Damage Report

The past two years have humbled both liberals and conservatives—or should have. The 1992 election, liberals hoped, would set in motion a new cycle of progressivism. It didn't. After the 1994 election, the new conservative leaders of Congress expected to stage a revolution. They didn't. First President Clinton failed to secure the bolder aspects of his program, notably health care reform and public investment; then the Republicans failed to enact most of the Contract with America and their seven-year budget plan. Clinton miscalculated on health care; the congressional leadership miscalculated on the government shutdown. Conservatives still have control of the national agenda, and they have won a big victory on welfare reform. But the collapse of public approval for Gingrich and the Congress—down to about 26 percent since January, according to a Wall Street Journal/NBC poll—has deflated their claim to a historic mandate.

Thus the 1996 election comes at a curious juncture. Juggernauts have been stopped, great ambitions set back, strategic calculations upset. Neither side goes into the election with any ideological momentum, but neither is in free fall. Liberals can say, "It's not what we hoped for in 1992, but not as bad as we feared in 1994." And conservatives can say, "It's not as bad as we feared in 1992, but not what we hoped for in 1994." For the moment, pending the outcome in November, each side can count more negative achievements than positive ones.

Two years ago, the public was supposed to be furious about gridlock in Washington, which must be why voters elected a congressional majority from the party opposing the President. Now many people have come to appreciate gridlock; it is evidently an acquired taste. If we cannot have our preferred policies, we prefer stalemate to action, and thus the status quo becomes a second-best solution that commands more approval, or at least acceptance, than any alternative.

So is the lesson of the last two years simply that, as the Founders intended, rapid, large-scale change in national policy is exceptionally difficult? After a half term of Clinton and two years of the Clinton-Gingrich coalition government of national disharmony, is America any different? What have actually been the results of the past two elections?

There have been significant results—some of them for the better. After the 1994 elections, Richard Rothstein compiled a list in these pages of "Clinton's Good Deeds: Or, 55 Reasons Why Liberals Should Have Cheered Clinton's First Two Years" [Winter 1995]. Surprisingly, most of Rothstein's items—such as the expansion of the earned income tax credit and restoration of tax progressivity with higher rates on the wealthy; gun controls; the National Voter Registration Act; the Family and Medical Leave Act; voluntary national service; California desert national park expansion; and a variety of actions protecting reproductive rights—still stand.

Of course, even during Clinton's first two years, the initiatives that required money, such as national service, were severely limited, and after the control of Congress shifted hands, Republicans were able to undo many of the changes in budgetary priorities that Clinton had introduced. Nonetheless, the surviving initiatives from the first half of the Clinton presidency make up a respectable, if not glorious, record and might have been seen as such if not for the overshadowing failure of health care reform.

From the outset, Clinton sacrificed more substantial spending initiatives for the sake of deficit reduction, and it is one of the cruel ironies of recent history that not only does he get no credit for it, but according to the polls, most people don't even realize the deficit has been cut in half. In fact, the U.S. deficit is now the lowest in relation to gross domestic product (GDP) of any of the G-7 nations, and if not for the high-minded demagoguery that dominates discussion of the budget, Americans might understand the progress we have made in putting our public finances in order.

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Much of what Clinton has achieved in the management of the federal government might also command more respect if so many people did not find the actual business of government so boring. Americans have supposedly been outraged by the kind of inefficiency symbolized by the Pentagon's mythical $600 toilet seat of some years ago. In 1993, the Congress passed a major reform of federal procurement, and as part of its effort to "reinvent" government the Clinton administration has made personnel management more flexible, sought to shift the focus of regulatory agencies from rules to results, and introduced new information technology to make it easier for citizens to obtain services and information. But while $600 toilet seats and petty scandals make great stories for "The Fleecing of America," the patient work of improving government is just too unexciting to make the news. I cannot say for sure that the federal government is, on balance, more efficient and responsive, but I am certain that there is no way Americans would have heard about it if it is.

Tn its second two years, jockeying with the Republican Congress, the Clinton administration has necessarily been on the defensive—rather successfully from the standpoint of gaining political advantage. The results in policy have been more dubious.

Until this summer, the single biggest accomplishment of divided government in the Clinton-Gingrich era was the passage last February of the Telecommunications Act of 1996, the most important change in communications law in 60 years. Similar legislation was poised to pass the previous Democratic Congress—it received more than 400 votes in the House—when in late September 1994, Bob Dole presented several nonnegotiable demands on behalf of the regional Bell phone companies, killing the bill. Although the new Republican Congress rewrote key provisions, particularly those affecting the cable and telephone industries, the 1996 model that ultimately passed and received President Clinton's signature was philosophically unchanged.

