Mondale Versus Reagan Jude Wanniski May 8, 1984

Executive Summary: Walter Mondale's path to the Democratic nomination seems secure. Gary Hart did himself in, with Mondale not being forced to alter his basic New Deal coalition strategy. The fall campaign will be Reagan's to win or lose. There has been no Reagan campaign thus far, a defensive mode prevails. Mondale's strength and weakness is that he is the agent of the liberal Democratic establishment; he would simply improve on the Carter-Mondale years. His three themes — safer world, competitive economy, fairness — promise a replay of those years when translated to policy. The parallel conservative establishment threatens the President's chances of easy victory. His political aides thus far resist new economic growth initiatives. But the President must be armed with a coherent, economic-growth agenda for 1985 or allow Democratic assertions of a coming COP austerity to stick. House Republicans gear for a flat-tax/monetary reform platform in Dallas that would stymie the Mondale strategy.

Mondale Versus Reagan

On the assumption that Walter Mondale will be the Democratic Presidential nominee, we now have a clearer picture of how the presidential campaign will unfold. It was always believed that Mondale's chances of defeating President Reagan next fall were not very good, but the way the Democratic contest for the nomination has developed has done nothing to improve Mondale's chances as his party's standard-bearer. He got quite a scare from Gary Hart, to be sure, but that pushing and shoving did nothing to turn Mondale into a stronger potential competitor for the President. Jimmy Carter's Vice President did not have to alter anything of substance in his original approach in order to turn back Hart's challenge. Where Hart's early surge was built on his Kennedyesque evocation of "new ideas," it took only Mondale's demand to know "Where's the Beef?" for voters to discover that Senator Hart's Kennedy model is more Teddy than Jack. As Hart became more specific, he was quickly perceived as being more egalitarian than Mondale on tax policy and more isolationist than Mondale on foreign policy. Mondale did not have to budge from his "What you see is what you get" posture to recover. Hart did himself in. If anything, the sparring with Hart may have hurt Mondale in the long run because it seemed to confirm his belief that he doesn't have to alter his fundamental approach in order to defeat Ronald Reagan.

Against this basic Mondale, the President should be able to win easily, in the best of circumstances winning all 50 states, including Mondale's Minnesota. John Sears, one of the nation's most astute political seers, believes Mondale has to run a perfect, errorless campaign in order to lose by only 53-to-47 percent. The only way for Mondale to win, says Sears, is for him to run a flawless campaign while Reagan's campaign is mishandled or the President makes major errors in foreign or domestic policies. Sears believes chances are that Reagan will not make such errors; Mondale's campaign will be short of perfection and Reagan's re-election margin will be decisive, perhaps on the order of 60-to-40 percent.

At the moment, in early May, Gallup has Reagan leading Mondale by only 8 percent, well down from his 20-point lead of early January. It further shows a Reagan-Bush ticket virtually even with a Mondale-Hart ticket. The numbers don't necessarily represent a "slide" on Reagan's part as much as they do the dominance of the Democratic campaign in the news media and the absence of a visible Reagan campaign. The fact that Reagan's personal approval rating by the public remains in the 50s is the better indication of his standing and potential. And the narrowing of these Gallup matchup numbers almost has to occur for the President's political handlers to break out of their defensive, run-out-the-clock mode.

We have to expect this early-lead syndrome, defensive posture, to cause problems in the Reagan campaign. It's astonishing, for example, that not a single Reagan television spot has yet been aired to offset the attention the Democrats have been getting from the electorate. The White House could never settle on a creative director for the commercial media campaign and finally settled on a committee approach. Almost certainly this will prove a dismal failure. The approach guarantees no risk taking, lest some voting bloc be offended by a new idea, and suggests a costly campaign to remind voters that Ronald Reagan has been President and is running again this fall.

When we see Ron and Nancy being filmed at China's Great Wall by a Reagan-Bush Committee camera crew, we can already see it coming: Voters will soon be reminded via paid video spots that Ron and Nancy went to China. In 1980, remember, the early, enormous Reagan lead over Jimmy Carter was squandered as millions of dollars were spent on TV spots reminding voters that Ronald Reagan had once been governor of California.

