The Magazine

WHEN THE ECONOMY TURNS

Feb 1, 1999, Vol. 4, No. 19 • By DAVID FRUM
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But if unemployment lines were growing, how long would the AFL-CIO and Clinton's supporters in black America stomach this president's hands-off economics? If incomes and asset values were tumbling, would middle-class Americans continue to yawn at Clinton's penchant for dreaming up new ways to spend their money? Worse, for all of Clinton's invocations of a "Third Way," it's quite clear that in hard times, the Third Way rapidly deteriorates into the old hardhat-and-steamshovel First Way. Look at the advice the Clinton economic team is administering to depressed Japan: Build highways! Dams! Pave over the entire island! It's as if they'd been clipping Felix Rohatyn articles from the 1981 New York Review of Books and saving them for just this emergency. Clinton's Third Way is a skiff that floats only in balmy weather.


Nor is it just the Democrats who need to worry about the politics of a downturn. The successful politics of the 1990s for both parties have been symbolic politics. For Democrats: V-chips, school uniforms, free cell phones for community-watch organizations, a patients' bill of rights, whoop-whooping against the evils of tobacco. For Republicans: the balanced budget amendment, the gauzy weepiness of the '96 convention, the congressional reforms in the Contract With America, whoop-whooping against the evils of marijuana. These gestures have achieved their political purpose because in good times, Americans expect relatively little of their government.


In bad times, however, micropolitics suddenly looks absurdly inadequate. Remember the fate of George Bush's "thousand points of light" in the recession of 1991? Or how silly Jimmy Carter's cardigan sweater looked after Iran took Americans hostage? In bad times, Americans rally to big ideas: to an Eisenhower who promises to "go to Korea," to a Kennedy who promises to "get the country moving again," to a Reagan who promises a 30 percent tax cut, and -- yes -- to a Clinton who promises health insurance for all that can never be taken away. That same opportunity may well beckon in 2000.


There are at least three grand issues or themes whose politics could look radically different in the wake of a slump: Social Security, taxation, and Clinton's personal style.


Social Security first. The Bulletin of the Atomic Scientists still posts on its cover a doomsday clock, graphically illustrating how close the world supposedly stands to nuclear Armageddon. It may be time for the board of governors of the Social Security system to borrow this attention-getting device. The crisis in Social Security is due in less than 10 years: in June 2008, when the first of the baby boomers turns 65. What should be done? President Clinton's State of the Union proposals are probably gambits: It seems incredible that he could believe that any Congress would let the government buy up industry. Clinton's main idea seems to be that if he can pile up big enough budget surpluses now, he will reduce the strain on the system in a decade. This squirrel-in-winter approach to pension finance is laughed at by most economists, but it has helped Clinton achieve his real goal -- avoiding an across-the-board tax-cut -- while (as a bonus) making it seem as if he were actually taking some action on the crisis.


Now suppose the economy turns down. The budget surplus -- which owes its existence to the fantastic increase in federal tax revenues of the past few years (up from $ 1.154 trillion in fiscal 1993 to $ 1.743 trillion estimated in fiscal 1999, a 51 percent increase, with much, much more projected for the years ahead) -- will shrink, even vanish. If it does, so do the Clinton administration's not-very-convincing-to-start-with claims to be doing something about Social Security. Clinton's verbal formulas worked politically because they gave people the comforting sense that somebody was keeping a careful eye on their financial future, and the mountain of money in the surplus was the tangible proof. No surplus, no proof. No surplus, and all the allegedly radical ideas of those who actually want the problem solved rather than evaded suddenly cease to look so radical after all.


Now think about taxes. In 1999, federal revenues will exceed 20 percent of gross domestic product for the first time since 1945. (Federal revenues were only 17 percent of gross domestic product when George Bush left office.) Federal, state, and local taxes combined now consume 40 percent of the income of the median family: an all-time record, more even than during World War II. Unlike in the last period of tax creep, the 1970s, middle-class wage-earning households have been insulated from the rising burden of the Clinton years by a proliferation of new, targeted, phased-out tax benefits. These benefits have minimized middle-class tax resentment: There has been no 1990s version of Proposition 13. And with business conditions seemingly so favorable, it's hard to convince Americans of the value of tax cutting for the economy in general, as Bob Dole found out when his promise of a 15 percent across-the-board tax cut so badly flopped.


If business conditions were not so favorable, however, the Clinton tax increases would not be so readily ignored. People get more anxious about where their dollars are going when they feel they have fewer of them. More urgently, in a recession the deflationary impact of high taxes will not be as easily brushed aside as it was in 1996. We've all watched the Japanese economy trapped for half a decade within a seemingly inescapable recession by its government's unwillingness to significantly lower tax rates: It's easy to imagine such a thing happening here -- and easier still to explain why it should not.


Finally there's the Clinton style. Probably not since John F. Kennedy has a president so influenced the way other politicians dress, talk, and emote, and not only in the United States, but around the world. Think of Gerhard Schroder and Tony Blair as much as George W. Bush and Newt Gingrich. (Well, where else did Gingrich get the idea to pose for his last book in hiking boots and open-necked shirt?) But unlike Kennedy, this much-mimicked president is not much admired: One of those polls he lives by, CNN-Gallup's poll for January 8-10, shows that by a 55-42 margin, the public does not respect him as a man. A "Kennedyesque" politician is glamorous and witty; a "Clintonian" politician is a shameless liar.


The Clintonian style is pervasive because it seems to have achieved fantastic results: Here's a politician who -- if the law were strictly enforced -- might easily be in the slammer, and instead he boasts 70+ percent job-approval ratings. It's tempting to infer from the Clintons' repeated success in overcoming the most gaping self-inflicted wounds that there's something about this style that is especially well suited to a postindustrial economy, to a female-majority electorate, to -- well, name whatever fancy theory you like. And it's equally tempting (or depressing, depending on your point of view) to believe that the Clinton style will therefore be with us forever.


But again: the politics of Clintonism may look very different if the economics do. If eighteen months from now we are all talking about mistakes that were unnecessarily stumbled into, avoidable dangers that were inattentively not avoided, tough but urgent decisions that were evaded or fudged -- we may find that about the last thing any ambitious pol wants is to be confused with the man whose most quoted remark is destined to be, "It depends on what the meaning of the word 'is' is."


This is all speculation, of course. Clinton has enjoyed amazing luck throughout his career, from his escape from the draft to the stock market rally that immediately followed his disastrous August 17 speech. His luck may yet hold just long enough to get him out of town with most of his secrets still intact and his job-approval ratings still at record highs. Since 1995, the coin has come up "heads" just about every time that Clinton has tossed it. Who knows? It may come up "heads" a dozen times more. Personally, I wouldn't bet my life on it. But Clinton has.




David Frum is a contributing editor to THE WEEKLY STANDARD.