Betraying Reagan?
President Bush's economic record. Plus port politics, Harvard faculty rule and immigration.

Monday, February 27, 2006 12:01 A.M. EST

Paul Gigot: This week on "The Journal Editorial Report," George W. Bush's conservative credentials under attack. Has the president been true to the Reagan legacy? An official for that administration says no. And he's here to make his case. Plus, congressional leaders are up in arms about a deal to allow an Arab company to manage U.S. ports. Is the political outrage a front for protectionists? Our panel tackles those topics and our "Hits and Misses" of the week. It all begins after the news.

Bartlett: I'm happy to be here.

Gigot: Imposter, betrayed, strong words. What's your complaint with the way President Bush has governed?

Bartlett: Well, you said in your opening that he's no Ronald Reagan. Well, in the book I say he's not even a Bill Clinton, I'm afraid. At least on the budget, Bill Clinton was a heck of a lot better. He actually cut spending. He reduced deficits.

This president finds no spending program unworthy of a veto--or worthy of a veto, I should say. And I think it's just appalling that he's five plus years into his term, into his presidency, and has never vetoed a single, solitary bill.

Gigot: But, Bruce, one of those reasons is defense. We had a big event, here, called 9/11.

Bartlett: That's right.

Gigot: And Bill Clinton reduced spending, in part, because he could cut defense spending from about 5% of the economy to 3%. President Bush had to take that up. Wasn't some of this spending inevitable and even responsible given the change in the circumstances?

Bartlett: Oh, sure. When I criticize him on spending, I leave aside defense and homeland security. The motivation for me to write the book, in fact, was the Medicare drug bill, which I just think is still appalling. And a bit tongue-in-cheek, I call it the worst legislation in history.

Gigot: There's a lot of those.

Bartlett: Well, George Will pointed out that, well, the fugitive slave law was pretty bad too. And maybe the income tax law of 1913. But still the reason--I was just appalled by his massive support for that legislation, to ram it through the House of Representatives, against principled conservative opposition. And we know the story about Nick Smith, who was virtually bribed. And I think that this is just going to cost us so much down the road that it's going to lead to a massive tax increase.

Gigot: Nick Smith was a congressman from--

Bartlett: Michigan.

Gigot: --Michigan. Is there any silver lining in the Medicare bill? A lot of conservatives argue that it was very expensive. We opposed it. But you got health savings accounts out of it, which have the potential to create an individual market for healthcare.

Bartlett: Well, I think we could have gotten that anyway without spending $18 trillion to get it. Here's a statistic. The unfunded liability of the Medicare drug benefit, alone, is $18 trillion in perpetuity, according to the Medicare trustees. The unfunded liability of Social Security, which the president rightly talked about the need to reform, is only $11 trillion. We could repeal the drug benefit, keep Social Security exactly as it is forever without ever raising taxes or cutting benefits, and still cut $7 trillion off of our national indebtedness, just by getting rid of the drug benefit.

Gigot: OK, that's spending. But you also criticize the president on taxes. And you say that the tax cut that he passed and got through Congress, first in 2001, and 2003, had no economic rationale.

Bartlett: Yes.

Gigot: And yet, you've had really strong economic performance since 2003, almost, you know, 10, 11 quarters of really strong growth, 4.7% unemployment. Weren't those a success?

Bartlett: Well, I think that the tax cuts did help a little bit. But I think you have to differentiate between what would have happened under the normal cyclical upturn of the economy. If you compare the upturn that we've had in this business cycle with the one after the 1991 recession, they're not that much different, and we raised taxes twice in that upturn. So, I think, my own personal opinion is that taxes don't really effect the cyclical ups and downs of the economy. They do affect the long-term trend rate of growth. They have a lot to do with things like productivity. But that's very much in the long run. And I think it's a mistake to look at current economic statistics and say, you know, this proves some point. I think we need to wait to see.

