By the middle of August 2004, President George W. Bush still had not settled on a coherent second-term domestic-policy agenda, and conservative policy mavens were starting to get nervous. They'd heard the renewed talk about providing uninsured, low-income workers with tax credits to buy health insurance, part of the "ownership society" agenda Bush announced August 9, and they were not impressed. The idea had been batted around by President George Bush Senior in 1991 and by both Bill Bradley and then-Texas Governor George W. Bush in 1999. Once elected president, Bush would write this proposal into his budget every year for four years. It went exactly nowhere.
Still, say conservative policy mavens, even if the idea wasn't original, exciting, or likely to become law, the fact that Bush was talking about it was a welcome signal to them that the administration was taking their domestic concerns seriously. "There was a real risk that the campaign might actually ignore domestic policy," said Joe Antos, the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the right-wing American Enterprise Institute, in an early August interview. "You can't do that if you're president. You can't do that if you want to win."
Less than three months before the 2004 election, a number of conservative policy experts described a president at sea, scrambling to cobble together a second-term domestic agenda from the dregs of his year-2000 proposals and struggling with a policy-making apparatus stripped bare by resignations and undermined by a lack of high-level experience. "They've done just enough domestically to get by" over the past four years, says Michael Tanner, director of health and welfare studies at the libertarian Cato Institute and leader of its project on Social Security privatization, an issue Bush touted in 2000 but dropped in the wake of September 11 and political opposition. "There hasn't been a domestic agenda."
That perspective might be a little deceptive. By late August, just days before the Republican national convention, at least one aspect of the president's domestic agenda was starting to gel behind the scenes. The direction, sketched out by some of the most powerful conservative advocates in the nation, is a striking one -- and, they say, one that Bush has been nervous about presenting to the public or his Democratic critics. It can be summed up in two short but incendiary words: flat tax. "Bush in a kind of very secretive way has been moving us one step at a time toward a flat tax," says Stephen Moore, president of the conservative Club for Growth. The full Treasury Department plan for tax reform that will accomplish this -- about which Moore says he's regularly in communication with Treasury Secretary John Snow -- is "something that would probably be released after the election," because of worries about creating proposals that can be "shot at" during the election period. "Given the closeness of the election, they're in a little bit of a risk-averse mode right now," Moore says.
But even if Bush won't say those two words, the movement toward a flat tax will be the net result of his piece-by-piece tax-reform agenda, as described by conservatives working with the administration on it. That agenda includes: eliminating the capital-gains tax; getting rid of inheritance taxes; doing away with dividend taxes (already halved during the first term); making the rest of the first-term tax cuts permanent; reducing the alternative-minimum tax; passing new tax credits for health insurance; expanding medical savings accounts for pre-tax dollars; creating new pre–tax dollar retirement-savings accounts and lifetime savings accounts; partially privatizing Social Security by shifting some portion of payroll taxes into private retirement accounts; and, of course, bruiting an array of always popular but largely symbolic middle-class tax cuts. "If you do all these things and put a single lid on it," says Grover Norquist, president of Americans for Tax Reform, who boasted to me that he's "in charge" of the Republican Party's tax agenda, "you've just passed Dick Armey's flat tax."
The appearance of having no domestic agenda and the reality of a strong anti-tax agenda go hand in hand, united by the party's philosophical opposition to the idea of government programs. In 1995, Armey, a principal author of the Republicans' 1994 "Contract with America" and then the newly elected House majority leader, led the charge for the Gingrich revolution. His flat-tax bill proposed completing, in one fell swoop, the kind of fundamental tax reform that Bush is accomplishing incrementally: turning the American tax system into one that taxes only unsaved wages, income, and pensions -- and does not tax the rich at higher rates than the middle class. Armey's radical plan went nowhere, but Bush's plan, with its array of "savings" instruments targeted to the top 5 percent of earners, has already been half-written into law and is likely to be the major focus of a second term. "When it comes to his domestic-policy agenda, the tax cut has really been front and center -- the biggest achievement," says Moore. "I expect he'll continue down that path in a second term."
Whatever nice words Bush may speak in Madison Square Garden, he doesn't have an actual domestic agenda, a platform of new ideas for solving America's problems. What he has is a tax agenda. Even his Republican compatriots admit this. Should Bush win re-election and pass his agenda, the new and extended tax cuts would, over time, add trillions to the federal budget deficit, already a record $422 billion in 2004, unless Bush decides to follow the second half of the supply-siders program as well. Title 2 of Armey's 1995 "Freedom and Fairness Restoration Act: A Comprehensive Plan to Shrink the Government and Grow the Economy" dictated, as bill one summary put it, that "[a]ll discretionary and unearned entitlement programs are sunset, i.e., set to expire automatically." The goal was to "reinvent government" whole hog by eliminating its role in domestic policy making altogether.
