Will the Real Clinton Please Speak Up? : Politics: Instead of focusing on helping the middle class, all Clinton now talks about is deficit reduction. Did we elect Tsongas after all?

On Wednesday, Bill Clinton will give--for the third time in the past eight months--the Speech of His Life. In truth, this is the big one-- more significant than the conven tion speech, more important than the inaugural. Even his advisers privately acknowledge that the fate of the Clinton presidency likely rides on the economic program he will present.

Beyond all the speculation on the size of his stimulus package, or the details of his tax plan, lies a larger question: Which Clinton will show up? Will it be Bus-Tour Bill, the populist who barnstormed around the country and won the November election with his promises of a fair shake for the middle class? Or will we hear Beltway Bill--a play-it-safe President hewing to the economic conventional wisdom about cutting the deficit? For both Clinton and the nation, much depends on the answer.

While campaigning, Clinton spoke often of relieving the financial pressures facing middle-class Americans. He backed a middle-class tax cut, paid for by higher taxes on the wealthy who he said had benefited from the same economic policies that brought us our current problems. He promised government would do more to provide college education, child care and health care. Most of all, he promised to create more and better-paying jobs--the cornerstone for renewed prosperity.

The voters liked Bus-Tour Bill. In fact, they liked him so much they elected him President.

As President, though, Clinton faces a whole new set of pressures. The nation’s elites--in business, politics, academia and the media--are pushing him to move deficit reduction to the center of his agenda. With the election over, this view holds, it’s time for “responsible” leadership, which means middle-class equality takes a back seat to fiscal restraint. It is well understood that those moving to Washington can develop unseemly tastes, for limousines, perhaps, or riding Air Force jets. But another hazard is the siren call of deficit fetishism.

We saw this bias in the campaign. When Clinton, or any candidate, unveiled his economic program, it came under expert scrutiny. The question asked, though, wasn’t: Will this plan make the economy grow? Or: How many jobs will this create? The question was: Does it “add up”? Translation: How much deficit reduction will this deliver? On Wednesday night, that will again be the elites’ only question.

Interestingly, commentators have given Clinton little credit for his apparent willingness to keep his pledge to increase taxes on the wealthy. This deficit-reduction step has the additional merit of reversing a 15-year trend of increasing regressivity in the tax system. That doesn’t excite experts because, as all well-informed people know, we can’t close the deficit just by taxing the rich.

Just last week, columnist George Will suggested Clinton should lose his “policy wonk” reputation for not recognizing that “the middle class has most of the money in America” and “there are not enough wealthy people to pay the government’s expenses.” Actually, a review of the evidence suggests that wealthy people are really rather, well, wealthy. The richest 9% of Americans have as much total wealth as the remaining 91%. Perhaps Will’s pundit license should be reviewed. But he is hardly alone--this is one of the most cherished pieces of conventional wisdom.

This elite viewpoint explains the muted response to Clinton’s apparent abandonment of the promised middle-class tax cut. For the truth is, experts are quite pleased to see Clinton drop this commitment--they didn’t like it anyway. In fact, they want to tax the middle class more. If Clinton includes a major consumption tax, such as one on gasoline, this will unquestionably be the best-received part of his plan. Unlike taxing the wealthy, it will prove he can get “tough.”

Paul E. Tsongas, along with several blue-ribbon co-authors, recently spoke for the elite consensus, calling on Clinton to cut entitlements and pass broad taxes on the middle class. It has come to this: Tsongas giving Clinton political advice. Isn’t that like the Buffalo Bills offering their playbook to the Dallas Cowboys?

However, Clinton may want to consider the possible political consequences of signing on with the deficit-reduction chorus. One danger is the “read my lips” problem: Clinton said he wouldn’t tax the middle class. During the debates he said this: “The truth is that middle-class Americans have been taxed more in the 1980s, even though their incomes have gone down. The wealthiest Americans have been taxed much less, even though their incomes have gone up.” Clinton now cites a bigger deficit than he expected as one reason for his new persona. Perhaps his paraphrasing of the Claude Rains line in “Casablanca”--”I’m shocked, shocked, to find deficits here”--will work, but it seems doubtful.