Gigot: But you had it--particularly, after the stock market bubble burst and after 9/11, you had a real downturn in business investment and business confidence. And those tax cuts of 2003 were directly aimed at restoring that business confidence and business cash flow through the capital gains and dividends cuts. That's a supply side tax cut, isn't it, Bruce?

Bartlett: No, now don't get me wrong, I mean, there are--I mean, I wrote columns praising those parts of the tax bill. But I think there's an awful lot of other stuff, including the tax rebate program in 2001, the kiddie credits. There's been an awful lot of stuff that was loaded onto all those tax bills that, even you would agree, have no economic benefit whatsoever. They're the tax equivalent of pork barrel spending. And what my real indictment of the president is, on tax policy, is, if he had had a vision of what he was trying to do when he came into office, I think a lot more could have been accomplished with the votes that were there, with the revenue that was there. We could have virtually totally reformed the tax system and, instead, we're still talking about tax reform. If the president had known what he was doing, or had a plan, we wouldn't be doing that.

Gigot: OK, Bruce, hold that thought. "The Wall Street Journal's" Steve Moore joins Bruce Bartlett after this short break. Still ahead, port politics, what's really behind the outrage over the Dubai Ports World deal? Our panel weighs in as "The Journal Editorial Report" continues.

Steve, you heard Bruce's argument. He says there was really no economic rationale for the Bush tax cuts. Do you agree with that?

Moore: Well, I certainly agree with Bruce on the big spending problems that George Bush has had. And I think that one poisonous element of this administration is it has turned the Republican Party into a big spending party. I think Bruce is very wrong on the tax cuts, especially when you look at the direct and immediate impact of the capital gains and dividends tax cuts. We saw a huge surge in employment. We saw a huge surge in investment, a turn around in the stock market right when we needed it. So I think that was exactly the right prescription at the right time.

Gigot: And it's continuing, Bruce, despite $60 oil and rising interest rates.

Bartlett: But one of things I think you have to differentiate between is the enactment of the tax cuts and what Bush was trying to do. Let us not forget that he did not propose a cut in the capital gains tax. That was Bill Thomas and--

Moore: Yes, but he wanted to zero--he wanted to go all the way down to zero on dividends, Bruce--

Bartlett: Well, that's right, but that was completely undoable. And at one point, he was ready to have us have a zero tax rate on dividends for one year only, just to try to get the camel's nose under the tent, and thinking, "Well, we can just extend this later on." But we can see how much difficulty we've had with the expirations of the tax cuts, which I think has held back their economic effect.

Moore: Well, sure but you can't blame--

Bartlett: Because people--

Moore: But, Bruce, you can't blame President Bush for that. I mean, these are arcane budget rules that we've editorialized on all the time, that, you know, you have to have these phased out after 10 years. I think we're all against that. I think my problem, Paul, with the book generally is that it just piles on Bush and blames him for everything. I mean, there have been many very positive things, Bruce, that President Bush has done for the economy, including the tax cuts. He's been generally pro free trade. You have to look at the people that he's put on the court, who have been exceptionally smart.

Gigot: The Supreme Court, right.

Moore: Well, even at the lower level, but especially the Supreme Court nominees, who I think are very strong conservatives. And that, I think, is left out of the book.

Bartlett: Well, I intentionally left a lot of stuff out of the book because I'm an economist. I wrote about the economic policy, so I did not mention the courts. And I certainly agree with you that Alito and Roberts are outstanding, but let's not forget the Miers detour. And I intentionally left out--

Moore: Well, yes, he corrected--he did correct that mistake.

Bartlett: Well, and maybe he'll do the same with the ports issue. I mean, they do respond. And I'm--

Moore: Even Ronald Reagan made mistakes. He had Bitburg and other problems. I think one other thing I'd like to just mention that, I think, is wrong in your book. When you talk about Bush deviating away from the Reagan legacy. Bush has been very strong on immigration. He's been pro immigration. He wants to keep the golden gates open. And you attack Bush, in your book, for basically trying to keep up the Reagan legacy in the Republican Party being a pro immigration party.