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For the last 40 years, the Democratic Party has been seen as the party of domestic policy. This year, polls have consistently shown that John Kerry and the Democrats have an advantage over Bush on domestic issues, sometimes by as high a margin as 19 points. And perceptions track with reality: In the past 40 years, Democrats have been stronger than Republicans on domestic issues, and have built an executive branch infrastructure to support that commitment.
Joseph Califano Jr., now the president of the National Center for Addiction and Substance Abuse at Columbia University, became the first White House domestic-policy adviser to hold a position equivalent to the powerful national-security adviser, in the summer of 1965. Domestic policy making back then meant implementing the Voting Rights Act, desegregating schools, fighting poverty, and protecting people from large corporations as big business expanded its influence and might. "We viewed government as a force to help people who were vulnerable get what most people get from their mother and father -- housing, health care, medical care," recalls Califano. "We'd put together task forces of experts in various fields, from all over the country. Each fall, by September, I'd have a book of 100 or 200 proposals for the president." It was a time of rapid social change and rapid-fire legislating. "It was a different world," he says wistfully.
Richard Nixon maintained Lyndon Johnson's structural elevation of domestic policy and expanded it by executive order in 1970, creating the Office of Policy Development, which exists to this day. Its role is to oversee two important subdivisions of the policy apparatus, which were enshrined by the Clinton administration, also through executive order. Bush Senior had created a National Policy Council, overseen by the Domestic Policy Council. In 1993, Bill Clinton divided it into the Domestic Policy Council and the National Economic Council, the latter a managerial enshrinement of James Carville's famous campaign dictum, "It's the economy, stupid." The point was to create "a group of policy advisers in the White House who would focus like a laser beam on the economy," says Bruce Reed, who served as deputy campaign manager for policy during Clinton's 1992 campaign and then ran the Domestic Policy Council for eight years.
If all those efforts supported a strong federal domestic policy, Bush Junior has moved in the opposite direction, undermining the power of domestic-policy advisers through structural changes of his own. While maintaining the offices created by Democratic (and a few Republican) presidents, he also added something new: the Office of Strategic Initiatives, headed by Karl Rove, who jokingly called it the "Office of Strategery." The office, run day to day by congressional staffer Barry Jackson, quickly became one of the most powerful forces within the West Wing. Its sole purpose: to marry policy and politics to ensure the re-election of Bush. That means subsuming sensible policy needs to politics, and policy research and development to campaign strategizing. "The Bush White House is set up in a way to diminish the influence of policy advisers," says Reed.
This diminution of policy-makers' roles has led to a serious revolving-door syndrome in this White House's policy shop and decimated the administration's brain trust for new ideas. Over the past four years, many of those who wrote Bush's original domestic-policy agenda in 1999-2000 have left their posts. Between swelling deficits, lack of presidential interest, and the shift of national attention to overseas conflicts in the wake of 9-11, the policy-makers found themselves increasingly marginalized.
Bush's economic apparatus has run into the most trouble. National Economic Council Director and campaign 2000 adviser Larry Lindsey, the architect of Bush's original tax-cut plan, left office in 2002, when he and Treasury Secretary Paul O'Neill (who came up with the idea for the retirement savings accounts and lifetime savings accounts the president is now touting) were ousted in an effort show leadership around the flagging economy. Mark McClellan, White House press secretary Scott's older brother and a strong tax-cut advocate, focused on domestic issues on the president's Council of Economic Advisers in 2001 and 2002, but left to head the Food and Drug Administration before being pegged by Bush to oversee the implementation of the new Medicare reforms.
The most creative minds also started rotating out of the Domestic Policy Council by the middle of Bush's term. Josh Bolten, who had played second in command in the domestic-policy shop for two years -- and whose intellect and creativity in the policy arena is praised by Democrats and Republicans alike -- now heads the Office of Management and Budget. Bolten's superior, attorney Jay Lefkowitz, lasted only a year as the deputy assistant to the president for domestic policy before returning to private practice in 2003. His predecessor, John Bridgeland, also lasted a mere year.
The people who remain in leading policy positions, say observers, are solid economists, but they lack background in the cutthroat world of political strategizing. Certainly former investment banker Stephen Friedman, director of the National Economic Council, and economist Gregory Mankiw, head of the Council of Economic Advisers, remain influential. But neither is the expert in turning diffuse goals into politically palatable programs that the campaign needs. The Bush-Cheney campaign, whose policy efforts are led by policy director and Lindsey-protege Timothy Adams, has chosen to build fewer than a dozen groups of five to 10 people advising it on the issues. The Kerry campaign, by contrast, has enrolled more than a thousand experts on dozens of different advisory boards.
