A Bush Presidency Jude Wanniski March 15, 1989

Executive Summary: He can still kick it away, but at the moment Vice President George Bush seems likely to be the next President. In contemplating a Bush presidency, we might assume that is outlines would be Reaganesque at the outset, attentive to his campaign pledges on taxes, free trade, enterprise zones, economic growth and strategic defense. How far and fast he would drift as his tenure unfolds? We're reminded that Bush is of the establishment, which will try to co-opt him quickly, but he's more complex than his preppy manner suggests; a populist strain was grafted onto him in his Texas years. His selection of a running mate will suggest direction: Jack Kemp optimum but unlikely; New Jersey's Kean and California's Deukmajian positive but with drawbacks. We assume Nicholas Brady at Treasury and James Baker III at State, with subcabinet selections crucial at each. A Baker State Department would be a great improvement. Federal court selections would lean to moderate. The administration would enjoy the benefits of a Reagan-appointed Fed in the early years. Whoever actually wins in November will benefit from the collective experience and wisdom at the Fed. It's too early to draw broad conclusions about a Bush administration, but the way he's conducted his campaign thusfar has made it easy for supply-siders to back him. A Bush administration easily could be a good one.
 the President.

A Bush Presidency

Vice President George Bush's stunning comeback from his early loss in the Iowa caucuses — in New Hampshire and on Super Tuesday — has given him a virtual lock on the GOP nomination. Massachusetts Governor Michael Dukakis still has to skirmish with Senator Albert Gore of Tennessee, but we can reasonably assume that Dukakis can handle Gore outside the South and take the Democratic nomination. The Democrats have always assumed that Bush would be the easiest candidate to defeat in the November election, but he suddenly looks like a winner all round — in the electorate's collective mind an extension of the popular President. He could easily kick it away, of course. But as an exercise, at least, it's appropriate to contemplate a Bush presidency.

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In the way he has managed his campaign, the Vice President has made it very easy for supply-siders to accommodate to the idea of a Bush presidency. Because he had been invisible during the Reagan years, it was natural to assume that he was the same fellow who ran against Ronald Reagan in 1980, and that either in the campaign or in the Oval Office, he would revert to form and once again reflect the conventional wisdom of the Eastern Establishment. Jack Kemp, it was assumed, would have to be the candidate to carry on the Reagan revolution.

Perhaps because Bush and his campaign manager, Lee Atwater, believed Kemp would be his principle competitor when all was said and done, the Vice President campaigned for the most part within the framework of Reaganomics. He was consistent, credible and upbeat, occupying the terrain of growth and optimism that Kemp believed he and Reagan had patented. Early on, he astonished (and dismayed) the Kemp team by ardently pledging against tax increases. His stance not only paid off for him in New Hampshire, when Bob Dole refused to take the pledge, but in a larger sense it cemented him into the Reaganite mold, reassuring those voters who want to ratify the Reagan experience.

This, though, is a cynical view of the Bush strategy. It overlooks the possibility that George Bush learned something in his weekly one-on-one taco and enchilada lunches with Ronald Reagan. Bush firmly advocates a cut in the capital gains tax, a position most certainly not favored by the GOP establishment. He also startled Bob Dole and Pat Robertson in the Atlanta debate with an impassioned defense of free trade, hurling the protectionist epithet at them on Southern turf that the political experts assume to be protectionist. When he derided the idea of a National Economic Commission as an unnecessary elitist panel, he had covered all the populist bases. "Bush is running virtually as the incumbent; Ronald Reagan and his record are the premise of his candidacy." David Broder wrote in The Washington Post March 6. Perhaps George Bush has become a believer.

It's natural to think of Bush as a pure establishmentarian, because of his silver-spoon Connecticut upbringing, Yale, Skull & Bones, Council on Foreign Relations, Trilateral Commission, etc. But it's largely because of his preppie manner that we overlook the populist conservative elements that were grafted onto him during his Texas years. Randall Rothenberg's superb profile of Bush in The New York Times Magazine of March 6 reminds us that the Vice President's political career has always been characterized by country club moderates worried about him indulging conservatives and right-wing ideologues mistrusting his avowed conservatism.