Like its earlier incarnations, the final Telecommunications Act removes regulatory barriers to competition across the boundaries that have traditionally divided local and long-distance telephone, cable, broadcasting, and newly emerging media. It allows larger consolidations of communications companies (particularly of broadcasters) than before. And it provides a continued regulatory basis for universal telecommunications service—indeed, it begins extending the concept to the new information superhighway. As I've noted in these pages ["Computing Our Way to Educational Reform," TAP, July-August 1996], the legislation for the first time makes "affordable" telecommunications connections for schools and libraries an aim of national policy. It also includes some strong protections for service to people with disabilities. With all its limitations, particularly its potential for increasing the concentrated power of communications behemoths, the legislation still counts, on balance, as modestly progressive.

The adoption of comprehensive reform of communications provides an instructive comparison with the earlier defeat of comprehensive reform of health care. Reforming an industry as large as health care was thought to be too ambitious; yet the sheer scale of communications, which represents an even larger share of the economy, never counted as an objection to a comprehensive bill. The Clinton health plan and other broad proposals were said to be too complex for most people to grasp; yet the communications legislation was incomprehensible to all but experts. (This summer the Federal Communications Commission released a more than 500-page ruling that sets out the terms for competition in the local phone market, which is just one aspect of the bill.) Some laissez-faire conservatives did want the government simply to go cold turkey on regulation, but the communications industries themselves explained they needed a regulatory referee.

Did favorable public opinion produce a positive outcome for the communications bill? There never really was any public opinion about it. The Telecommunications Act was the work chiefly of the business interests that negotiated it in concert with a few key congressional representatives and government officials. Telecommunications reform passed chiefly because of the commitment of its business sponsors, whereas health care reform suffered a decisive blow in early 1994 when business, large as well as small, decided it had more to lose than gain. Moreover, telecommunications reform didn't require any federal revenue; universal phone service (which is just over 90 percent "coverage") is supported by subsidies built inconspicuously into charges. But there was no way to finance universal health coverage without some major source of new revenue.

As I write at the end of July, Congress is moving toward approval of health insurance reforms initially introduced by Senators Edward M. Kennedy and Nancy Kassebaum. The Kennedy-Kassebaum bill confirms the pattern I've just described. It is utterly inoffensive to both big corporations and small business and calls for no significant new financing. Some refer to the bill as "incrementalist," but "minimalist" would be more apt. By comparison, President Bush's 1992 proposals would have done far more. After all the debate about the uninsured, the legislation offers no assistance to help people without insurance buy it. Instead, it mainly tries to help people with insurance keep it—a worthy objective, especially to those of us who already have coverage. The legislation is supposed to guarantee "portability"—a misleading claim, because employees will not be able to carry the same insurance or stay in the same HMO after leaving a job, except for the short-term coverage available under COBRA. Under the legislation, insurers will be unable to deny coverage for a preexisting condition to people who have been covered for the previous 12 months under another plan. There is no limit, however, on what the insurer can charge, although some provisions are meant to help keep rates down. You'll have a right to coverage if you can pay for it.

As a result of pressure from conservatives in the House, the health legislation also includes provisions for a four-year national experiment with medical savings accounts (MSAs). The experiment will enable 750,000 people to use tax-sheltered dollars to pay out-of-pocket costs under insurance policies with very high deductibles. Those who don't get sick and thus don't use their MSAs can keep the money. This is a wonderful deal for people who are healthy and relatively affluent; by pulling these people out of the general insurance pool, however, the MSAs are likely to make insurance more expensive for everyone else.

The significance of the health insurance legislation depends on how it is followed up. The MSA experiment could become the proverbial camel's nose under the tent, or Kennedy-Kassebaum could help to clarify the limitations of minimalist market reforms. Since the legislation provides no financing for the uninsured, it is unlikely to reduce their number significantly. In a future recession, the limitations will be especially apparent because the portability provisions mainly help people who change jobs, not those who lose them. Supporters of Kennedy-Kassebaum have justified it as a kind of confidence builder for a Congress nervous about any action on health care. But the debate will move ahead only when enough people lose confidence that minimalism is enough.

The Republican Congress might have dissolved without any sense of historic achievement if it had not been for passage of welfare reform. Perhaps the House conservatives finally recognized that their own inflexibility had led to a self-inflicted defeat in the battle of the budget. In the compromise on welfare reform that they struck in midsummer with Senate moderates and the President, they gave up their effort to end the federal entitlements to Medicaid and food stamps, and they retreated on a number of subordinate issues, such as the "family cap" on benefit increases for children born on welfare. They gave enough ground to get Clinton's signature and thus triumphed on their central goal: eliminating the federal entitlement to cash assistance, setting time limits on benefits, and devolving authority to the states.

