This article appeared in Upside (October 1992)
Bush destroyed his credibility and his claim to a second term back in 1990, when without so much as an apology, he broke his only economic policy pledge. Though repeated like a mantra throughout the 1988 campaign, George Bush never grasped that millions of Americans regarded his "No new taxes" promise as a solemn vow. These voters knew back then what the sorry history of the 1990 Budget Agreement has proved yet again: Regardless of how much tax money the federal government takes in, it will spend that and more, much more. With the Congress hopelessly corrupted by the special interests that feed off deficit spending, Bush's pledge was the last hope for Americans who realize that our future prosperity hinges on cutting total government (federal, state, & local) spending, now over 45% of GDP.
Why did George throw it all away? The most telling clue slipped out in an offhand comment made just months after he abandoned his tax pledge. Asked how he liked working on economic problems, Bush admitted he "wasn't that interested in it." Though shockingly honest, his comment shouldn't have come as a surprise. Don't forget, for two decades, in one role after another (Ambassador to the U.N., Envoy to China, Director of the CIA, and Chairman of the National Security Council when Vice President), George Bush had spent the bulk of his career inside America's vast national security apparatus. To this day, Bush says that running the CIA -- where he revelled in signing his memos "Head Spook" -- was his favorite job.
More thoroughly prepared for his foreign policy role than any previous president, Bush put together the brilliant national security team of Baker, Cheney, Powell, Gates, and Scowcroft, led an unprecedented global alliance against Sadaam Hussein, negotiated stunning nuclear arms cuts with the squabbling chieftains of the former Soviet Union, and got the Arabs and Israelis to sit down at the same table at the same time.
But for those of us who must earn a living somewhere beyond the Beltway, Bush's remarkable foreign policy achievements are overwhelmed by his suicidal economic policies. From the unprecedented growth of regulations, to the fastest rise in federal spending since the Kennedy administration, to the pathetic "car sales" trip to Japan and the longest American recession in 50 years, George Bush has demonstrated profound economic incompetence.
Bush's isolation from and ignorance of American economic life was captured in a "defining moment" video clip taken just last year. In it, Bush reacts with "gee whiz" amazement on seeing his very first supermarket checkout scanner. Apparently, he'd been too busy to get to the market for the last decade.
Well, what about Bill Clinton's economic policies? The bottom line: right problems, wrong solutions. Clinton hammers away at the core economic problems which Bush has all but ignored: lousy schools, crumbling infrastructure, the environment, and, of course, the federal deficit.
And what of Clinton's remedies? Sadly, despite all the relabeling, it's more of the same bad medicine that Democrats have been prescribing for decades. For example, instead of reforming the monstrous public school monopoly/union /bureaucracy by forcing all schools (public and private) to compete for students, Clinton toes the party line of the 90s' most powerful union -- the National Education Association. In the place of real reform, he calls for higher teacher salaries.
To rebuild our roads, bridges, and airports, Clinton calls for $50 billion more in federal spending. Yet, privatization of government assets, wherever it's been tried, has been shown to be radically more effective at providing essential facilities at affordable costs. Forcing projects to meet a market test is the best way to weed out pork and fill real social needs.
In 1987, the British government sold off its airports, including Heathrow and Gatwick, for $2.5 billion. Since then, passenger satisfaction is way up, as is virtually every measure of airport performance. A huge new Heathrow Terminal 5 is in the works. And BAA, the company which bought the airports, is now worth $4 billion.
Government highways have seen virtually no design changes in 40 years, but now the private sector in California is building four highly innovative tollways. Electronic toll collection and time of day (or congestion) pricing are intelligent market responses to traffic problems. Can we expect infrastructure innovations like these by feeding our bureaucrats more?
On the environment, Clinton made his position clear by naming Al Gore. Read Gore's book. His proposed "Strategic Environmental Initiative" calls for all-out "command-and-control" of the economy to save the environment. Using tradable permits to create efficient pollution markets and stimulate new technology goes unmentioned.
A year ago, I gave a three hour private briefing to Al Gore and his top aides on the bionomic approach to economic policy. Gore paid close attention and followed every nuance of the argument. But when, among other things, I concluded that our absurdly complex, redistributive income tax system should not remain the government's key revenue source, Gore's face went blank and his staffers literally squirmed in their leather chairs. Apparently, I had challenged the sacred instrument of government power. Gore, for several years the Senate's leading spender according to the National Taxpayers Union, sees Washington's economic manipulations as essential to the society's well-being.
To cure the deficit and stimulate investment, Clinton takes a page from George Bush's playbook -- another income tax increase. You figure it out! By the way, this time Clinton's not proposing a measly 3% bump in rates from 28% to 31%, but a real man-sized leap up to 37%. The $150 billion (another 2.5% of GDP) in new taxes it's expected to generate should be just about enough to turn this lingering recession into a good, old-fashioned collapse.
In a way though, it may be best to have Clinton's "bigger is better" government crowd responsible for both ends of Pennsylvania Avenue when runaway federal spending and red ink finally push the economy over the brink in the mid-90s. As devastating as this crisis will be, it now looks inevitable and necessary. How else will we find the political courage to reverse the steady rise in government's share of GDP?
In short, despite the veneer of moderation and the talk of free markets, Bill Clinton and his economic advisors have not learned the fundamental economic lesson taught by socialism's collapse. Deep-down they still believe that a nation's "economic engine" must be under the "command-and-control" of its central government.
Ironically, over the last few months, George Bush started making genuine pro-growth decisions. He made it much easier for new biotech food products to get to market, came out strongly for real school choice, and issued an executive order that will make it far easier for state and local governments to sell-off infrastructure assets. But these moves are too little, too late. We can only wonder how history would have turned out if, when it really mattered, George Bush had cared -- even a little bit -- about the future of the American economy.