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

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.

    Four years ago a World Bank report caused titters throughout Asia because of its conclusion that the "miracle economies" of Japan, Korea, and Taiwan showed the power of private enterprise unencumbered by the state. Maybe the governments hadbeen involved in these economic miracles, the report conceded, but the countries would have done even better if bureaucrats had kept their hands off. Last June a new, "Oh, never mind" report from the bank essentially recanted the original one. Effective state intervention, the World Bank now said, was the "cornerstone of successful economies"; without it "economic and social development is impossible." What unites these developments, and recent electoral victories by the left in France and Mexico, is the sense that global capitalism is getting too big for its britches. It should be a tool for increasing wealth, the new thinking runs -- not the final determinant of how a society develops.

    As the Dow Jones average kept moving up, America took little interest in this debate. But it has grown vociferous enough elsewhere that it will probably soon be heard in some form here. And the person responsible is likely to be ... Dick Gephardt, the mildest-mannered and most deferential of today's major political figures. To judge from his recent speeches, and two long interviews I conducted with him this summer, he is ready to make a frontal case.

    GEPHARDT is similar to Bill Clinton in one way and different in most others. The similarity is in the way he listens. Many politicians are visibly miffed when they have to sit still while someone else is the center of attention. At best they remain engaged only long enough to figure out which of the many prepared-answer tapes their brains should start playing as soon as the other person has finished speaking. Gephardt, like Clinton, uses eye contact and a range of facial expressions to suggest that he really is listening -- that his attention and time, a politician's scarcest commodities, are completely yours while you speak. Richard Ben Cramer devoted several paragraphs to this phenomenon in What It Takes. For example:

    When Gephardt started to listen, his whole person went into "receive" mode. He locked his sky-blue eyes on your face, and they didn't wiggle around between your eyes and your mouth and the guy who walked in the door behind you: they were just on you, still and absorptive, like a couple of small blotters.... If it was just you and your problem, he'd stay on "receive" until ... you were weak from being listened to.

    As for the differences: Clinton, ruddy and big-featured, fills a room; Gephardt is trim and undercolored, with famously pale hair and eyebrows. Clinton has a rhetorically powerful voice range, effective either preaching at a black church or talking ironically with editorial writers. Gephardt seems unable to shift registers when moving from public to private discourse. Both ways he is well-mannered and sincere. Clinton was an early favorite of the policy-writer crowd, because he has a gift for spinning out ideas and imagining all their complications -- a big help to writers. Gephardt is a man of committee work and of Congress; when he's presented with a big theme, his first instinct is to think of what bills he could introduce.

    Interviewing Gephardt can therefore be frustrating, to put it mildly. He doesn't think or talk the way writers like. When I asked during our second interview the softest of questions -- How would he sum up his economic message in a sentence or two? -- he said, "I haven't thought about the exact right words to say it. Let me just throw out different words." (Which he then did: "Higher growth, or strong growth, getting the pie to grow again.... Building from the bottom up is a big part of it. 'Moral capitalism' might be a way to say it, where you are sustaining higher productivity and higher wealth creation by treating people fairly.") When thrown another easy pitch -- a request to say exactly what he would do if he were put in charge of economic policy -- he responded with another rambling list, of mainly small-scale initiatives. (First on the list was "Reward for Results," a program that gives extra school aid to the schools whose students meet performance standards.)

    "There is no such thing as 'broad philosophy' at the legislative level," Barry Bluestone, an economist at the Boston branch of the University of Massachusetts, has said in explaining Gephardt's listlike style of speech and thought. "The only way to put together a broad philosophy if you're in Congress is through a series of specific bills." Bluestone worked as a staff adviser to Gephardt for six months, and is one of several economists and writers Gephardt consults in developing economic plans. Others are James K. Galbraith, of the University of Texas at Austin; Larry Chimerine, of the Economic Strategy Institute; Jeff Madrick, the author of The End of Affluence; and Jeff Faux, of the Economic Policy Institute. Gephardt has also followed the writings of Robert Kuttner, the author of and William Greider, the author of Most of those he consults claim, as Bluestone puts it, that the long lists of career legislator's specifics do indeed "fit together into a broader view of governing and leadership" -- and that this view should make Dick Gephardt, rather than Mario Cuomo or Paul Wellstone or any Kennedy or anyone else, the main vehicle for a reaction against the current economic consensus.

