Newt's New Contract

It was a frosty February day, but the rhetoric in House Speaker Newt Gingrich's office was white-hot. Budget Committee Chairman John R. Kasich (R-Ohio) told House Republican leaders that he could not simultaneously erase the deficit and slash taxes within seven years. Gingrich stood firm, insisting that Republicans needed to deliver on the promises in their Contract With America. Kasich grimly set off to do the Speaker's bidding. Three months later, Kasich authored a balanced-budget blueprint that slashes spending by $1.4 trillion--and cuts taxes by $353 billion.

If nothing else, Gingrich this year has demonstrated that the conventional wisdom is wrong: It is possible to reshape the public-policy debate in Washington. Under his iron rule, House Republicans approved 9 of the 10 Contract items (term limits flopped) and then opened their second 100 days with a thunderous assault on the very notion of centralized government. Neither the White House nor Congress' minority leadership has been able to counter the GOP juggernaut. "He's setting the agenda," says Democratic consultant Mark McKinnon. "The reality is, there is a huge Republican wave crashing over Democrats, and we are just running around looking for snorkels."

Gingrich shows no sign of letting up. Indeed, he is determined to dominate Washington through the 1996 election--and beyond. In the coming six months, Gingrich says he will turn to social and budgetary issues that he deferred to focus on the Contract. His goals: to abolish the current welfare and Medicaid systems as part of a wide-ranging move to shift power from Washington to the states.

What's more, he hopes to frame the issues for the coming Presidential election. Next up: a four-day foray into New Hampshire, beginning June 9. Even if Gingrich, 51, doesn't run himself--he won't rule it out--all nine GOP presidential wannabes already feel compelled to respond to the agenda he's setting. Gingrich is determined that "the next President will be Gingrichian in worldview," says adviser Grover G. Norquist, president of Americans for Tax Reform. "As long as Newt Gingrich is the 800-pound gorilla who might roll out of bed one morning and run for President, Bob Dole will give us our tax cut and spending restraint."

To force Democrats as well as Republicans to tackle his issues during the campaign, Gingrich is designing a Contract for 1996, advisers say. Major elements include a constitutional amendment requiring a three-fifths vote before Congress could raise taxes, another amendment permitting prayer at some school events, and limits on lawsuit damages. "The key is leading the culture, not leading the government," Gingrich told BUSINESS WEEK, "because if you change the direction of the entire dialogue, everything else falls in place behind it".

Despite a polarizing style, the Speaker has seized the agenda-setting role traditionally played by the President. And on no issue is his influence more pronounced than deficit reduction. Five years after George Bush broke his read-my-lips pledge and raised taxes, Congress is engaged in a debate that delights conservative Republicans: whether to balance the federal budget by slashing spending by $1.4 trillion, as the House proposes, or by a mere $1 trillion, as the Senate prefers.

There is virtually no argument in Congress over the merit of a balanced budget--only over the optimal time in which to achieve it and the size of the promised tax cut. With the help of Senate allies Phil Gramm (R-Tex.) and Trent Lott (R-Miss.), Gingrich has convinced Senate Majority Leader Bob Dole (R-Kan.) to embrace at least token tax relief.

Gingrich has controlled the House agenda by handpicking committee chairs and doling out plum assignments as rewards for loyalty and aggressive action. The result is a contest among Republicans to come up with ever bolder proposals to eliminate agencies and even Cabinet departments, to hand over federal programs to states while privatizing others, and to deregulate industries such as telecommunications and pharmaceuticals. "A couple of years ago, you were considered outlandish if you talked about eliminating the Commerce Dept.," says Claremont McKenna College political scientist John J. Pitney Jr. "It's mainstream now."

The meat-ax approach to downsizing government now being practiced comes right out of the postmodern political philosophy of a history professor who has been plotting his revolution for nearly two decades. Gingrich has synthesized the management theories of Peter F. Drucker and W. Edwards Deming and the futurist vision of Alvin and Heidi Toffler to create nine strategic principles that guide his agenda of minimalist government in the new high-tech global economy. With his flair for technology, Gingrich has created the first Information Age political machine--a computer-linked coalition of conservative think tanks, business groups, radio hosts, and Christian conservatives that has mobilized to hand him a series of victories.

Demoralized Democrats note that even as Gingrich chalks up legislative successes, his negative ratings are soaring, while the President's popularity shows an uptick. "Very few people feel warm and cozy with Newt," says independent Georgia pollster Claibourne Darden. "Newt is an ideologue. He has all the warmth of a pine tree."

And though Democrats admire the Speaker's ability to dominate the national dialogue, they say that many segments of the public are coming to view his vision as extreme. "Everywhere you look, it's tilted toward the billionaires, the corporate special interests," says Representative Rosa L. DeLauro (D-Conn.). "They aren't concerned about kids or working families, veterans or senior citizens. That could help the Democrats." Indeed, Senate Republican moderates acted on this sense of unfairness by blocking the House's legal reform and regulatory freeze.

Still, the Gingrich offensive has confounded the White House, which has adopted a tepid two-track strategy: a "me too" embrace of some reforms and an attack on others as extremist. Says American University political scientist James Thurber: "Newt's strategy is splitting the Democratic Party, and the President has been eclipsed."

Democrats are convinced that Clinton can reassert his power as President by vetoing hard-right legislation--or merely making the threat to do so. For instance, Clinton's pledge to veto a $16 billion spending-cut plan that exempted GOP pork sent Republicans scurrying to look for compromise, despite Gingrich's grousing that White House staffers reneged on a

deal. Responds senior Clinton adviser George Stephanopoulos: "That's patently untrue."

Gingrich isn't likely to sit down and make peace with Clinton any time soon. That situation leaves the Democrats hoping that Gingrich will overreach and suffer the fate of other radicals who have been consumed by their own revolutions. But confident Gingrichites believe that they are within reach of their ultimate agenda: the biggest political realignment in America since the New Deal.


"Renewing American civilization"


Require welfare recipients and prisoners to work, force the unemployed into training programs as a condition of benefits


Change environmental, tax, and labor laws that prompt manufacturers to export jobs, give companies incentives to increase productivity


Deregulate telecommunications, shrink the FCC


End federal programs such as welfare and public housing, let states and charities try new ideas


Give states and localities broad power over federal functions, including transportation, school lunches, Medicaid, and the arts


Speed purchases of technology, reform civil-service laws to weaken organized labor, and rewrite procurement policies to save money.


Cut some federal programs, transfer others to states, slow the growth rate of others. Find new options to overhaul Medicare and Social Security trust funds


Build no-frills prisons, require prisoners to attend classes and learn job skills. Increase penalties for crimes involving guns


Increase military readiness, assert American might around the world, and avoid multilateral alliances that submerge U.S. sovereignty

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