Bush called in two veterans of his 1988 campaign, speechwriter Peggy Noonan and media adviser Roger Ailes, to add glitz to this pivotal moment. Together, Noonan and Ailes helped the president deliver a respectably crafted speech and a respectable performance. NEWSWEEK decodes the address to show what Bush was really saying, and why:
..MR.-
- A year ago tonight I spoke to you at a moment of high peril. American forces had just unleashed Operation Desert Storm … Soon after, the Arab world and Israel sat down to talk seriously, and comprehensively, about peace-an historic first And soon after that, at Christmas, the last American hostages came home. Our policies were vindicated. ..MR0-
Operation Desert Storm, the liquidation of the Soviet empire, the winding down of 40 years of cold-war tension-who could blame Bush for wanting to savor his triumphs? Foreign policy is his strongest suit and the main reason he still beats his Democratic competitors in trial heats of the ‘92 election. The Bush campaign can also play up last week’s news footage of the president meeting Boris Yeltsin at the United Nations-the very image of a commanding figure in the global arena, the architect of a new world order. But the events that made Bush so popular at home in 1991 seemed less compelling in 1992. To some observers of the State of the Union speech, Bush seemed awkward as he began his delivery. The reason was obvious. As a senior adviser put it, “The president knew that people would be wondering when he was going to get to his domestic message. Although he was discussing global changes of ‘almost Biblical proportions’–changes that would have dominated a State of the Union in any other year-they seemed a bit out of place in today’s circumstances.” Another possible cause of presidential discomfort, of course, is Saddam Hussein’s stubborn survival after the war.
..MR.-
- Let me tell you right from the start and right from the heart: I know we’re in hard times, but I know something else: This will not stand… None of this will happen with a snap of the fingers-but it will happen. And the test of a plan isn’t whether it’s called new or dazzling. The American people aren’t impressed by gimmicks; they’re smarter on this score than all of us in this room. The only test of a plan is: Is it sound and will it work? ..MR0-
So cut to the chase-what’s the message on the economy? First, acknowledge the undeniable reality of “hard times” and tell ’em you empathize–probably a Peggy Noonan touch. Throw in a few rhetorical allusions to John F. Kennedy, Barry Goldwater and even Paul Simon (". . . this age of miracles and wonders"). And then the punch line, “This will not stand”–a promise that the president who licked Saddam Hussein can lick the recession, too.
But how will he do it-and how soon? Bush needed to sound a cautionary note here, and he did so. The recovery won’t happen “with a snap of the fingers,” he said: there are no quick fixes. So stroke the voters–tell ’em they’re too smart for “gimmicks.” In truth, the no-gimmick gambit was more than a little deceptive, since the economic plan Bush outlined was chockablock with dumb budget tricks. Take the idea of letting low- and middle-income workers reduce their withholding taxes. This could add $22 billion in spendable cash to the U.S. economy during 1992, and that is money, as the president said, that “people can use to help pay for clothing, college or to get a new car.” But it averages out to about $3 a week for single taxpayers and about $6 a week for married couples, so nobody’s lifestyle is likely to change. It is also a classic case of play now, pay later, and it will force the U.S. Treasury to borrow more heavily until the taxes come in.
Then there was a gigantic accounting gimmick–a shift from pay-as-you-go bookkeeping to something known as “accrual” accounting in the government’s pension-guarantee and deposit-insurance funds. This bit of fiscal legerdemain magically reduces the projected federal deficit for 1992-93 by up to $38 billion, which is enough to avert real cuts in entitlement programs or worse, a political meltdown with congressional Democrats over the 1990 budget agreement. “A return to smoke and mirrors,” said House Budget Committee chairman Rep. Leon Panetta, rightly enough.
Bush’s pious call for an end to “political pork” in the federal budget process may have been the most disingenuous stroke of all. In fact, the administration’s 1992 budget contains $35.6 million for an annex to the federal building in Concord, N.H.–a tiny bit of pork for the recessionbound state whose upcoming presidential primary, on Feb. 18, just happens to kick off the political year.This one’s for you, Pat Buchanan.
..MR.-
- I am proposing… a change in the alternative minimum tax, and the creation of a new 15% investment tax allowance . . . Real estate has led our economy out of almost all the tough times we’ve ever had … My plan would modify the Passive Loss Rule for active real estate developers. .. My plan would allow first time home buyers to withdraw savings from IRAs without penalty-and provide a $5,000 tax credit for the first purchase of that home … [And] I cannot take No for an answer: You must cut the capital gains tax. ..MR0-
Now we’re getting serious, sort of. But first, call your accountant-or better yet, call your dentist’s accountant. The “alternative minimum tax”? The “passive loss rule”? Capital gains again? Who, exactly, are the intended beneficiaries of these esoteric proposals? The answer, in broad terms, is Republican voters who have become disenchanted with Old Read-My-Lips on the issue that really matters: taxes.
Let’s start with an easy one: a two-part proposal to expand federal tax subsidies for first-time home buyers. It will help younger voters whose allegiance to the GOP may now be wavering. If you qualify (read the fine print), you can deduct 10 percent or up to $5,000 from the purchase price of a home you buy before the end of 1992. You can also withdraw money from your IRA without penalty to finance this purchase. -In essence, this is a one-shot stimulus to the construction industry that does no particular harm to the economy overall.