Today, few conservative intellectuals and policy wonks even know who's in charge of the administration's domestic policy. "Who would be the leading light in the administration?" asks the Heritage Foundation's Frederick "Tripp" Baird, when I asked him to name Bush's lead thinkers on domestic policy. "I think obviously [Education] Secretary [Rod] Paige has been a strong advocate for education reform. ... [I]t's been very noble to call the teachers' unions to the mat." (Paige notoriously called the National Education Association a "terrorist group," leading to such an outcry that he had to apologize.)
But when it comes to domestic-policy leaders inside the White House, Baird had hard a time recalling any prominent names. "I'm trying to think, who runs his Domestic Policy Council?" asked Baird. "Do you know who it is?"
If anyone might have played the role of domestic-policy guru in the Bush administration, that person was unable to do so after 9-11. Margaret Spellings, who runs the Domestic Policy Council, has been such a low-profile character in Washington that in early 2003, Slate wrote a piece on her headlined "Meet Bush's Domestic Policy Chief: Where's She Been Hiding?"
In late 2002, former Office of Faith-Based and Community Initiatives Director John DiIulio got in trouble for saying, in a Ron Suskind article that appeared in Esquire, "There is no precedent in any modern White House for what is going on in this one: a complete lack of a policy apparatus. What you've got is everything -- and I mean everything -- being run by the political arm." At the time, it was a daring revelation, and DiIulio was soon forced to recant. Today, though, the absence of a strong domestic-policy leader is a generally acknowledged truth, especially in conservative political circles. "I don't think there's anyone," says Michael Franc, vice president of The Heritage Foundation, when asked who's directing Bush's domestic policy. "One hallmark of the administration is that there is no domestic-policy czar per se through whom all ideas flow at a substantive level." After ticking of a list of Bush officials who used to work on policy issues but who've since left the administration or their policy posts, he added, "There is one person I didn't mention: Karl Rove. ... By default, he takes the broadest view of all these domestic issues."
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The history of the Bush administration's domestic efforts is a direct result of the low value placed on policy making. The past four years have been chock full of proposals announced with great fanfare that then went nowhere; initiatives that were framed as approaches to real problems but that only really benefited Bush's business cronies; and programs whose appropriated funds so failed to live up to the authorizing legislation's promises that they became, functionally, entirely different laws.
In early 2004, for example, the president proposed a $12 billion, five-year program to build a base on the moon that would be a stepping stone to Mars. The proposal was largely political, and the White House didn't spend a lot of time fighting for it: When the budget was drawn up, Congress sliced the program's first-year funding in half, citing budget deficits. Similarly, in his 2004 State of the Union address, Bush promised to institute fundamental immigration reform and a guest-worker program for Mexican immigrants; the proposal, designed by Rove and his allied domestic advisers, died on the vine after meeting widespread opposition in conservative circles. The president's $15 billion AIDS initiative and the standards-raising No Child Left Behind (NCLB) law have been funded at levels far below those he promised, partly because Bush deferred funding for AIDS and, in the case of NCLB, failed to fight for funds that the initiative required.
Bush's simultaneous commitment to Rove's political agenda (and the programs and pork that agenda demanded) and to the supply-siders' tax cuts have encoded a conflict into the heart of his presidency and every program it proposes. The aims of America's government are now on a fiscal collision course. Rove, while infuriating to liberals, has been a bane to conservative ideologues because his political calculations have prevented the administration from doing the "principled" supply-side thing by cutting government. Real conservatives were aghast at the Medicare bill, which was a Rove-driven fulfillment of a very nonconservative campaign promise to seniors, as well as a payoff to corporations and insurers. It was also, as Califano notes with some combination of pride and bemusement, the largest expansion of an entitlement program since the Johnson era.
Today, the president publicly promises to cut the deficit in half within the next five years while simultaneously letting it be known to conservatives that he intends to baby-step the nation into a flat-tax schema. The combination is a fiscal impossibility. Will Bush have the courage of his convictions and do the program cutting to go with his tax plan? The evidence suggests not. Bush's focus on politics above policy has meant he's been unable to say no to pork-barrel spending. Like Johnson, Bush faces re-election as the principal architect of an increasingly unpopular foreign intervention. But where the increasing chaos in Vietnam led Johnson to focus ever harder on forging a domestic legacy, Bush has let the domestic chips fall where they may, at the hands of whoever pushed hardest for federal dollars.
If Bush has a second term, it's possible that, because he won't be facing the prospect of re-election, Rove's influence could wane and the supply-siders' could wax. One thing, though, is clear: In a second term, Bush would either have to begin the deconstruction of government as we know it or renege on his deficit-reduction plans. Either way, it won't be pretty.
Garance Franke-Ruta is a Prospect senior editor.
