August 1, 2007
Vol. 42, No. 16a
To: Our Readers
- Rove questions Iraq War’s impact on politics while Clyburn says a successful surge would be a "problem"
- Congress pushes two bills to raise taxes and expand government
- Alaska Republicans face serious ethics questions about their earmarks
- What impact does Thompson’s wife have on his ’08 presidential bid?
- Sununu in danger in New Hampshire
- The Middle East initiative by former British Prime Minister Tony Blair is not taken seriously. He is limited to economic, not political, aspects, and is spending no more than one week a month on the project. The highest-ranking U.S. representative in the Israeli-Palestinian situation is at the assistant secretary level. That is a sign that President Bush is not truly serious about achieving a settlement.
- The addition of a tax increase to the farm bill (for the first time since 1933) is a clear sign of the future. A Democratic President and Congress definitely will mean major tax increases. The last time a tax increase happened it was followed by the Republican victory in 1994.
- Republican melancholy grows with prospect of major losses in the Senate. Sen. John Sununu (R-N.H.) (see below) is severely endangered. The expectation in Virginia now is that Sen. John Warner (R) will not seek another term, opening the door for a Senate run by former Gov. Mark Warner (D).
- The consensus among Democrats is that Sen. Hillary Clinton (D-N.Y.) was the clear winner in the dispute with Sen. Barack Obama (D-Ill.) over meeting with foreign despots as President. It went to his greatest political weakness: his presumed inexperience compared with Clinton. Former President Bill Clinton‘s intervention in the dispute keeps it in the news and ends it while she’s way ahead.
- Sen. Chuck Hagel (R-Neb.) is still considering the possibility of a presidential campaign as an anti-war candidate and soon will make his decision. He could make a splash in the primaries.
Iraq: Bush advisor Karl Rove continues to downplay the role of the Iraq War in causing the Republican disaster that was Election 2006. He offered congressional corruption as the main reason for the GOP defeat in a school for Republican House candidates at the National Republican Congressional Committee in Washington last week.
Democrats, meanwhile, could not hide their nervousness over the possibility that the surge strategy might be improving the situation in Iraq. Rep. James Clyburn (D-S.C.) made an artless comment that a positive report from Gen. David Petraeus in September would be "a problem."
SCHIP: The Senate’s vote to expand the State Children’s Health Insurance Program (SCHIP) to the non-poor and to finance it with a large hike in cigarette taxes, represents a major step in the direction of universal health care. It will also likely result in a future funding crisis.
- Although the administration has threatened to veto this $50 billion expansion of SCHIP, Democrats would love to have a vote or veto "against the children" to hold against Republicans. This illustrates their cynicism behind this proposal, but President Bush’s cynicism is also evident. Compare his support for a much larger, more expensive, and politically important prescription-drug plan for senior citizens.
- From a taxation point of view, there are two arguments against SCHIP expansion: First, cigarette taxes represent a very unreliable funding stream. To the extent that health education campaigns and price increases have helped bring down the number of smokers in the United States, they also threaten the government’s stream of revenue. This means that another tax increase will be needed to sustain the newly expanded SCHIP in the future.
- Second, because the bill could lead states to give government health coverage to children in a family of four making up to even $80,000, the bill redistributes income in a regressive fashion — from the poor (and smokers are disproportionately poor) to the middle class. This too is similar to the prescription-drug bill, which promised subsidies for the prescriptions of the nation’s wealthiest demographic, senior citizens, at the expense of young workers.
Farm Bill: The long and twisted history of U.S. agricultural subsidies continues with a farm bill that improves nothing and perpetuates America’s government-subsidized farm economy. But the political lesson of last week’s vote in the House is that the farm lobby is so powerful, it can win a tax increase vote from four Democrats and 18 Republicans who had promised publicly never to support higher taxes while serving in the House of Representatives.
- The House farm bill continues and increases subsidies in one of America’s least free markets: agriculture. In order to win non-rural votes, the bill’s authors larded it up. They added new subsidies for previously unsubsidized crops and increased food subsidy programs that are most commonly used in cities. Attempts to limit or eliminate subsidies by amendment were badly beaten on the House floor. The congressmen who supported these amendments were a motley mix from the right and left.
- The House Democratic Leadership, at the last minute, included a large tax increase on the U.S. subsidiaries of foreign corporations. The tax would fall, for example, on Subaru plants in Indiana or Toyota plants in South Carolina. It would affect and potentially jeopardize hundreds of thousands of American jobs.
- Democrats can explain the insertion of the tax increase in terms of PAYGO issues. But more importantly, wishing to put rural Republicans in a hard spot between a tax hike and the farm bill, they cleverly forced a vote on a bill that unnecessarily connected the two. It was a win-win.
- Among the most surprising "yes" votes was that of Rep. Adrian Smith (R-Neb.), a freshman who last year was carried through his primary and general election with more than $400,000 in contributions and nearly $100,000 in independent expenditures from the Club for Growth. As he represents most of rural Western Nebraska, Smith had always been expected to vote for a farm bill. He would have seemed like the last person in Congress to vote for a tax hike.
Ethics Reform: The legendary pork-barreling of Sen. Ted Stevens (R-Alaska) has its origin in the federal government’s unwillingness to let Alaskans drill for the oil beneath their state. As long as they cannot drill, Stevens has asserted a right to drill instead into the federal budget in order to compensate. As a result, Alaska, the least populous state, enjoys by far the highest level of federal spending per capita.