There is no doubting the symbolic impact of these changes. President Clinton came to office hoping to make health care a right of every American and has ended up signing legislation that abolishes the right of dependent children to a minimum standard of subsistence. Of course, he put welfare into play himself; he said the system was broken and pledged to fix it by establishing a new framework that would move recipients from dependency to work. His view is also that the entitlement to cash assistance has never been much of a right, given the enormous variations in eligibility criteria and benefit levels from state to state, and that the poor will be better off if antipoverty efforts are reconstructed on a new foundation. That may yet turn out to be true, as many articles in this journal have argued. Indeed, one virtue of Clinton's decision is that it cuts off the defense of traditional welfare as a political strategy and forces all sides to think seriously about full employment.

Still, this legislation is a long way from Clinton's original program and from any genuine effort to ameliorate poverty. Instead of expanding support for training, child care, and health insurance to help the poor get off and stay off welfare, the legislation reduces expenditures and provides no assurance of work or any source of income when benefits end. After welfare recipients hit their limits, it will just be too bad for them, their children, and the communities that must deal with the consequences if they lose their homes and are forced into complete destitution.

A decade after Charles Murray in Losing Ground called for abolishing welfare outright, the federal government has taken the first step—if this is really the first step. The significance of welfare reform, like Kennedy-Kassebaum, will depend on how it is followed up. It provides states the latitude to cut benefits; much will now depend on whether there is a race to the bottom, as past experience and fiscal incentives both suggest. Ultimately, the basic premise of this reform—that the poor will shape up and get work when they can't get away with freeloading—will run up against the reality that employers don't want all these workers. The harsh provisions of this legislation may simply not hold once the human impact becomes clear. But this is to assume that the theory of conservative welfare reform is falsifiable by evidence of human misery, and that may be expecting too much.

Trom these past four years, it is difficult to distill much optimism, but there are at least some cautionary lessons worth retaining.

Beware the countermobilizing effects of reform. High-energy talk of change evokes high-energy responses. Seek to inspire your supporters, and you may inspire the opposition even more. Clinton did it on health care reform. Gingrich did it on Medicare. The Christian Coalition does it on its social agenda. Many people who cannot agree what to do can agree what not to do and thus can be organized more effectively around a negative proposition than a positive one. Progressives face a particularly difficult choice because their adversaries are likely to have more resources to countermobilize than they have to mobilize. This is not to say that reformers should proceed quietly. But they have far more need of defusing the opposition with early compromises than the hard-liners among them typically recognize.

Class interests count. Politics is still, in the classic phrase, about who gets what, and in the final analysis, class interests played a critical role in who got what in the policy conflicts of the past four years. When the dust cleared in the battle of the budget, the poor were the principal losers. The risk of welfare reform will be borne by poor women and children. After debating what to do for the roughly 40 million uninsured, the Congress did nothing. Instead, it adopted portability provisions that meet the middle-class concerns about keeping coverage between jobs and set up experimental tax shelters that are great for healthy people in higher income brackets. In one of the few steps that ran in the opposite direction, Clinton and the Congress in 1993 made the income tax more progressive by raising taxes on the wealthy and cutting taxes on the poor through the earned income tax credit. But this was reported, and is now remembered, as a tax increase, even though more people actually had their taxes cut and the vast majority of Americans were not affected by the higher taxes on the rich. And big tax cuts that will make federal taxes more regressive are now on the table.

Sometimes the best new idea is an old idea. In the world of public finance, there is a saying that "an old tax is a good tax" (Someone might have mentioned it to Al Gore when he was pushing the Btu levy in 1993.) The idea applies more generally. Regulation was thought to be unpopular, until disaster struck in the air and the public demanded stricter airline safety and security rules. Many people were surprised by the public's positive reaction to the Clinton administration's new approach to meat inspection. Who cares about meat inspection? It turns out a lot of people do. England's recent bout with mad cow disease may have helped to remind Americans (including ranchers and restaurateurs) of the virtues of regulation. The debate over the minimum wage is another example of the discovery that an old idea may still be the best idea available. I suspect that the coming debate over Social Security may lead to the same appreciation.

Another old idea is that political leaders can't accomplish much if they have no larger force behind them. The outcome of recent conflicts over national policy, particularly health care and welfare reform, testifies to a deeper failure. The Clinton presidency has failed to reverse—even to contest—the ideological sway that conservative ideas have enjoyed since Reagan, and it has been unable to stir any movements comparable to the unions in the 1930s or the civil rights movements in the '60s that could support its policies on behalf of Americans facing economic insecurity and restricted opportunities. Most likely, no president could have done much about these political realities; Clinton hasn't tried—and by echoing conservative ideas about government and balanced budgets, he may have helped to solidify the orthodoxy. As long as these underlying forces persist, America is unlikely to take a much different direction than it is now following—though it could certainly do worse. Of course, the turn to the right in national policy does have one benefit: it could be a potent countermobilizer.

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