THE PRESIDENT TURNS BACK . . .

Mr Bush has broken with Reaganism by nice mess he has got himself into

Washington 'OUR long national nightmare is over,' said Gerald Ford on the day that Richard Nixon resigned and he took office as President in 1974. Something of the same sigh of relief could be heard from liberals and Democrats when President Bush ack- nowledged last week that it was clear to him that 'tax revenue increases' would be necessary to solve the increasingly difficult problem of the federal budget deficit. It was as if the President's willingness public- ly to revoke the most widely remembered promise of his political life somehow sig- nalled an end to the Reagan era. Not only Michael Dukakis, which one might have expected, but even the man Reagan beat in 1984, Walter Mondale, were trotted out to gloat, more in sorrow than in anger, that their long-standing belief that the Amer- ican people are not taxed enough had been vindicated.

What I hope is that we'll all learn something [said Mondale]. This is probably the most basic, deliberate, horrible economic mistake in American history and it was all driven by disingenuous political strategy that has cost our nation terribly. Let's hope we learn our lesson and start to talk honestly and openly in these campaigns.

'George Bush, has announced that he is raising taxes,' said the Democratic Repre- sentative Robert Torricelli: 'The charade is finally over.'

Though the Reagan revolution was neither nightmare nor charade to Republi- cans, some on the Right were beginning to believe that Bush had betrayed it even before last week's announcement. 'Truly, the conservative hour in American politics is over and a new liberal hour is at hand,' wrote the former Reagan speech-writer, Patrick Buchanan, recently. Richard Viguerie and Steven Allen of the United Conservatives of America are equally fed up: 'George Bush spent most of his career as a country-club Republican, then res- tyled himself as a Reaganite to win the Presidency and is now reverting to his old ways.' Such people, although they are not yet numerous within the party, will now be listened to more closely. They don't forget that Bush once characterised Reagan's tax-cutting policies as 'voodoo economics' — a phrase which, together with 'read my lips: no new taxes' and 'deep doo-doo', is one of his few contributions to the political vocabulary. Curiously, all three are re- levant to his present situation.

So has George Bush finally come to his middle-of-the-road senses? Having re- canted his recantation of the voodoo line, is he ready to lead the nation in a return to its natural belief in the power of govern- ment to do good — at a cost? Yes and no.

There can be little doubt that his conver- sion was a reluctant one. The decision was forced upon him by the refusal of the Democrats with whom he is trying to make a budget deal to settle for anything less. And he has to get a deal because the slowdown in the American economy, together with the steep rise in the cost of bailing out the bankrupt savings and loans, means that the budget deficit will be some $100 billion more than forecast in January in the administration's budget submission to Congress. The Gramm-Rudman Deficit Reduction Act makes that illegal. If the President and Congress cannot agree on a package of revenue increases and budget cuts to eliminate that rogue $100 billion, then something called 'the sequester' com- es into effect. This is an automatic, across- the-board cut in everything except interest on debt and entitlement programmes, like social security, until the target is met.

Everybody agrees that this would be a disaster. Government services would come if not to a screeching at least to a whining halt right around election time. To bring the Democrats into an agreement to fore- stall that, Bush had to compromise on the hitherto sacrosanct issue of the tax in- crease; but, unwilling to help the President out of his difficulties and already labelled by a decade of Republican rhetoric as the high tax party, the Democrats refused to go first in calling for new taxes. That is the reason for his grudging statement last week, which had all the panache of a ransom note written by the kidnap victim.

It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require all of the following . . .

There then follows a list of six require- ments of which 'tax revenue increases' is the second. Maybe he hoped that it wouldn't be so noticeable that way.

Well, it got noticed anyway. Having said on Tuesday that he intended to let the statement speak for itself,' he was forced by the ensuing outcry ('Read my lips,' bannered the New York Post: 'I lied') to call the press conference on Friday to react to the reaction. Did he deserve it?

Well, I expected it. But I don't — I think the 'deserving' of it will — the proof of pudding is going to be in the eating, and how it comes out, because I think the American people recognise that the budget is greater than we had predicted and the Democrats had pre- dicted, the economy has been slower, and so we'll just wait and see how we come out. That didn't do a lot to make his earlier statement look clearer — or less like a U-turn.

Yet, had it been politic to do so, Bush could have offered a much more coherent explanation. It lies in the other five items on his list of requirements for a budget solution, which included spending cuts that will be as difficult for the Democrats to swallow as tax increases are for the Repub- licans. He is hoping that, in return for a few token tax increases he is able to get ycirne of the budget cuts — and reforms in the budgetary process — that both he and Reagan have been trying for in vain for years. Such a victory would both mollify the Right wing and look more like an act of leadership and statesmanship than one of betrayal to the electors.