The Gallup finding that Mondale does much better in a matchup with Reagan when joined on the ticket by Gary Hart is of some importance. The voters that Hart continues to attract are of the "chablis-and-brie" milieu who in 1980 turned to John Anderson's third-party candidacy. Now called "Yuppies," the young, urban professionals are up for grabs with John Anderson having declared himself out this trip. The fact that Reagan in 1980 barely got a majority of the popular vote, against Carter/Anderson, suggests that he has to find ways to pull these independents into his orbit if he wants a comfortable re-election mandate.

President Reagan certainly does not attract this group with his cultural positions — ERA, abortion, school prayer, etc. Nor will Reagan attract them with his foreign defense policies. While the yuppies are not the peaceniks of yore, they're still not comfortable with Reagan's posture toward the Soviets and are nervous about the use of military force. Still, they find Mondale's last-ditch attempt to play New Deal, special-interest coalition politics distasteful and they have no illusions about the failure of the Carter-Mondale years. This is why the President's best chance of attracting them lies in elevating the economic-growth issue. This will require risk-taking on new policy initiatives, something that the White House in its current defensive mode is resisting — for the time being.

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The greatest strength Fritz Mondale will have as the Democratic nominee is the loyalty and support of the liberal Democratic establishment. He proved his loyalty as a faithful servant of that establishment throughout his entire political career. Mondale has never been thought of as his own man, a political leader who brought ideas and stratagems to the party. He has, rather, been an agent of that complex of Democratic institutions which has shaped policies for the party from World War II onward. He has risen from the ranks not as a political entrepreneur but as a corporate executive; first, a junior executive accepting assignments from the establishment and carrying them out with skill and enthusiasm; then, a senior executive drawing on the consensus of the hierarchy's board of directors for his thinking and direction. His career path, dominated by promotions rather than elections, resembles that of a Soviet politburo member or a Fortune 500 senior V.P. more than any presidential nominee of either party that one can recall. He's not impetuous, but solid and predictable. He won't make any obvious blunders in the campaign because he'll be careful to have his each move approved in advance by his establishment counselors.

This is actually Mondale's greatest weakness as well. He seems to actually believe that the Carter presidency, which he helped supply with establishment designed policies and personnel, would have been successful if only he, not Jimmy Carter, had been in charge. In other words, Carter's failure was in his personality, particularly his inability to play the insider's game on Capitol Hill. In Mondale's mind, this can be about the only possible explanation of why Carter failed and why the voters refused him a second term.

In almost every other respect, after all, the Carter years were almost more Mondale's years than Carter's. Carter, remember, ran in 1976 as an anti-establishment outsider. At the July convention in Madison Square Garden he did not choose Mondale as his running mate as much as he bowed to the wishes of the establishment that he accept Fritz. The Carter "ship" was manned by a mere handful of loyalists (Ham Jordan, Bert Lance, Jody Powell, Griffin Bell), hardly enough to run a government. Mondale proved to be the gangplank over which marched the entire liberal establishment, the Brookings people, the ACLU, the Naderites, the AFL-CIO, the Council on Foreign Relations and the Trilateralists. Mondale's office in the White House West Wing, two doors from Jimmy's, was the administration's employment office. When the smoke cleared after Inauguration Day, most Cabinet and sub-Cabinet offices down to the fourth tier were occupied by the network that Mondale served. Here is how Morton Kondracke, editor of The New Republic, put it in an article on Mondale that appeared in the April 3 issue, a year ago:

There are those who say that [Mondale] wrecked the Carter Presidency. The most prominent such person — and so far the only one willing to stand up and be counted publicly — is former Attorney General Griffin Bell, who says in his book Taking Care of the Law that Carter "failed" partly because "he staffed the government with McGovern people, with Kennedy people — with people with no feelings of loyalty toward him, and more important, with a different view of government. President Carter did this unwittingly by accepting the so-called Washington government-in-waiting." Carter's "crucial error," Bell writes, was in moving Mondale into the West Wing, where he impressed on the government policies and personnel that were "not the same" as Carter's. Carter's views, according to Bell, were "well to the right of Vice President Mondale's."