Even leaving aside the honesty issue, voters defeated Ross Perot and Tsongas for a reason: They want economic revival. Ask people to name the nation’s biggest problem, they answer the economy and unemployment far more often than the deficit. Polls also show a substantial majority want to see economic stimulus--even if that means limiting progress in reducing the deficit. And by an overwhelming margin, Americans say creating jobs should be the top priority of Clinton’s first 100 days.

Nor does the public share the elite’s priorities on government spending and taxes. They were less than excited by the proposal to suspend cost-of-living-adjustments for Social Security beneficiaries. They also have their enthusiasm for tax increases well in check, including the much-discussed regressive gasoline tax. The exception: any tax on the wealthy. This ranks just below motherhood--and a little ahead of apple pie--in the public’s esteem.

Clinton might also consider a disturbing historical precedent from the Administration of one of his heroes: Franklin D. Roosevelt. Many have noted, with some irony, Roosevelt’s call for a balanced budget in his 1932 campaign. Often forgotten, though, is that Roosevelt tried to make good on his promise. In 1937, he sharply curtailed spending so as to retire a $400-million national debt. He nearly wrecked the economy: By October, the stock market had lost 40% of its value, and industrial production dropped 14%. Years later, historians marveled that anyone would try to balance the budget during such difficult economic times. What then will future observer’s say of today’s leaders’ fealty to debt reduction?

The political lesson is no more encouraging. After Roosevelt’s actions, the ruling Democrats fared little better than the Dow Jones: They lost 70 House seats and 7 Senate seats the following fall. A comparable political loss in 1994 would cost the Democrats the Senate and produce a moderate-conservative majority in the House. That would mean two years of gridlock leading up to Clinton’s reelection campaign.

But Clinton doesn’t seem to be heading in a direction that would squeeze the economy that tightly. He remains committed, he says, to a short-term stimulus package. This obscures a more significant shift on a larger question: In the long term, do you bring the deficit down through economic growth, or do you produce economic growth by shrinking the deficit? Candidate Clinton consistently said the former; President Clinton increasingly talks about the latter.

The consequences of this shift are revealed as much by what Clinton doesn’t say as what he does. Grand national-service plans are scaled back. Welfare reform is dumped onto a study commission--Washington’s most crowded graveyard. Gone is the proposed requirement that all companies devote 1.5% of revenues to job training for employees. Little is heard of guaranteeing a college education to all qualified young Americans. These and similar ideas were the heart of Clinton’s notion of “public investment.” They were the road both to economic prosperity and--critical for his party’s hold on power--to relegitimizing government in the eyes of the middle class.

Clinton seems to be gambling that once he brings down the deficit, he will be able to turn his attention to such an agenda. But a President’s political stock is never higher than in these early months. A year or two from now, with taxes already increased and today’s sense of urgency dissipated, will Clinton be able to sell bold new domestic programs? History is not encouraging on this point. Rather, it suggests that political capital is one of the fastest-depreciating forms of wealth.

Clinton is now confronting the ingenious trap set by the Reaganites in 1981. They believed that massive budget deficits--created by tax cuts for the affluent and higher military spending--would stifle domestic initiatives. Deficits provided an immediate rejoinder to any proposal for new government action: There ain’t no money.

Clinton’s strategy now is apparently to bring down the deficit, and thus tear down the barriers to domestic policy. But rather than slipping the trap, he may be springing it. The focus on deficit reduction leads to a cramped vision of political possibility. As “sacrifice” dominates the discourse, we hear less about innovation. In addressing one deficit, Clinton creates another: a public ambition deficit. National renewal delayed may well mean renewal denied.

Like Ronald Reagan, Clinton came to power promising dramatic change. He didn’t merely want to get America “back on track,” he liked to say, because the track wasn’t good enough. For two decades, the country had lived with increasing inequality, urban decay, receding social solidarity. We needed, Clinton said, a new track.

The question now is whether Clinton still believes that. On Wednesday night, we’ll find out.