Sunday, November 16, 2003

Dean: Fiscal Discipline in Our Future?

Bruce Bartlett on Robert Rubin' Master Plan

As I predicted yesterday, the publication of Bob Rubin's memoir is going to provide considerable ammunition for Democrats to make fiscal responsibility their mantra. In coming weeks, we are going to hear over and over again how Clinton's deficit reduction plan in 1993 created the 1990s economic boom.

The first excerpt of Rubin's book, In an Uncertain World (Random House), appears in today's Financial Times. Not surprisingly, it deals entirely with the 1993 budget deal.

Rubin explains how Clinton apparently adopted deficit reduction as his "threshold" issue without much of any persuasion. In truth, Clinton had to be dragged kicking and screaming into abandoning all his populist, big government spending plans. This is well documented in Bob Woodward's 1994 book, The Agenda (Simon & Schuster).

Nevertheless, to his credit, Clinton did become a born again budget balancer. Rubin explains why this triggered the 1990s boom:

"The view over the next few years that fiscal discipline was being restored contributed to lower interest rates and increased confidence, and that led to more spending and investment, which in turn led to job creation, lower unemployment rates and increased productivity."

There I think you have the Democrats' 2004 economic playbook. We are going to hear it over and over again. Howard Dean is already preparing to run as a fiscal conservative. With Rubin at his side, once he gets the Democratic nomination, he is going to get support from some of those ordinarily expected to support the Republican candidate.

The fact that Dean, the presumptive Democratic nominee, plans to forego matching funds means he will have to go to Wall Street and the business community for campaign contributions, which will reinforce the need for him to make fiscal responsibility a key issue. With his left-wing base secured by Iraq and Bush hatred, they will say nothing critical of Dean's move to the right on fiscal policy.

My fear is that President Bush may feel the need to respond to a constant drumbeat of criticism about the deficit amid rising interest rates. Since, realistically, you can't cut much out of the deficit without touching entitlements or raising taxes--especially with defense off limits-- this will give Democrats a chance to scare seniors and demoralize the Republican base. As I said yesterday, their goal is to replay the 1992 election.

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