    THE view begins with the deceptively trite-sounding premise that the U.S. economy, despite its recent boom, has been growing far too slowly. Most economists would agree on the "slowly": during the economic recovery of the past four years the U.S. growth rate has averaged about 2.3 percent a year, as compared with an average of about 3.5 percent during recoveries in the first two thirds of this century. The disagreement is over whether this growth is tooslow -- and whether anything can be done if it is.

    The prevailing view holds that the economy has kept on growing precisely because the growth has been so slow. Anything faster would bring back inflation, which would ruin the stock market and everything else. Alan Blinder, an economist at Princeton University, explained the reasoning behind this view in a recent issue of magazine. Gephardt and his camp contend that fear of inflation is out-of-date. Instead, they say, the extremely flexible structure of the new economy, in which people bounce from job to job and computers may finally be increasing productivity, should make it possible to increase output, jobs, and pay much faster than before without hitting inflationary limits. The seemingly tiny difference of a point or two on the target for a U.S. growth rate has enormous political and social consequences. Gephardt argues that the contemporary "boom" with slow growth has aggravated America's worst problems, from social inequality to underinvestment in schools and roads. He told me, "I buy the theory that for a hundred years we grew at an average of three and a half percent a year, and for the past twenty or twenty-five years we've grown at two and a half. I think what [these] years have shown is that when the pie grows less rapidly, the people at the top have greater political influence and are able to claim a larger and larger share of the pie. The people at the top, being affected like everybody by a pie that's not growing as fast, have worked very hard to hold on to their share or enhance it. And so the very act of getting the pie to grow again at three or three and a half to me is critically important."

    Blaming slow growth for inequality is a convenient rather than a completely convincing position for Gephardt. It is convenient because until the growth rate actually does pick up, there is no way to disprove his claim that if it did, it would offset today's poor-get-poorer trend. It is unconvincing because so much evidence suggests that most economies around the world are becoming less equal by the year, and few or none are growing fast enough to reduce inequality. Still, this is where Gephardt will make his stand, and it raises the question of how, exactly, he would propose to make the pie grow. Apart from a variety of specific palliatives -- such as a "best practices" initiative, in which the federal government would follow the Australian model of publicizing industrial success stories -- his answer lies with the federal budget. Far from spending too much money, Gephardt claims, the national government might well be spending too little. Gephardt is the only prominent politician to claim that the recent achievement of "balancing the budget down" so as to achieve a zero deficit within a few years may make the country poorer rather than richer.

    "Remember, what's the goal?"he says. "The goal, to me, is growth, high standard of living, high quality of life. And the fiscal-responsibility part [the balanced budget] should be a part of the strategy to serve that goal. And I think you best serve [the real] goal by changing your definition of balance. I like to call it 'rough balance.'"

    "Rough balance" will be Gephardt's argument with the Republicans -- and with Al Gore and the Clinton legacy as well. He claims that a deficit equal to one percent of the gross domestic product is trivial by historical standards, and that a budget with such a deficit should be considered "roughly" balanced. The reason to stop at one percent or half a percent rather than pushing on to zero, he says, is that taking the last bit of money out of the budget (in today's economy half a percent could mean about $40 billion) could make it almost impossible to invest in education, research, environmental efforts, or other sources of long-term public wealth. (The money could in theory be taken out of entitlement programs such as Social Security and Medicare, but Gephardt knows that in reality the investment accounts are easier to cut -- which is generally what has happened.) A few weeks before Bill Clinton signed the balanced-budget bill, Gephardt said, "We've got to get off this idea that [balance] has to be exactly mathematically calibrated each and every year or we're all going to turn into pumpkins. We've got to get people to understand that if you're below one percent of [GDP], that's good enough, thank you. We don't have to keep turning the wheels here until we destroy everything." Because during the Reagan years there seemed to be no end to deficits, he said, the public swung to the belief that cutting the deficit was more important than any other conceivable goal. His case would be that "we have a greater goal, which is to have a higher standard of living ... and higher expectations, and saving the environment, and having social peace." All these goals, he said, would be more easily achieved with faster growth -- which in turn would be easier to achieve with another $80 billion a year in public spending. "Where he diverges from the prevailing view," James Galbraith says of Gephardt, "is in saying that economic growth and high employment and a more equal income distribution are more important than the accounting abstractions of balancing the budget."