I've known Bush since February 1967, when he came to Congress representing the Houston congressional district. Because I opposed his 1980 candidacy in favor of Reagan and his current candidacy in favor of Kemp, it was probably natural that I have long suppressed thoughts of his qualities. In his profile, Rothenberg reminds us of Bush's decision, as CIA director, to permit an outside "B" team to assess the strength and intentions of the Soviets, a team headed by Harvard's Richard Pipes and composed of other hardliners. This, after conservatives had questionned the CIA bureaucracy's sanguine assessment of the Kremlin. The arms-control establishment was horrified at the time at Bush's seeming apostasy and will never completely trust him again. The opposite side of this coin is that conservatives can never completely mistrust him.

If there is a central ingredient to Bush's political style, beyond his acknowledged sense of fairness and loyalty, it is his Lyndon Johnson-like taste for consensus. He's not an idea man and has never pretended to be either intellectual or ideological. A Bush presidency, we can be fairly certain, would reflect this bent. Insofar as the world of ideas about the political economy is a much different place than it was in 1980, consensus would now produce a more Reaganesque approach to policy even in a Democratic administration, certainly in a Dukakis administration, maybe even in a Jesse Jackson administration. Politicians are impressed by nothing as they are by political success. As much as the Democratic candidates decry the Reagan White House, a great many Democratic pros are moderately awed by his popularity and achievements.

A Bush administration would be more or less Reaganesque, depending on several variables. First is the tone and content of the fall campaign. The party platform almost certainly will be an extension of the Reagan platforms of 1980 and 1984; the Bush delegates who would dominate the New Orleans convention are essentially Reaganites. The less Bush drifts from these lines in the campaign, the more likely he will hew to them in 1989, when the establishment assumes the next President will propose major tax increases and accept a recession in the first leg of his term, to "get it out of the way."

On the other hand, if the economic expansion continues strong through the end of the year, which seems likely at this point, the team at the White House and in the Cabinet will feel more secure in hewing to Reaganesque principles in both foreign and domestic policies. A budget deficit that continues to decline as a percentage of GNP will help as well. The outlines involve protection of the Reagan tax reform and low marginal rates, continued movement toward monetary reform and a "commodity standard," free and open trade policies, and further movement toward strategic defense. These elements will be emphasized in the GOP platform in New Orleans, with President Reagan still in charge. Establishmentarians are quick to insist that "nobody reads the platform," and will attempt to peel a President-elect Bush away from it as quickly as possible.

In this regard, the people a President Bush would bring to his team will be critical. The most important decision Bush would make as the GOP nominee is his selection of a running mate. It will tell us who he will be having taco lunches with in the Oval Office. A Bush-Kemp ticket would be optimum, from the standpoint that it would insure minimum drift in a Bush administration on both economic and foreign policy. It would also provide the clearest avenue to Bush for fresh initiatives from the conservative and supply-side intellectual cadres in the GOP. For that reason, it's unlikely at the moment Kemp will be invited on the ticket, and he does not expect to be. The establishment elements in the Bush high command are privately expressing profound disinterest in Kemp as a running mate, on the grounds that he would not add anything to the ticket. The argument for him, which some Bush supporters such as Governor Carroll Campbell of South Carolina are making, is that Bush would most easily unify the party with Kemp, just as Reagan pulled the party together in 1980 by picking Bush. Kemp now plans to spend the year campaigning for House and Senate Republicans, in the process pressing his ideas toward the top of the ticket through the ranks.

Bush does not have to make a decision on his running mate until the last moment, in New Orleans, and he shouldn't. Electoral politics may dictate a regional candidate for the V.P. slot. If Dukakis is the Democratic nominee, his strategy would almost certainly have to concede the South to Bush and concentrate on carrying many of the Northeast industrial states and the West Coast. Bush will weigh arguments on behalf of California Governor George Deukmajian, New Jersey Governor Tom Kean and Illinois Governor Jim Thompson. A drawback to Deukmajian is the Democratic lieutenant governor of California, who would be elevated if a Bush-Deukmajian ticket succeeded. A drawback to Kean is his Ivy League, silver-spoon upbringing, which would give the ticket a double-barrelled preppie look. Thompson of Illinois is not especially popular in his home state these days. Senator William Armstrong of Colorado would appeal to the "social conservatives," including Pat Robertson.