And if there is no agreement he can take his campaign to the country in the autumn as the man who was willing even to compromise on the sacred tax pledge but who was rebuffed by the perfidious, tax- happy Democrats. As Senator Gramm of Texas said, then the President can 'rear back and start swinging'. But that is not the way most of his party is looking at it now.

The wishful thinkers among them, includ- ing the House Republican whip, Newt Gingrich, and Secretary of Housing and Urban Development, Jack Kemp, point out that the wording of the statement — 'tax revenue increases' — in fact repre- sented no definite break with the campaign pledge because tax revenues could be increased — by better collection methods, a spurt of growth in the economy or even Bush's pet capital gains tax cut — without any increase in tax rates.

That kind of sophistical subtlety fails to recognise the reason why Bush signed the statement in the first place: the Republi- cans have been trying to sell those ideas for years and the Democrats have not bought them. They are still not buying. Without a tax-rate increase there will be no deal, and if there is no deal what has Bush to gain by leading people to think that he is willing to go back on his word? He will have the worst of both worlds if he gets no signifi- cant deficit reduction and yet is seen as willing to compromise on an important principle.

And he may be in deep doo-doo no matter what he does. Within 24 hours over half the Republicans in the House of Representatives signed a letter written by Representative Walker of Pennsylvania to the President claiming to be 'stunned' by his U-turn and insisting that 'a tax increase is unacceptable'. Any tax increase. And if these were backbench rabble rousers, Senator Don Nickles of Oklahoma said, 'I'm part of the Republican leadership, but if we come up and find ourselves with a big tax increase, I'm going to jump off.' Bush was therefore presented with the prospect both of splitting his own party and en- dangering its electoral prospects in Novem- ber, since the tax issue is the Republicans' one great strength.

It is therefore safe to conclude that only dire necessity made Bush break with Reaganite orthodoxy. But it is also true that he never has been a true-believer Reaganite, even when he was Reagan's Vice President. He prizes loyalty and team-spirit above all things but he is himself a technician, a fixer, someone who sincerely believes in the power of govern- ment to do good. He has what Warren Brookes, a writer on economics and one of his most severe critics on the Right, calls 'the typical Tory-wet mentality: he believes that he can do government more kindly and efficiently than the zealots on either side. But he is wrong.'

Brookes points to a huge increase in government regulation under Bush, espe- cially in a whole host of environmental matters but also in education, transporta- tion and the securities industry, which will add an enormous burden to an already sluggish economy. 'Bush has gone further than ever Dukakis could have gone. Duka- kis could not have produced the Bush Clean Air Act — costing five or six billion dollars a year just to clean up acid rain and hitting hardest already troubled manufac- turing industries in the rust-belt states. The outcry on the Right would have killed it dead.'

Christopher DeMuth, who oversaw reg- ulatory matters in the Office of Manage- ment and Budget during the Reagan admi- nistration, agrees that 'Bush has identified himself with the growth of environmental regulation' but adds that, although 'we're about to make some very large and point- less expenditures under the Clean Air Act', the Bush regulators are more aggres- sively interested in the use of markets than Reagan's were, and Bush has also won some political success with the issue. 'There are areas where it is more or less difficult to be a leader. Anyone not en- vironmentally involved today will not be in office very long.'

DeMuth, who is now president of the American Enterprise Institute, is much more critical of Bush's attempts to regulate the financial markets and his failure to do anything about Federal Deposit Insurance, which continues to make the savings and loan mess worse. And, when I spoke to him, he put his finger on the connection between Bush's 'belief in government' and the tax announcement last week:

That was a blow to public trust in him, and for what? The increased taxes under consid- eration are trivial and everybody knows that the trade-off is not to reduce spending but to increase it. The Reagan combination of tax reduction and deficit spending kept the lid on spending for ten years. For ten years the believers in spending have been trying to get rid of that cap; now Bush has joined them. Why? Because he works with politicians that have a lot of things they want to spend money on.

At Bush's news conference on Friday, where he attempted to turn aside some of what he repeatedly called the 'slings and arrows' that had been directed at him from Right and Left one thing stood out even more than his citing of Abraham Lincoln as a precedent for 'thinking anew'. It was a phrase from his opening statement: 'I believe that ultimately good politics is rooted in good government.' Ronald Reagan would have said less government.