Bartlett: Well I--you make it seem like I wrote a lot about that issue and there was really about one paragraph, I think. And I am conflicted on that issue. I'd like to be more libertarian on that subject, but I'm just very concerned about, we've passed a tipping point. There was just too much. And I don't think we have a strategy for dealing with it. But I do think that also--

Moore: But that's your opinion. How can you blame Bush for being anti-Reagan when, in fact, you're the one who's not for Ronald Reagan's--

Bartlett: Well, look, you know, I didn't say he was 100% against Reagan. But, I mean, by and large, I think, if you look at Ronald Reagan's philosophy as being the cornerstone of what Republicans believe in, I think he's done more to go against it than to go towards it. And that's really the gist of my argument.

Gigot: All right, Bruce, you get the last word.

Bartlett: Thank you.

Gigot: And thanks for joining us. Steve, stay with us. Coming up after the break, protectionism rears its ugly head as members of Congress vow to block an Arab company from managing several U.S. ports. Our panel reacts. Plus, our "Hits and Misses" of the week when we come back.

Jason, let's talk about the merits of this first. Is there any reason to believe that turning over port management to this Dubai company would be a threat to national security?

Riley: No. No. U.S. Customs and the Coast Guard and the Port Authorities run security at ports. And this deal would not change that in any way. To buy the criticisms of this deal, you have to believe that a president that's been caricatured as sort of warmongering Texas yahoo super hawk, suddenly is going soft on national security. And there's nothing in the history of this administration that would lead you to believe that. It's just preposterous.

Gigot: What about the fact that this is a state-owned company and, therefore, is not a normal free market transaction, and it's a state-owned government by the Arab country in the Middle East?

Riley: Well, foreign companies run 80% of terminals in U.S. ports already. Those vary from Chinese companies to the Singapore government having companies run them. So even that argument doesn't really hold water because there are foreign companies already running so many terminals in U.S. ports.

Gigot: OK.

Dan, why, then, the political uproar over this? It's bipartisan, Right and Left; we have the Bill Frist-Hillary Clinton coalition, strange bedfellows. What's going on?

Henninger: Well, it's Congress acting like Congress, it seems to me. It gave the Democrats an opportunity to get to the right of the president on a terror issue, and attack him for being soft on terror, which is, as Jason suggested, a somewhat silly argument. The more serious extent--there is a serious point here--is that the administration didn't consult with Congress. And this is kind of a formal argument, and it's been made against this administration for quite a while. I have a big problem with that.

If they can--what reason do we have to believe that, if they went up and talked to them, that they wouldn't have turned the issue around and used it politically against the White House, just as happened with the NSA wiretaps? They had been informed about the wiretaps. They had said nothing about it. And then when it got into the front pages, they all fox-holed and attacked the administration. So you have to have some basis for good faith negotiation from both sides. And that hasn't been evident the last several years.

Moore: Dan is right on the Democrats trying to get to the right of Bush on national security issues. But it's worse than that, Dan. Because what they're doing is sort of using this national security excuse for their agenda of anti-globalization, anti-free trade, anti-foreigner. And I think that's the real hidden agenda in this--to try to block any move towards more open free trade and globalization.

Gigot: But, Steve, Bill Frist is not known for being anti-foreigner, anti-foreign investment, anti-free trade.

Moore: Right.

Gigot: Yet, he's on that--

Moore: No, I was talking about the Democrats. And you're right. On the Republican side of the aisle, I think that it's, you know, that they are legitimately concerned about, you know, whether or not this firm can--I think there's a lot of confusion actually. I don't think a lot of these Republicans understand the point that Jason made. That they are going to be engaging in a commercial activity, not the security activities at the ports.

Riley: I wouldn't--I wouldn't go there. Lindsey Graham is a very smart man. I think he gets the facts of this. And I wouldn't give the Republicans a pass on the protectionism issue. But the fact of the matter is you can't go around the world preaching free trade and then balk when a foreign company tries to buy U.S. assets.

