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Voyeur At A Chicken Wreck
The game of budget chicken may have changed since my deadline for copy (Wednesday), but I'll bet the feathers and guts still look about the same. Anyway, there's some excitement in the risk of being wrong before published.
This game of chicken is distinguished by one player who never intended to swerve at the last minute: Mr. Clinton. If he can finish the game as well as he has started it, he may assure his re-election.
Granted, Mr. Gingrich is the easiest man in politics with whom to pick a fight; but Mr. Clinton has picked the right fight on the right ground, and the overconfident Mr. Gingrich has lurched into a no-win cul de sac.
The partial shutdown of government is designed to cause so much pain that the Republicans will be forced to give in. It won't take many Moms unable to apply for Social Security before the Republicans must provide temporary funding, and drop their demands for immediate surrender.
How much of this wreck is calculation, and how much happy accident for Mr. Clinton? Leaks have made it clear that his people have been planning a partial shutdown of government for a couple of months. Mr. Rubin at Treasury doesn't like default brinkmanship, but is prepared for several weeks of semi-shutdown without harm to the financial markets. This is no spur of the moment collision.
Mr. Clinton's Presidency has had two main problems: one of form, and one of substance. First, he has been unable to depart his liberal soul for the political center without spineless appearance. Second, he has been unable to explain to a restive electorate, more conservative every day, why the social programs he wants to defend are worth defending.
The shutdown solves both problems. "See, I do have a backbone!" (preening while nibbling stiff upper lip); and better, unsaid: "If you don't think government does anything useful, then do without it for a while."
The country is not prepared to do without, and the pain is going to be the Republicans' fault. For one thing, Mr. Gingrich and Mr. Dole look like it should be their fault, as their television personae resemble a couple of extras in a grade "B" Frankenstein flick. For another, there is no mean streak in most Americans, no matter how impatient we are for a balanced budget. We would rather stay in hock than stop Thanksgiving paychecks for 800,000 people.
After the Republicans toss in the temporary funding towel, real negotiations will begin.
The deal may take a couple of months, but the Republicans don't have a prayer. Any time they threaten to walk away from the table, Mr. Clinton will have only to threaten a replay of this week's shutdown. Medicare spending will slow more slowly, and the Republican tax cuts will be whittled to tokens.
Once the deal is signed, the financial markets will evaluate it for reality. The markets will not be kind if the final budget rests on phony assumptions ("interest rates will stay below 2% for the next seven years while tax revenue grows at 7% per yearÉ.). If it's a real deal, as is likely, the Fed will follow through with some sort of rate cut carrot.
However, as always, no matter who tries what sort of manipulation, interest rates depend on the economy. At the moment, the economy seems to be weakening, which means lower interest rates at the usual cost. A balancing budget will be a further drag.
The political awards: Mr. Clinton gets credit for low rates and low inflation, and the Republicans get blamed for recession and general churlishness.
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