Of this group, Kean of New Jersey would be the best from my point of view for the future of the economy. He's a friend and admirer of Kemp, and has pursued growth policies in New Jersey, including inner-city enterprise zones, that has earned him the respect of the black community. Deukmajian would be a close second, having demonstrated an understanding and commitment to growth-oriented tax policies in California. Thompson would be a distant third. He and Armstrong would be the more likely to encourage Bush to drift back to conventional Republican economics. This does not exhaust the possibilities, of course. Bush himself is said to like Tennessee Governor Lamar Alexander, but for a variety of reasons, including the heavy weight this ticket would give the South, this outcome seems most unlikely. If it appears by convention time that Bush will need California in a neck-and-neck race, chances are he'd pull Deukmajian in, accepting the idea that it's more important to retain the White House than the Sacramento state house. Deukmajian, neither intellectual nor ideological himself, would not be a major influence on policy the way Kemp, or even Kean, would be. The Vice President can be of little noticeable influence, as Bush was, or of critical influence, as Walter Mondale was in the Carter administration. (Carter's Attorney General, Griffin Bell, blames Mondale for the overall failure of that administration.)

The conventional wisdom of the establishment seems already to have decided on key appointments in a Bush administration. Dillon Reed's Nick Brady, who in 1982 was appointed to the U.S. Senate by New Jersey's Kean at George Bush's request (to fill the seat vacated by Harrison Williams), is assumed to be Bush's choice for Treasury. James Baker III is assumed to be Bush's Secretary of State. We have no reason to doubt conventional wisdom on these points. Brady is safely establishment, which Donald Regan was not. If unattended, he would likely view the recommendations of the National Economic Commission as Holy Writ. But he could be turned by strong assistants, as Carter's Michael Blumenthal was by his lieutenants. The economic posts in a Brady Treasury would be crucial, especially the undersecretaries for tax and monetary policy and the assistant secretary for international policy.

Hobart Rowan, the economics editor of The Washington Post, has already decided that the two most influential economists in the Bush entourage are Stanford's Michael Boskin and Harvard's Martin Feldstein. Rowen reported March 10 that Boskin is already itching to raise consumption taxes in 1989 while Feldstein is lusting to decouple the dollar from the G-7 agreement, so that it could sink anew. If it were true that Boskin and Feldstein would have major influence on economic policy in a Bush administration we would head for the hills. But it is the nature of the game that unidentified "insiders" will promote the economists they prefer and have journalists repeat their names in dope stories, hoping to develop conventional wisdom and established fact.

The dominant actor in the Bush Cabinet would be Jim Baker, and it is difficult to imagine Baker putting up with Martin Feldstein. He was an embarrassment to the Reagan Administration as chairman of the Council of Economic Advisors, with his loudmouthed predictions of economic decline being overwhelmed by the fact of economic growth. His views on the dollar are also obsolete within the conventional mainstream, precisely because of the work Jim Baker has accomplished in moving the G-7 nations toward exchange rate stabilization.

If he is to be Secretary of State, Baker would be in a position to help further this process, building on the international economic experience he has acquired. George Shultz resisted monetary reform at State and was able to slow the process. We have to remember, though, that Jim Baker is essentially a negotiator, not an innovator. Another Reagan policymaker reminded me of this central characteristic a few days ago when I asked why he thought Baker had his people at Treasury pummelling Korea and Taiwan to deflate their currencies. "When Jim Baker wakes up in the morning, he looks around for something to negotiate."

