continues to add to his poor record at home. Indeed, the Soviet perception of U.S. weakness has not rested solely or even largely on Jimmy Carter's determined pacifism, but on the erosion of the U.S. economy—especially the inflation that saps national vitality. His enormously destructive "Windfall Profits" tax on the domestic energy industry is about to be signed into law, increasing U.S. dependence on OPEC in the 1980s. He has just ruled out a tax cut in 1980, although productivity and the national savings rate continue to fall under the weight of inflation-swollen tax rates. And Fed Chairman Paul Volcker is proving to be even worse at his job than his predecessors; while some of the fantastic climb in the price of gold this year can be attributed to war scares in the Middle East, the fact that the Fed has been pumping liquidity into the banking system at a 20 percent annual rate since early December is much more likely to be the primary cause. Volcker is simply not doing what he pledged to do, i.e., control bank reserves.

If we were to project the results of the Iowa caucuses into a Carter-Bush contest for the presidency there could be little optimism about the course of the economy. On the economic issues that count—monetary and fiscal policy—there are no noticeable differences between Carter and Bush. Neither of them understand, or believe if they do understand, that the central problem of this era has been the collision of dollar inflation on the progressivity of tax systems, here and around the world. The solutions require sharp reductions in the progressivity of the income-tax rates, across the board, and at the same time movement toward reform of the central bank, taking away Volcker's ability to flood the economy with bank liquidity by restoring the convertibility of the dollar into a primary reserve asset, gold.

The only major presidential contender who both understands the central problem and who believes in the solutions is Ronald Reagan. John Connally, who was instrumental in ending dollar convertibility in 1971, remains in a defensive position on the issue and has been unable to focus on it. Howard Baker toys with the issue, seems interested in understanding it, but with a lethargy that has characterized his entire campaign. George Bush, though, is openly hostile to these ideas, reflecting the deeply-held economic views of the Republican Old Guard.

In this framework, continued optimism about the course of the economy rests entirely on the assumption that as the campaign unfolds Reagan will at least be able to force his ideas onto the agenda. Reagan came close to wresting the nomination from President Ford in 1976 on foreign policy differences; in 1980, with Carter discovering militancy and Reagan's GOP adversaries uniformly hawkish, Reagan must press his differences with the field on domestic policy. In Iowa, these critical differences between Reagan and the field on economic policies were not illuminated, primarily because Reagan did not debate. On the assumption that these differ­ences will be illuminated in New Hampshire and beyond, and that Reagan's views have more fundamental appeal, he should go on to the GOP nomination and from there go on to defeat Carter on domestic policy differences, the bread-and-butter issues that bring the voters out.