    WHETHER Gephardt challenges Gore in the primaries or merely challenges Gore's ideas from Congress, his claim that the government deserves to keep and spend more money is the most significant novelty in recent politics. Gephardt has already challenged the Clinton Administration on its tax and welfare policies. He voted against the recent round of tax cuts because, he claimed, more than half their benefits would go to the top 10 percent of taxpayers. He bitterly opposed Clinton's welfare-reform bill. In his interviews with me he departed from Administration beliefs on a variety of other issues, including normalized trade with China ("All the arguments for [trading normally with] China [are] reminiscent of the arguments people made against sanctions against South Africa ten years ago") and the benefits of having extended the North American Free Trade Agreement to Mexico (he claims that the boom in U.S. exports to Mexico is illusory, since most are components shipped back to the United States after processing).

    Gephardt's one big brush with national controversy came with his strong anti-trade-deficit push in the 1988 campaign. Wearing a nylon union-member windbreaker and foreshadowing Pat Buchanan's protectionist arguments of 1992 and 1996, Gephardt argued that foreign exports were destroying American jobs. He remains skeptical of the mainstream claim that any expansion of trade, under any circumstances, is automatically beneficial for all parties. "I think the terms on which trade takes place are extremely important," he said. The proper terms of trade, in his view, include pressure on China and Mexico for workers' rights and political liberalization. His trade argument is connected to his deficit view, since both involve the claim that a steering role for government can produce a better outcome than pure laissez-faire. His trade position is more familiar -- and less acceptable -- in mainstream discourse than his deficit claims, and it may be the factor that disqualifies him from a hearing on economic policy in general.

    Gephardt seemed at different moments to shrink from and to welcome the pro-government implications of his message. He mocked what he said would be the standard Republican response: "They'll say, 'Just get rid of the government and cut taxes and everything will be fine.' I mean, we [Democrats] began this argument in '96 over the role of government, and our message was simple. We said we don't think there ought to be deep, damaging cuts in Medicare and education and the environment to pay for a tax cut for the wealthy. And I think we won that argument. Dick Armey would say that people don't want Medicare, they don't want public education -- they really want home schooling or whatever. I think we proved that wrong. I mean, I can't prove that to you, but we won the presidency, we picked up seats in the House." But Gephardt also hastened to damp down the implication that he was making a stronger pro-government case than Bill Clinton did in 1992: "I don't think you go out and say, 'We need more government' or 'Government is the answer to all problems.' I do think you say in very specific terms that the world we're in requires educated, trained, mentally capable, productive human beings. We have to lead and manage people so that they can be highly productive. I think if you stick with specifics, you don't need a theoretical discussion of government. What you need to say is, 'We need to educate these kids. How are we going to do this? We know how to do it. We've seen it done. Let's do it!'"

    If he wants to become the public symbol of the activist case, Gephardt will need to work out its mushiness, kinks, and internal contradictions. He might need rhetorical gifts approaching those of Franklin D. Roosevelt to sell a pro-government concept in post-Reagan, post-Clinton America. If he plans to use his ideas in a run for the presidency, he will also need some way to offset Al Gore's energetic use of incumbency. But American political debate is shaped as often by outspoken losers as by careful winners. Jack Kemp has so far lost every race for national office but greatly advanced the supply-side case; George Wallace and William Jennings Bryan, each in his own way, changed the campaigns and policies of the men who beat them. If Dick Gephardt, a cautious survivor by nature, wants to make a lasting impact, he may need to seem as daring personally as he is becoming in his thinking.

    James Fallows is the editor of and a contributing editor of The Atlantic.

    Illustration by John Collier

    The Atlantic Monthly; November 1997; A Democrat Who Admits It; Volume 280, No. 5; pages 32-44.