- This is the backdrop for the federal investigation that has led to a raid on Stevens’ home and widespread speculation that he will be indicted. Alaska has been roiled with a public scandal involving executives of an engineering and pipeline services company, VECO, and state legislators, including Stevens’ son (a former state Senate president).
- The elder Stevens himself is under scrutiny for more than $100,000 of work performed on his home and overseen by former VECO CEO Bill Allen. By whom was it financed? Was the arrangement honest? Stevens insists that he paid for it. Allen has already pleaded guilty to bribing public officials. It is worthy of note that home equity has previously been considered a "safe" place for members of Congress and other officials to become mysteriously wealthy, since they do not have to report the value of their homes on federal disclosure forms. There is no public evidence that Stevens acted improperly to help VECO specifically, but he did secure many earmarks that resulted in major VECO contracts.
- Also connected to VECO and under investigation is Rep. Don Young (R-Alaska), the state’s only House member and formerly the powerful chairman of the House Transportation Committee. Young’s attempt to earmark funds for two unnecessary bridges in his state — the so-called "Bridge to Nowhere" and another one to be named "Don Young’s Way" — demonstrated the might of the Alaska delegation in pork-barreling, but it also gave momentum to the drive for earmark reform.
- Young’s and Stevens’ names can now be added to a long list of members of Congress with potential problems with the law related to earmarks: Representatives John Doolittle (R-Calif.) and Jerry Lewis (R-Calif.), as well as Democratic Rep. Alan Mollohan (W.Va.). Rep. Duke Cunningham (R-Calif.) sits in a federal penitentiary for taking bribes in exchange for earmarks. (Note that in Cunningham’s case, it did him no good in the end that he tried to conceal his ill-gotten wealth with homes — a San Diego house for which he was grossly overpaid and a houseboat. Property tax records gave him away.)
- The question for Republicans is simple: how many more of their members have to go to jail before their leaders embrace the concept of reform? The motivation need not even be so negative: The conservative ideological position of limited government gives the GOP an opportunity to exploit a great political issue by embracing reform. Yet neither the prospect of several Republicans’ going to prison nor the disastrous loss of the 2006 election has weakened the party’s embrace of the earmark model they ran from while holding the majority, in which each congressman provides for his district or state according to the New Deal model of "Tax, tax! Spend, spend! Elect, elect!"
- The persistence of this consensus is therefore puzzling, especially when Republicans have few other issues working in their favor, thanks to the Iraq War. To date, Republican leaders have been very reluctant to upset the bipartisan consensus on earmarking. Between the parties and across regions of the country, lawmakers remain, by and large, steadfastly supportive of every congressman’s right to perform "private charity" with other people’s money. Senate leadership of both parties has been indifferent and even hostile toward Senators Jim DeMint (R-S.C.) and Tom Coburn (R-Okla.) for pursuing this issue with vigor.
- Senate Majority Leader Harry Reid (D-Nev.) has sought at every turn to weaken reforms that have already passed the Senate almost unanimously. He has succeeded. The bill the Senate will see next is the one that passed the House yesterday with only eight votes in opposition. It significantly weakens Senate rules on earmark transparency, earmarks benefiting family members, and threats made against members that they will lose their earmarks if they do not vote for bills.
- Because their leadership has not cared for this struggle from the start, Senate Republicans will likely be forced to vote for this weak bill simply because they will otherwise look like they are obstructing reform.
Fred Thompson: The spectacle of former Sen. Fred Thompson‘s (R-Tenn.) Republican adversaries’ demeaning his wife, Jeri, in conversations with newsmen, suggests how seriously they regard his prospective candidacy. He starts his campaign in the top tier of candidates, and he has a strong claim to the loyalty of the South and social conservatives. His test is how he will do after Labor Day when his candidacy’s phantom stage has been finished.
- The exit of Tom Collamore as "manager" of Thompson’s non-campaign is far less significant than some have speculated. Collamore, a former bureaucrat and tobacco lobbyist, has little political experience. Not even Collamore’s friends could conceive of his running a national political campaign. Speculation that he was forced out by Jeri was overblown.
- Close associates maintain that there was no chance Fred Thompson would be a candidate for President were he not married to Jeri. He tells friends the reason he abandoned what seemed a promising campaign for the 1996 nomination was that he did not feel he could manage that endeavor as a single man.
- Thompson’s take of $3.45 million in 26 days in June is not really as disappointing as some in the press are portraying it. Taken day-for-day, it is comparable to the amount raised by former Massachusetts Gov. Mitt Romney (R) during the second quarter. Thompson’s much bigger problem has nothing to do with money, but rather with his need to get into the race before he loses all of the momentum he’s built.
New Hampshire: Former Gov. Jeanne Shaheen (D) and her husband are telling supporters that she there is about a 70 percent chance that she will run for Senate against Sen. John Sununu (R). There is no need for her to move too quickly, since the state is currently consumed with presidential politics, and she already has universal name recognition there.
However, her delay appears to be affecting the primary that will be run if she does not get into the race. Katrina Swett, wife of former Rep. Dick Swett (D), is running away with the fundraising race against Portsmouth Mayor Steve Marchand (D). Marchand’s problem is that the Democratic political crowd in his Seacoast base is extremely gun-shy and wants to keep the powder dry until they know what Shaheen does first. Shaheen, who narrowly lost to Sununu in 2002, is by far the best candidate the Democrats could put up against him in 2008. She trounces Sununu in early polls, whereas he narrowly leads the other two potential candidates.