To the very end of the budget summit's five months of deliberations, President Bush resisted going to the nation to sell a capital gains tax reduction and instead stayed faithful to cutting a deal with the Democrats.
Even as the Oct. 1 sequestration deadline neared, the president rejected advice that he address the nation over television. That means the budget agreement he seeks to wrap up today will be less than a jump start for frightened markets and a sagging economy.
Republican strategists, including some Bush advisers, are frustrated that the president did not play the strong cards in his hand: presidential popularity, congressional unpopularity, concern about the economy and -- most of all -- a decade of GOP success in pushing lower taxes. The reason he did not goes to the essence of George Bush's political style.
It is not because he thinks capgains cuts are voodoo economics. On the contrary, when advisers early in the 1988 campaign pressed him to come forward with economic proposals, Bush instantly proposed cutting capital gains from 28 percent to 15 percent.
But the president embraced Budget Director Richard Darman's strategy, abjuring open-mouthed advocacy for fear it would torpedo negotiations. A policy of silence was enforced in the administration. That left the field to Democrats to mercilessly flog the capital gains policy as a rich man's darling. Even the president's men began to think they were swimming upstream against public opinion.
When such defeatism became evident, Democratic summiteers led by Senate Majority Leader George Mitchell turned preference into inviolable dictate. No capgains cuts, they said, unless the top individual tax rate of 28 percent was lifted to 33 percent -- an unacceptable demand for Republicans.
That put the president at a crossroads as the deadline neared. The route he chose was to finesse the Democrats by seeking a "growth package" in the budget deal that does not pronounce the ineffable: capital gains cuts. It has been widely reported that research and development tax breaks, tax-free enterprise zones and indexing capital gains taxes against inflation will not violate that prohibition. In addition, word has seeped out about prospective deductions on the sale of new securities.
What is afoot here is a variation on Darman's famous "duck" test for tax proposals: anything that sounds, looks and smells like a tax is a tax. Here, the president is trying to get the Democrats to sign off on a tax incentive for investment by making sure it does not sound, look or smell like a capgains cut. The problem is that it will not be perceived by the markets as one either.
The other fork at the crossroads would have taken the president into America's living rooms to plead for capital gains. Even with Democrats dominating the rhetorical arena, the NBC-Wall Street Journal poll of Sept. 20 showed 41 percent for the administration's tax package (including capgains) and 43 percent for the Democratic version. Bush's own advisers were certain that he could win over the country by arguing that in truth capital gains cuts would benefit ordinary middle class Americans and are essential to economic growth.
When the president brought up capital gains in his Sept. 11 address to Congress, it was assumed he was following the confrontational path and would go to the country with the bane of sequestration and the boon of capital gains. That he did not is attributed inside the administration to defection on capgains by the party's congressional leaders, Sen. Robert J. Dole and Rep. Robert Michel, and lack of GOP stomach for sequestration.
When Bush campaigned in the Midwest Wednesday, he had another chance to sell America on what he feels is needed to revive the economy. But he was still committed to the finesse strategy, mentioning capital gains only once and then in a rhetorical flourish (it is not "capital gains" but "Capitol Hill" that is blocking a budget deal). Instead, the president stressed spending cuts, an area where the Democrats were about to agree and where Republicans have been unable to arouse the nation for over 60 years.