That explained completely how Baker can be for stable currencies and yet be for unstable currencies. It does depend on what he's negotiating, not how he conceptualizes the broader scheme of things. He's determined to negotiate a trade bill the President will be able to sign, and the weak showing on Super Tuesday of the most protectionist of the candidates, Richard Gephardt among the Democrats and Bob Dole and Pat Robertson among the Republicans, ironically makes it more likely that he will succeed. The congressional Democrats will now make more concessions to get something, rather than invite a veto in order to retain what they thought could have been a popular political issue.

Baker, though, doesn't like the odds on negotiating a cut in the capital gains tax, although both Reagan and Bush are urging one. "We really ought to cool it for a while with respect to major changes in the tax code," Baker told the Senate Budget Committee last week. He thinks capital gains should be left alone until the 1990s, a position that may have helped cool the stock market last week.

On balance, though, Baker would be a positive force at the State Department. His intellectual tendencies, after all, have not been unaffected by the Reagan experience. He would fight any attempts to tamper with his tax reform (which may be why he doesn't want to reopen capital gains). It would be surprising to see him abandon attempts to reform international money. And I would be astonished if he didn't take the Third World debt portfolio with him from Treasury, further developing the Baker Plan. The economic posts at State, especially the Agency for International Development, would be extremely important positions worthy of high-caliber talent.

It would be fascinating to see a Secretary of State Baker negotiating on the plethora of issues that will confront a Bush administration with the Soviets. George Shultz is more an arbitrator than a negotiator, by training and temperament, a bit too quick to see both points of view and split the difference. The chief reason conservatives are so unhappy with the INF treaty is the belief that it will lead to more deals for the sake of deals. Baker, in his natural element, would be a tougher negotiator with Moscow. The ultimate objective is to persuade the Soviets to accept strategic defense as the operative doctrine, because they cannot persuade us otherwise.

In The New York Times Magazine of March 13, Richard Nixon advises on "Dealing With Gorbachev," that "Under no circumstances should the United States allow its foreign policy to be affected by changes in Soviet domestic policy. It would be utter folly to make concessions in arms-control negotiations to help Gorbachev succeed at home. His reforms stand or fall on their own merits. Nothing this country does can affect what happens in the Kremlin. If we reward Moscow every time the Soviet press publishes exposes of problems in the Soviet Union, Moscow will collect strategic gains while we collect newspaper clippings." Not bad.

In a Bush administration, the chief of staff would be an especially important player, more so if Bush's Vice President were a neutral figure. We will be able to tell an enormous amount about the shape and texture of a Bush administration by the person selected for this job. The more the person is associated with the Reagan wing of the party, the less likely we will see the administration drift into the economic, foreign policy and national security mode of the establishment.

A Bush administration would have its clearest swing away from the conservative wing of the party on federal court appointments. We'd most likely see a "moderate" Attorney General sifting moderates for a President Bush to name to the judiciary. It's quite probable that Bush would get to name at least two Supreme Court Justices and there will be no Robert Borks among them. Conservative Republicans would be relieved to get even moderates out of a Bush Presidency, I think, and for this point alone the liberal establishment is probably ready to reconcile itself to a Bush White House. Even so, the Supreme Court would continue to move rightward, with moderates replacing liberals.

For the early years of a Bush Presidency, the Reagan legacy would be felt even more definitely at the Federal Reserve. Just as Reagan was burdened with Carter appointees for his early years, Bush will enjoy the benefits of Reagan appointees in his. There is a collective repository of wisdom at the Fed that counts for a great deal, and it will be a center of policymaking that will benefit any administration, Democratic or Republican, into the early 1990s.

When we try to come to a conclusion on a Bush administration, we find we can't. It's too early to tell because Ronald Reagan is still in the White House and George Bush is still swimming in the slipstream of the Republican nominating process. How will he conduct the fall campaign? And if he wins, will he be able to resist the pressures from the establishment to convert to its agenda — abandoning economic growth in order to grapple with the twin deficits, abandoning SDI in order to collect newspaper clippings from the Soviet press? The best guide we have so far is the collective assessment of the Republican electorate, which has decided both that he seems credible and that he's earned a try. If in November the national electorate agrees, I'd be prepared to expect a Bush administration that wouldn't be all that bad.

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