....Other former Administration officials make a more sweeping condemnation than Bell's, though they are not willing to be quoted by name. "Griffin Bell made an ideological thing out of it," said one former White House aide, "but mush was what basically was coming from the policy process, and Mondale was the architect of that process. That was a Mondale government as much as it was a Carter government. The Cabinet and sub-Cabinet people reflected more Mondale's orientation than Carter's. Ham [Jordan] and Jody [Powell] deferred to Mondale, and Stu Eizenstat was his ally. Carter lost his way as soon as he got into the White House. He was captured by his government, and Mondale constructed most of the government. It was a government without a theme, resume government. Mondale represented the consensus of conventional liberalism."

Along a similar line, another ex-White House aide says...."Mondale's big negative is that he tried to turn the Carter Administration into a traditional liberal coalition — a liberal, reactive Administration. With him, there was always some group Carter had to respond to. Labor and civil rights groups got Humphrey-Hawkins. The National Education Association got the Department of Education. Mondale talked Carter into keeping the $50 tax rebate [in 1977] even though the economy was turning around. I never went into a meeting when he didn't take the liberal Democratic special interest line on issues. That's where his heart is and what he believes, which suggests lack of discretion and judgment."

What kind of race will this Mondale run against Ronald Reagan? The fact is Mondale really believes the Carter-Mondale years would have been good years if only Carter had handled Congress better and if there hadn't been a tripling of oil prices to foul up the economy and a crazy Ayatollah spoiling foreign policy. He will promise an improved version of those years, built around the same kinds of people and policies.

His Three Themes are by this time fixed in concrete: A safer world, a more competitive economy, a fairer system. Reagan has made the world less safe because of his reliance on military solutions instead of diplomatic solutions, Mondale says, and if elected he will negotiate with adversaries everywhere, in Moscow, Central America, the Middle East, etc. He promises to resubmit the SALT II treaty, cut the defense budget a little bit, strengthen NATO, eliminate certain weapons systems, etc. In short, he will operate within the framework of the liberal foreign-policy establishment.

Mondale's more competitive economy boils down to selective protectionism and currency devaluation, limiting imports and subsidizing exports, all of the failed international economic policies of the Carter years that contributed to the stagflation. The Carter Treasury and State departments were loaded with Mondale people who pushed trade and currency manipulations for "competitive reasons/' Mondale seems especially fascinated by the idea that a 30 percent dollar devaluation would have beneficial effects. (If we could persuade the Japanese to accept 30 percent more wheat of ours for 30 percent fewer of their cars, we would have more jobs!)

The "fairness" issue is the standard redistributionist schedule. Reagan's tax cuts helped the rich at the expense of the poor, by creating monstrous budget deficits that keep interest rates high. Mondale will attack the deficits by taxing the rich. Discussion about a Bradley-Gephardt flat tax plan has simply disappeared from the Mondale campaign; too many of the special-interest coalition oppose the idea. If Mondale is elected, 1985 will be a big year for tax hikes.

There would be some interesting exceptions. The liberal establishment has been coming around to an acceptance of a lower capital-gains tax. Sen. Paul Tsongas of Massachusetts, among the most liberal Democrats in Congress, recently observed that he had voted against the 1978 Steiger Amendment that halved the capital gains tax rate only because he was a Democrat, but now concedes that the measure had beneficial effects on his state's economy. Mondale talks of eliminating the rate altogether for "new businesses," which sounds like a fascinating new loophole. But this is a rare "new idea" in Mondale's repertoire. His candidacy really does represent a kind of Last Hurrah for the decrepit New Dealers. If the ideas are as stale and moldy as last year's bread, that doesn't seem to matter. Ideas aren't nearly as important to the Mondale campaign as the camaraderie of the old coalition. They will denounce Reagan and greed and nuclear war and celebrate teary-eyed compassion.

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The only thing as obsolete as this New Deal coalition is the parallel Conservative Coalition, best represented by the Business Roundtable, the National Association of Manufacturers, the American Enterprise Institute, the commercial Keynesians of Wall Street, and the Republican members of the Council on Foreign Relations and the Trilateral Commission. President Ford ran as the candidate of this coalition and was defeated by the Carter-Mondale coalition. In 1980, George Bush was the candidate of this coalition and was trounced by Reagan, the supply-side populist conservative. What kind of campaign will the President run this year?