The passive-loss proposal, similarly, is a modest boost for the commercial real-estate market, which is currently swamped with hundreds of millions of square feet of vacant office and industrial space. Tinkering with the rule should stimulate investor demand, but it will also provide a bonanza for a limited number of big-time real-estate operators. Liberals and some economists don’t like it, mainly because it reopens the loophole that created the real-estate bubble in the first place. But that’s tough: more than 300 members of Congress have already signed on.
The larger plums are for conservatives and the tax-phobic well-to-do-but they don’t amount to much (about $4 billion overall) and they will not do much to jump-start the stalled economy. Take the investment tax allowance and the alterative minimum tax. The ITA is nothing more than an election-year gimmick for corporate taxpayers: it will make buying new equipment slightly more attractive for CEOs. The alternative minimum tax is an accounting change that should stimulate investment in capital-intensive industries like steel, the airlines and (surprise!) oil. Still, the Bush plan for liberalizing the alternative minimum tax would provide only a modest nudge to investment-the tax savings to business is a scant $200 million in 1992 and $400 million in 1993.
Or take the administration’s renewed demand for a cut in capital-gains taxes. This idea, which has been going nowhere in Congress, has been a favorite hobbyhorse for GOP neo-supplysiders since Bush took office. Bush says he means it this time: “I cannot take No for an answer.” But he’s playing statistical games when he argues that cutting the capital-gains rate from 28 percent to as low as 15.4 percent would benefit average Americans. It is true, as he said, that 60 percent of those who itemize capital gains on their tax returns earn less than $50,000 a year. But it is also true, as the Democrats pointed out, that 67 percent of all the benefits of the Bush proposals would go to people who earn more than $200,000 a year. This is class warfare–or, more accurately, a class spat.
..MR.-
- I pride myself that I am a prudent man. I believe that patience is a virtue, but I understand that politics is, for some, a game-and that sometimes the game is to stop all progress and then decry the lack of improvement… And you know, when principle is at stake I relish a good fair fight. ..MR0-
Hello, Congress, this is the Prez-a prudent man, a patient man, but also a man who, like Ronald Reagan before him, takes a certain pride in being above Mere Politics. That message is, of course, the very best politics of all, particularly in a year when voters are plainly fed up with the mess in Washington. Will Bush, with his previously insurmountable lead in the polls now down to something like even money, play a few partisan games himself’.? You bet-and setting a March 20 deadline for congressional action on his domestic program, as he did last week, is a good way to beat up the Democrats. In truth, absolutely no one at the White House expects Congress to comply. But the president’s talk of “relishing a fair fight” sounds a little like Harry Truman’s campaign against the do-nothing 80th Congress. It also fits perfectly with the administration’s simmering frustration, through three years of legislative gridlock, at Congress’s failure to pass the main elements of Bush’s domestic program.
This may mean an epidemic of election-year sparring on health-care reform, education reform and crime, all of which are important issues to Republican voters. In coupling these proposals to a potpourri of tax cuts, the Bush campaign is essentially following an old political maxim: get ’em in the pocketbook, and their hearts and minds will follow. The crime issue is particularly hot with GOP voters-and to test-market it, Bush’s handlers last week assembled a “focus group” of 40 Illinois Republicans to listen to the SOU. These voters were given buttons to record their reactions to the speech, and the crime issue played like a Stradivarius. “Some issues always work for us,” an administration official said. “Crime is one of those.” Beyond that, recent polls show that the voters blame Congress even more than they blame the administration for the economy. Translation: Bush can score some easy points by giving ’em hell.
..MR.-
- Welfare was never meant to be a lifestyle… It’s time to replace the assumptions of the welfare state, and help reform the welfare system. .. And I want to add as we make these changes, that our intention isn’t scapegoating or finger pointing. If you read the papers or watch TV you know there’s been a rise these days in a certain kind of bitterness, racist comments, anti-Semitism, an increased sense of division. Really, this is not us… this is not acceptable. ..MR0-
Now for a sleeper issue. Administration sources say welfare reform, an issue that has been moldering since the 1970s, zapped the Illinois focus group right on the hot button. Why? It harnesses the national resentment toward the dole-and it is one more way of saying that Bush is on the side of the angry middle class. His sermonette against racism and anti-Semitism, on the other hand, was a good way to soften the blow. Is the president being divisive? Is welfare reform this year’s equivalent of Willie Horton? Perish the thought.
Taken as whole, the SOU was nothing less than a blueprint for the Bush re-election campaign. House and Senate Republicans were programmed, for example, to erupt in “spontaneous” applause throughout the speech, and they did so 77 times. Cabinet officials and other GOP stalwarts were given a list of talking points for the press. Last week’s line was “the president hit a home run tonight.” (Former drug czar William Bennett must be out of the loop: according to him, Bush hit only a double.)
Bush and his surrogates-Dan Quayle, Jack Kemp and others-are hitting the road to argue that his plan “will work” to lift the nation out of its economic doldrums. The truth is that they, along with many economists, think the current recession is relatively mild and relatively likely to end sometime before Election Day. The other truth is that their primary goal, in proposing a smorgasbord of low-cost and not very meaningful tax stimulants, is to avoid doing serious harm to the economy by running up the federal deficit. (The administration’s deficit projection for fiscal 1992 now stands at $399 billion, a record 6.7 percent of the entire domestic output expected this year.) But no one in the White House thinks the election will be won with Mondalean plain talk on the need for austerity. That probably means the Bush campaign, like last week’s SOU, will shape up as an exercise in cautious promising-and a gamble on the economy as well.
