A Democrat Who Admits It

Richard Gephardt is unafraid to say that the government should spend money on big public programs -- things that other Democrats said before they echoed Republicans
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The Democrat Who Admits It

THROUGH most of his career Richard Gephardt has seemed earnest, and therefore wooden. His problem has been like Al Gore's. But Gephardt is on the verge of having a provocative political case to make, and he may make it against Gore in the next two years -- if Gephardt decides that the cost, fatigue, and potential humiliation of another long-shot bid for the presidency are worthwhile. (Like Gore, Gephardt lost to Michael Dukakis in the Democratic primary in 1988. Unlike Gore, he had the story of his campaign told in Richard Ben Cramer's wonderful account of several participants in the 1988 race, That book, published in 1992, is the best account available of Gephardt's personal history, professional background, and operating style.) Whether or not Gephardt runs again for President, whether or not the Democrats regain control of the House, allowing him to move from minority leader to speaker, his current ideas help to explain the next major source of tension within the Democratic Party and an issue sure to affect the next presidential race.
The heart of Gephardt's claim is that the American policy elite has a mistakenly rosy view of today's economic circumstances, and therefore too rosy a view of the strategies that produced today's "success." The drive to balance the federal budget has been a central part of 1990s economic policy, for Republicans and Democrats alike. Gephardt says this drive has gone too far. His tolerance for larger deficits is the most startling part of his argument that what "everyone knows" about today's economy may not be true.

Since the early months of the Clinton Administration the most publicized economic indicators have all moved the right way. Unemployment and the federal budget deficit have both kept going down. Inflation has stayed low. Until the market reverses of late summer, the Dow Jones average had continued its amazing several-year surge. As long as the stock market was soaring, most national politicians were willing to declare the prevailing economic policies successful, and a consensus among academic experts backed them up. It seemed that this was an era of remarkable good fortune in economic policy, and that whatever made it happen should be preserved.

Behind this mood of contentment lies an amazing, and recent, shift in the party politics of economic strategy. In August, Bill Clinton celebrated -- as did Trent Lott and Newt Gingrich, the Republican leaders of the Senate and the House -- the passage of budget-balancing and tax-cutting bills. (Gephardt, the senior Democrat in the House, voted against the bills.) The air of shared achievement was more than cosmetic, despite Clinton's later line-item vetoes on the tax bill. In all fundamental ways Clinton's Democratic Administration has come to share mainstream Republican beliefs about how best to manage the economy. Clinton's "triangulations" and "moves to the center" to take popular issues away from the Republicans have been widely noted on social issues like welfare reform and affirmative action. His shift on economic policy is more dramatic and profound.


WHEN running for President in 1992 Clinton said, in effect, that although free markets produce the best results for buyers and sellers, at times they can serve the larger national interest badly. Wall Street might well make its traders rich but fail to direct enough money toward the long-term basic research from which future riches would spring. Private investors might well neglect public infrastructure, from school systems to roads. A privatized medical system might inflate total spending for care while leaving many people with no coverage except in the emergency room. Therefore, Clinton said in his manifesto, and in countless speeches and interviews, the national government had a crucial if limited role to play. That role was to referee competition and encourage investment in public infrastructure in the hope that such measures would equip everyone to compete and the nation to prosper more fully than with straight laissez-faire.

Five years after his election Clinton is obviously taking a different approach. The collapse of his national health-care proposal, in the summer of 1994, followed by the Republican sweep in congressional elections that fall, accelerated the movement he had already begun away from the idea of activist government. For the past three years the Clinton strategy for growth has boiled down to

  • steadily reducing the budget deficit, which in turn means

  • reassuring the Federal Reserve Board that inflation will be controlled, which in turn means

  • holding down interest rates, which helps to buoy the stock market, and meanwhile

  • pushing a more or less open trade policy, designed to help U.S. exporters and hold down domestic prices in the face of competition from overseas.

    This strategy is not supply-side Republicanism, with its emphasis on tax cuts above all else. But it differs from mainstream Republican policy only in degree. The most telling indication of Clinton's conversion to Republicanism is not his interest in cutting the deficit -- Democrats have complained about "Reagan deficits" for fifteen years -- but the way in which he agreed to cut it. From the late 1970s through the early 1990s federal spending grew from about 20 percent to about 22 percent of the national economy. Most of this increase was for fixed expenses, mainly retirement and medical programs. One way to reduce the deficit would be to "balance up," or bring revenues up to 22 percent (from around 19 percent in the Reagan years). But the President has agreed with the Republicans to "balance down," through a deal that will, if its assumptions hold, lower federal spending to about 19 percent in 2002. As Matthew Miller, of U.S. News & World Report, has pointed out, "balancing down" to 19 percent is a profound and underappreciated victory for conservatives. If the President had persuaded Congress to reach balance at, say, 21 percent, the extra two points could have meant an additional $200 billion in federal revenues each year. Conservatives are glad to deny the government this much money; the Clinton of 1992 would have contended that it could be used for education and infrastructure.

    If the results are judged by the Dow Jones average and the unemployment index over the past four years, the Administration's essentially Republican strategy has worked brilliantly. As judged by Al Gore, it is bound to keep on working, because Gore has no choice but to run on the Administration's record -- which he hopes will continue to be seen as a success. His Republican opponents, whoever they may be, already know how to deal with this record. They will wait for something to go wrong, as it probably will, at which point they can say, "Aha! We don't need four more years of this failed economic approach." And if, on the other hand, the stock market doesn't crash and inflation doesn't come back, then the Republicans can say, "Aha! The Democrats have given you a weak and watered-down version of the good ideas they copied from us. Why not get the real thing from the original source?"

    The challenge within the Democratic Party will be more complicated. It might not become a personal challenge to Gore as nominee. Like George Bush in 1988 and Walter Mondale in 1984, Gore may (barring legal problems) succeed in creating such an air of inevitability within his party that no rival can raise enough money to run. The problem for Gore would come in the general election, when without Clinton's personal flair he would have to run on "balancing down," viewing Alan Greenspan as a savior, and other concepts that may fail to energize his party.

  • AT just this moment, when Democratic and Republican politicians have joined with mainstream economists and journalists in declaring today's laissez-faire approach a total success, an unusual swirl of critical ideas is gathering around the dominant concepts. Some of these criticisms are familiar in the American press -- most notably, that while the economy as a whole is growing, it is also becoming more unequal, so many Americans are losing ground. Other elements of the criticisms are heard mainly outside the United States. For instance, in Southeast Asia, economies like Thailand's and Malaysia's have boomed for the past decade through exposure to trade. This year those economies learned that this also meant exposure to currency speculation: when international exchanges sent the value of the Thai baht and the Malaysian ringgit plunging, leaders in those countries complained bitterly about traders at computers in New York or London who could destabilize lives on the other side of the world. Why do countryside vistas in France, England, and Ireland look different from those in America, with more farms and village houses, and fewer billboards and strip malls? Because landowners in Europe are saddled with "inefficient" controls on development. Opportunities for world investment, and the modernization of the European Union, are putting pressure on these antique rules, but the role of the state may not be in the decline it appears to be.

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    James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

    James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

    Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

    Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.
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