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The Buzzing In Bob Dole's Head


News: Analysis & Commentary: THE CANDIDATES: ELECTION '96

THE BUZZING IN BOB DOLE'S HEAD

Can he form an economic vision out of swarms of advice?

In the echoing halls outside the Senate Majority Leader's Capitol office, politicians and passersby could sense that something big was afoot. Bob Dole's closest advisers scurried in and out of a daylong meeting on May 14, searching for a strategy to rescue his flailing Presidential campaign.

The next day, Dole announced a decision--and it shocked GOP loyalists and Democratic foes alike: After 36 years in Congress, the Kansan will surrender his beloved Senate seat to devote all his time to the race against President Clinton. "I will seek the Presidency," he declared in a May 15 press conference, "with nowhere to go but the White House or home."

HAMSTRUNG. The stunning announcement makes it clear that Dole is groping for dramatic measures to close the vast gap in the polls between him and Bill Clinton. At the moment, his campaign is foundering, dragged down by a divisive intraparty fight over Washington gridlock that makes the Majority Leader look ineffectual and hamstrung. Dole hopes that bursting out of Washington will reenergize his campaign.

What Dole needs more than anything, though, is a strong, visionary economic platform. To hammer one together, he has enlisted an eclectic crowd of top economists, including former Council of Economic Advisors member John B. Taylor and former Federal Reserve Governor Wayne D. Angell to help. But now Dole must decide between his lifetime record of fiscal conservatism--which played well for years but which may be too austere for a Presidential campaign--and supply-siders pleading with him to woo voters with a package of tax cuts.

Supply-siders, such as Lawrence Kudlow of A.B. Laffer, V.A. Canto & Associates, are urging Dole to embrace a Reaganesque program built around a 15% across-the-board income-tax reduction. Another possible sweetener: relief from the sting of payroll taxes. If Dole bites, the GOP's premier deficit hawk will have hitched his hopes to a $500 billion tax plan that he'd be hard-pressed to pay for, even under a seven-year, balanced-budget timetable. But the supply-siders dismiss those qualms. "When Republicans run on tax cuts, we win," declares a GOP economist. "It's that simple."

Dole may just be desperate enough to adopt the supply-side line. He's deputized Senator Spencer Abraham, a GOP freshman from Michigan, to flesh out a 15% tax cut and test it in public. Fans argue that the across-the-board cut--replacing the $500-per-child tax credit and other scattershot proposals the GOP has pursued lately--will pull together the party and rally voters. "We need to unite taxpayers, rather than divvy up spoils among them," says Bruce R. Bartlett, the former Bush Administration Treasury official who was the first to propose the 15% tax cut.

Other supply-siders fear that cuts in top rates could renew charges that Republicans favor the rich. So they want Dole to back a deduction or credit for some share of workers' Social Security payroll tax. That would directly address worker anxiety--but at enormous cost. Offsetting even 10% of payroll taxes would cost the Treasury $54 billion a year.

Trouble is, paying for tax cuts of such magnitude would force Dole to come up with equally huge spending cuts. It was just that approach that landed Dole and the GOP in hot water with voters in 1995 as Republicans tried to slice into popular middle-class entitlements, such as Medicare and Medicaid nursing-home care.

Moreover, big tax cuts clearly go against Dole's history. The Kansan reluctantly shepherded Ronald Reagan's 25% income-tax rate cut through the Senate in 1981--and came back with tax hikes to rein in the ballooning federal deficit in 1982, '84, and '90. He's always derided the supply-side wing of the Republican Party, scoffing at claims that lower rates will spur enough economic growth to make up for lost revenues. Last year, Dole dutifully went along with House Republicans' calls for a big tax cut--but he worked behind the scenes to shave the size of the package from $365 billion to $122 billion.

So Dole is torn between supply-siders and the economic mainstream. Conventional GOP economists got their innings with the candidate on May 8, when Dole invited six prominent gurus and six senators to a barbecue dinner in his office. Their goal: Find a set of policies that will raise the economy's long-term growth rate to 3%, up from the 2% average of the 1990s.

Dole handpicked the six economists at the session: Taylor; Martin S. Feldstein, who chaired Ronald Reagan's Council of Economic Advisers; Nobel laureate (and BUSINESS WEEK columnist) Gary Becker of the University of Chicago; Harvard's Robert Barro; Charles Wolf of RAND; and John Lipsky of Salomon Brothers. The group kicked around a variety of ideas, such as expanding individual retirement accounts, reforming the court system, instituting choice plans or vouchers to improve schooling, and overhauling federal regulations.

NO SURPRISES. Taxes, too, were on the table--though these economists give more weight to cutting levies on interest, dividends, and capital gains than to supply-side rate cuts. The group is slated to reconvene in a few weeks to hammer out more specifics on their initiatives. "It's a very mainstream group--they aren't going to produce major surprises," says economist David D. Hale of Zurich Kemper Investments Inc.

Whatever ideas Dole's economic brain trust produces must pass muster with two other groups of advisers, however. Dole has long turned to his peers in the Senate and to friends in the business world for down-to-earth advice on how policies will affect business. Angell, for example, makes many economists' eyes glaze over with his twangy talk of using gold prices to fight inflation. But Dole remembers him as a Kansas banker, and values his advice. From Capitol Hill, GOP Senators Bob Bennett of Utah, who built the Franklin Quest day-planner company, and Connie Mack, a former Florida banker, have put the pro-entrepreneur sheen on Dole's recent speeches. And Senator Pete V. Domenici (R-N.M.), Dole's second-in-command during 15 years of budget battles, reinforces the candidate's hawkishness on deficits.

CAUTIOUS GROUP. The final say rests with Dole's inner circle, a small band of Senate staffers and former aides. On economics, campaign treasurer Robert E. Lighthizer, Dole's former chief-of-staff on the Senate Finance Committee, takes the lead. He is assisted by fellow Washington lawyers Roderick A. DeArment and William Diefenderfer. Dole's current chief-of-staff, Sheila Burke, helps pull all the advice together.

Schooled in Dole's art-of-the-possible style, these aides form a cautious group. But they're also fiercely loyal, and they know they're fighting for their boss's political life. In the wake of Dole's May 15 announcement, they are hoping the next likely Senate leader, Mississippian Trent Lott, will give them a boost. They want him to use his close ties with House Speaker Newt Gingrich (R-Ga.) to forge tough economic policy bills reforming welfare, overhauling Medicare, and cutting the budget. Those measures will force Clinton into unpopular vetoes that GOP strategists hope will highlight the contrast between statist Democrats and power-to-the-people Republicans. That way, Lott, Gingrich, and company can lob political bombs at Clinton in Washington while Dole is out on the hustings.

There's one problem with this plan: Dole's campaign is nearly broke. So Dole will rely on the kindness of GOP governors and party honchos to fund his travel and advertising until he gets more federal funds right after the Aug. 12-15 Republican Convention. But even a new infusion of funds won't revive a campaign bereft of ideas. That's why supply-siders are confident of converting Budget-Balancing Bob to their religion.

Clinton's advisers are already practicing their retort--that old Reagan favorite, "There they go again." Senate Majority Leader Dole would be stung. But candidate Dole may decide that budget-busting is a small price to pay for the White House.By Mike McNamee, with Howard Gleckman, Dean Foust, and Douglas A. Harbrecht in WashingtonReturn to top


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