We can't forget that Reagan's chief-of-staff, James Baker III, was campaign manager to both Ford and Bush and will effectively be the President's campaign manager this year. As of now, if it were entirely up to Baker, the President would run a Bush-Ford type campaign, saying as little as possible about future policy initiatives, taking no chances, and bowing to the wise men of the Conservative Coalition. It was Baker who pushed the "down payment" plan as a concession to the Coalition's deficit hysteria. And while the President is being snookered once again into supporting a big tax hike without meaningful spending cuts, and should veto the tax bill that comes to him, we must assume Baker will revert to the role he played in 1982 in pushing TEFRA I. This will make it hard for Reagan to answer Democratic assertions that no matter what Reagan says in the campaign, hell sign yet another big tax hike in 1985. Baker also bows to the Conservative Coalition's awe of Paul Volcker in restraining White House criticism of Fed policy and resisting even talk of monetary reforms in a second Reagan term.

On the other hand, Baker has always believed Mondale would make it a close race and a run-out-the-clock strategy would be too risky in itself. He's tempted to think the President should have something new for the voters, perhaps a campaign unveiling of a flat-tax plan. The arguments he hears against it are the same Mondale hears: The special interests don't want to lose their tax advantages and will make a lot of noise. But he's also hearing that the idea is popular at the grass roots and a number of political people he respects are urging him to work it into the campaign.

The recently introduced Kemp-Kasten bill has not yet been closely examined by the Administration, but when it is, chances are it will get more favorable consideration than anyone now imagines. All flat-tax proposals must confront the same dilemma: How can it be designed to prevent low-income taxpayers from facing higher tax liabilities? The distinguishing feature of Kemp-Kasten, which cuts the top personal rate to 25 percent and the top corporate rate to 30 percent, is a differential on "wage income" that solves the dilemma. The concept should prove irresistible, considering the politics of any flat tax.

Republican convention politics also favors inclusion of Kemp-Kasten as a platform plank. Rep. Trent Lott, the House minority whip, is chairman of the platform committee. He is a Kemp-Kasten co-sponsor and is eager to have the President run a dynamic campaign that would give congressional Republicans popular issues in their campaigns. And Senator Kasten is chairman of the economic subcommittee. Lott also supports Jack Kemp's call for a gold-based international monetary reform in the second Reagan term, and the first draft of the platform includes such a plank. President Reagan has asked Treasury Secretary Regan of the feasibility of such reform and Regan has been vaguely positive, knowing the President is inclined in that direction.

By the time the Democrats convene in San Francisco in July, it should become clear to the White House that a dynamic economic-growth program for 1985 will be indispensable to the fall campaign. Because the economic expansion will likely work to the President's advantage in the campaign itself, Mondale will without any doubt campaign against the "illusory recovery" and charge that it was bought by Reagan at the cost of mammoth budget deficits in order to see him through re-election. The Democrats will warn of an inevitable Reagan belt-tightening recession to squeeze down the deficits, GOP cuts in social spending, Social Security, Medicaid, massive new consumption taxes, etc. Presidential denials will do no good. It will all sound too plausible; these are all the prescriptions of the Conservative Coalition, David Stockman, Marty Feldstein, et al. If the President is not going to put forward a coherent, plausible economic-growth program for 1985 — one that addresses the deficits, high interest rates, unemployment and potential inflation — it will be hard for the electorate to believe he will not cave in to the austerity wing of his party. He has caved twice already. It might not be enough to defeat Reagan, but it would make things awfully tight. The New Deal coalition would rouse itself again, Jesse Jackson and Mondale would come to terms and the black vote will soar, and the Yuppies will vote Democratic.

The President's political handlers, who are now fussing with computers, taking pictures of the Great Wall, and dreaming of splits in the Democratic Party, will have this specter to contemplate by the time August and the Dallas convention roll around. As a result, we predict, the President will come out of Dallas armed with a growth platform that will give him an easy victory over Walter Mondale in November and the makings of a successful second term.