Gigot: But what you're saying is, if Lindsey Graham is smart enough to understand the facts of this, that what's going on here is raw political cynicism?

Riley: Paul, of course.

Henninger: Yes, but because he did not know the facts. John McCain, who usually doesn't get a lot of support around this table, was the one guy who said, "We don't know much about this issue. And I think until we do know the facts, we're just going to add more heat than light." The problem is a guy like Bill Frist is displaying weakness when you get this firestorm of anti-Dubai, anti-Arab security issues, and immediately caves and says, "I'm concerned too." He didn't know what was going on.

Riley: And you know what this reminds me of? This reminds me a lot of the immigration debate, where politicians have decided that it's more politically expedient to scaremonger, than to educate voters about the facts.

Gigot: Well, what about those who say, Jason, that this is--that the point you just made that's just waiving the race card. We're scaremongering ourselves because, in fact, this isn't anti-Arab, this is about security issues?

Riley: Well--

Moore: These are the same people, right, who don't want to--

Riley: Yes, opting out of the global economy is not an option is, I guess, the bottom line. And so protectionism in the long run is going to hurt us. And I think the obligation of public officials is to go about explaining that to the American people and not playing the protectionist card to scare them.

Gigot: I think we're also being told constantly, in this whole debate over terrorism, that we have to win the hearts and minds of the Muslims who are on our sides. And, yet, here is a Muslim country, a moderate Muslim country that has helped us on the war on terror, and has helped us in other ways, and here we're telling them, "Look, you can't invest in our country."

Moore: So much for diplomacy.

Gigot: That's right.

All right. We have to take one more break. When we come back, our "Hits and Misses" of the week.

Henninger: Yes, under pressure from the Harvard faculty, its President, Larry Summer's, quit. Now, Henry Kissinger, who taught at Harvard, was once asked at the end of his long political career in Washington, how he had survived in Washington. He said, "Oh, it was easy after surviving Harvard faculty politics." Well, you know, Harvard has always gotten whacked by conservatives, but I, by and large, have thought that, somehow, the university has always managed to make its areas of excellence outweigh the craziness up there. But if the faculty is taking over at Harvard, I think it's entirely possible that the institution of Harvard may not survive Harvard faculty politics.

Gigot: Only at Harvard could a former Clinton treasury secretary be considered a radical right winger. OK, Dan. Next, Sen. Hillary Clinton makes a remarkable argument against school vouchers. Steve?

Moore: Poor Hillary Clinton just can't control herself. For the last couple of years, she's tried to masquerade as a centrist moderate. But this week, she made some outrageous statements about school choice, where she said, if parents have the ability to send their kids to the schools they want, many of them will choose white supremacy schools and schools of jihad.

Now, the people that we're talking about, who would get vouchers, are mostly low-income black and Latino parents. I don't think too many of them are going to choose white supremacy schools for their kids. This is an insult, especially given that Hillary Clinton's daughter had choice. They chose a private school for their kid. So it appears that the "H" in Hillary stands for hypocrisy.

Gigot: All right, Steve, thanks. Finally, why is a conservative congressman attacking the leaders of some of the country's biggest religious groups? Jason?

Riley: Well, Tom Tancredo, of Colorado, a Republican congressman, is attacking these large religious denominations because they oppose a bill that the House passed on immigration on border security last year. And that bill says that anyone who even unknowingly assists someone in the country illegally could be subject to criminal prosecution. And that would include groups that run soup kitchens and shelters. So it's understandable why these religious groups would oppose it.

And what they need is not criticism from politicians. What they need is an immigration policy that can distinguish between smugglers and charity groups. And I think that's pretty reasonable. And I think the congressman's way out of line on this.

Gigot: All right, Jason, thanks. That's it for this week's edition of "The Journal Editorial Report." Thanks to Dan Henninger, Steve Moore and Jason Riley. I'm Paul Gigot. Thanks for watching. We hope to see you next week.