This article appeared in Upside (May 1993)
In my view, it never made sense to expect genuine reform to flow from the 1992 election. Massive institutions, like the federal government, don't change unless they face a harrowing crisis. The long-delayed restructuring of IBM and GM, not to mention the Soviet Union, are obvious examples. The great forces which hold the American government hostage -- deficit spending, PAC money, profligate waste, and rampant bureaucracy -- are enormously powerful and mutually reinforcing.
The basic problem, as General Electric's CEO Jack Welch puts it is that, "Change has no constituency. People like the status quo. . . If your change isn't big enough, revolutionary enough, the bureaucracy can beat you. When you get leaders who confuse popularity with leadership, who just nibble away at things, nothing changes. That's true in countries and in companies. . . Pulling off a Band-Aid one hair at a time hurts a lot more than a sudden yank."
From what we've seen so far, Clinton's proposals -- from taxes and spending to national service, campaign finance, technology policy, and trade -- amount to tugs on the old band-aid. That "sudden yank," the thorough-going transformation of the federal government for which millions yearn, will not come about until the futility of superficial change becomes unbearable. We haven't reached that breaking point, and no one knows how long it will take to get there.
If forced to guess, I'd say we'll be stuck in this historical holding pattern for three to seven years before some startling event breaks the stranglehold of entrenched interests and unleashes a cascade of radical reforms. For the Soviet Union, the catalytic event was the fall of the Berlin Wall. At GM and IBM, unprecedented multi-billion dollar losses shocked directors into action. In each case, the necessity for deep change had been obvious for decades. But until the legitimacy of established authority was shattered by some devastating event, inertia held sway over reform.
The larger the organization, the longer it takes before reformers gather enough strength to overwhelm defenders of the status quo. Chrysler, the smallest of Detroit's Big Three, was the first to have a brush with corporate death and the first to remake itself into an effective organization. Ford followed Chrysler's tracks. But GM, by virtue of its sheer massiveness, needed another decade to reach the same point of desperation. The U.S. government, the largest organization on the planet with three million employees, a $1600 billion budget, and the authority to print its own money, needs more time to pass the point where wholesale reforms become unstoppable.
Not only is it too soon to expect genuine reform of the federal establishment, it is unrealistic to expect that Bill Clinton would lead such an effort. He is, after all, a product of the existing system. Like Mikhail Gorbachev, IBM's John Akers, or GM's Robert Stempel, Clinton can initiate some minor changes, but he cannot attack the system of power itself. He must retain the support of the interest groups who put him in office.
This is why, even before he was inaugurated, Clinton abandoned the only campaign promises which actually threatened Washington's power elites. Slashing the budget deficit in half within four years, passing a tough campaign finance law, and enacting a presidential line item veto are precisely the kinds of systemic changes that the power brokers cannot tolerate.
Since a real restructuring of sacred federal programs was out of the question, Clinton had to disappoint those who expected a significant headway on the deficit. With annual deficits of nearly $400 billion (the oft-cited $300 billion figure ignores the plundering of the Social Security trust fund), the U.S. government will pile up another $2000 billion in debt over the next five years. Even if his own projections were reliable, Clinton's $325 billion deficit reduction package would at most slow the hemorrhaging by sixteen percent.
Making matters worse, to come up with that $325 billion reduction, Clinton's program calls for $3 of new taxes for every $1 of reduced spending, reversing a campaign pledge of $3 in cuts for every dollar of new spending. Again, this was a promise Clinton could not keep without alienating his core constituencies.
But perhaps the most damaging feature of Clinton's economic plan was not embedded in the plan itself but in the State of the Union message which accompanied it. After extensive polling and focus group research, Clinton's team crafted a speech overstuffed with calls for "real change" and "shared sacrifice." Post-speech polls, which recorded nearly 80% approval ratings, bore out the effectiveness of the market research and packaging.
In the following weeks, however, as the rhetorical smoke cleared, it became obvious that Clinton's plan won't actually demand significant sacrifice from anyone. Sure, the energy tax will sting consumers. Energy-intensive industries will be hurt. Higher income tax rates will pinch. But will these measures seriously disrupt anyone's life?
As every budget analyst knows, especially Bill Clinton, real sacrifice means cutting the entitlements that now account for over two-thirds of domestic spending. But the president offered no such proposals. Indeed, Clinton even jettisoned Budget Director Leon Panetta's modest one-year delay in the Social Security cost of living adjustment (COLA).
Clinton's preference for the illusion over the reality of change was also revealed by the much ballyhooed "25% cut" in the White House staff. It turns out to be little more than a reassignment of head count to other departments that will yield savings of less than five percent. Similarly, a 100,000 person drop in the federal payroll sounds like a lot, but it's less than a 3% "attrition only" shrinkage over four years. After all the radical downsizing by American corporations, would anyone outside the Beltway have the nerve to argue there isn't a single federal employee who could be laid-off?
Almost as if to emphasize the illusory nature of Clinton's pleas for sacrifice, when the Congressional Budget Office showed the president's proposals would generate $55 billion less deficit reduction than claimed, moderate House Democrats discovered another $55 billion in savings in just a few days. How could it have been so easy to find that much money, if Clinton's plan had called for real sacrifice in the first place?
By repeatedly sounding the clarion call for sacrifice without actually proposing any, Clinton has vaporized his future credibility on this pivotal issue. Like Gorbachev, who talked endlessly of perestroika (restructuring) only to be ridiculed for failing to deliver any, or Bush with his infamous "Read my lips," Clinton made the classic error of telling voters what they wanted to hear when he could not follow through. In 1995 or 1996, who will rally to Clinton's call for sacrifice when the numbers show that earlier "sacrifices" were a sham?
Why is Clinton hurtling down this disastrous path? Because he is trapped by deeply held, but hopelessly outmoded beliefs about the proper role of government. At a time when the microchip revolution is driving centrally controlled hierarchical systems to extinction, Clinton still believes that social and economic change must be designed and imposed by Washington. Instead of creating an economic environment that will allow millions of consumers and businesspeople to evolve their own solutions, Clinton and his gang of Rhodes scholars believe they're smart enough to plan the future for us.
Nonetheless, out here in the hinterlands, the forces for real change are gathering strength. Term limits, so central to shattering the "iron triangle" of politicians, lobbyists, and bureaucrats, won all 14 statewide referendums in 1992. The Balanced Budget Amendment, which will ultimately compel a massive downsizing of the federal establishment, was narrowly defeated in Congress last spring. But 30 of the required 34 states have already passed legislation calling for such an Amendment. The Line Item Veto, another powerful tool for reducing waste, is also gathering support. Clinton, by the way, now opposes every one of these reforms. Ross Perot supports them.
The conditions for true reform are not yet ripe. The illusions of change created by President Clinton's rhetoric must first be pierced by the accumulation of facts.