Democrat Bruce Babbitt

An Arizona governor rejects both the industrial-policy gurus of the Left and the supply-siders of the Right. Meet the candidate of the radical center

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Last month in this space we heard the voice of pragmatic Republicanism. This month we turn to the Democrats. And of all the Democrats running for President in 1988, we've found that Bruce Babbitt has the clearest fix on how business works, and what government can -- and can't -- do to help it.

If things had gone according to plan, Babbitt might now be running one of his family's successful ranching and trading enterprises in northern Arizona. It was a love of geology that led Babbitt away from Arizona and business to the mountains of Bolivia, and it was the poverty he found there that led him back home to a career in politics and public-interest law.

As the Democratic governor of a conservative Republican state, Babbitt's politics were, of necessity, more practical than ideological, his social initiatives framed in the context of government efficiency and economic growth. He was among the first public officials to preach the folly of chasing after big business with tax breaks and subsidies, concentrating on building up the state's infrastructure -- highways, water resources, educational systems -- so that Arizona could grow its own businesses. And it worked -- so much so that when Babbitt retired from office early this year, he had won the solid support of business, the grudging respect of labor, and the enduring admiration of environmentalists and social activists.

An awkward speaking style, a grasp for detail, and a disdain for the Democratic Party establishment have prompted many to compare Babbitt with an aspiring and little-known governor of an earlier era. But where Jimmy Carter was a cautious and calculating politician, Babbitt is given to candor and risk taking, with a genuine flair for political leadership. He spoke with INC. senior editor Steven Pearlstein and writer David Osborne at his law office in Phoenix.

INC.: Your party will have been out of the White House for 16 of the past 20 years. What does that mean for you as a Democratic candidate?

BABBITT: Democrats, I think, have to wrestle with one fundamental question: how is it that we put forward a coherent view of a world in which you balance the need for economic growth with traditional Democratic concerns for equity and justice? In the recent past, the party has drifted away from the issues of economic growth and gotten itself in the position of reslicing a static pie. The view of government was of a giant check-writing machine. What I've learned is that a genuine, aggressive emphasis on growth and economic development, if successful, generates one hell of a lot of political support and fiscal support for social programs. I'll admit that sometimes there is conflict between those two goals. For Democrats, the question is: how do we hold both within our vision simultaneously?

INC.: A cynic -- or a Republican -- might say that all you've really done is adopt the platform of the other party. Why bother with the imitation if you can have the real thing?

BABBITT: Because the real thing, as you call it, isn't real at all. Right now, after nearly seven years of Reagan, the economy has been growing at something like 3% in real terms over the past few years -- not much to crow about there. And we have unemployment nationally of more than 6%, which is twice the level of previous decades -- and, to me, unacceptable. Budget deficits are up, trade deficits are up, productivity is down, savings are down. So I'd have to disagree with you on the premise of your question. The Republican Party has hardly proven itself to be the party of economic growth.

What the Reagan people have said over the past seven years is, basically, that poor people don't work because they get too much money, and rich people are loafing around because they don't get enough money. And so they have set about devising a very simplistic answer that says if we slash marginal tax rates, the marketplace will take care of everything else. Baloney. What we have instead, is an orgy of speculation going on. The gap between the rich and the poor has widened. The gap between labor and management has widened. The trade gap has widened. And the Republican Administration simply hasn't stepped up to those issues. We get sermonettes -- and no policies.

INC.: You criticize the Administration's position on trade, and yet, until recently, you essentially were in agreement with what might be loosely termed a freetrade policy.

BABBITT: Here is how my thinking evolved on that. I'm a classic free trader in the sense that I believe that industry-specific protection sows the seeds of destruction of that industry. Cars, steel, shoes -- we agonize over what protections we are going to offer, we finally offer them, and what happens? The industry only gets less and less competitive. So in that respect, I have not moved from my original position.

Over the past couple of years, however, as the trade deficits with certain countries continued to mount, I kept running into a conceptual problem: why didn't all those deficits result in a steeply devalued dollar? Under classic trade theory, that's what should have happened. Then I read an article by Peter Drucker in Foreign Affairs magazine that explained clearly something that I was coming to realize on my own -- namely, that capital flows are now an important part of the picture. If you run a country that builds up a big pile of dollars, you use those dollars to buy equity. You buy Wall Street. You buy American real estate. The Japanese have already bought up much of midtown Manhattan, and now they're loose in Arizona, of all places. It's a deliberate policy to maintain an export-driven, trade-surplus economy in perpetuity, without devaluing all the dollars and property and stocks they already own.

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