THE IRAN-CONTRA AFFAIR: -Constitutional Confrontation? -Whither the White House? EDITOR'S TABLE OF CONTINTS COLUMN
he Iran anns-contra aid affair has EDlTOR'SCOWMN ...... •. .. . •..•...... •.. .. . 2 left many Americans shaken and in wonder about the direction of T PROFILES AND PERSPECTIVES: the Reagan administralion. In particular, it A Conwrsalion wuh Sidney Blumenlhal ...... •..•.•..• , • . . . .. 3 has left many in doubt about who is in charge of the White House and what the MERGER MANIA: An Insider's Perspective: administration's agenda will be during its 7 last two years. Steven B. Klinsky ...... In his interview, Washington Post staff writer Sidney Blumenthal , author of EDilURIAL: After a Disastrous FaU, Whith,r the White House? ...... 8 The Rise of the Counter-Establishment: From Consen'(l(ive Ideology to Political REVENUE SHARING: Looking Beyond a Forsaken Option: Power, claims thaI the Iran affair is al heart Jamie Mclaughlin •• . • . ••• . •••••• . • . •• . • . ••.•••..•.• . •.••.••••••• 12 the product of conservative ideology being carried into actio n by movement conserva LETTERS·T(). T HE-EDITOR ...... • ...... •...... •. 14 tives like Lieute nant Colonel Oliver North. Blumenthal , who has been hailed THE LONG HAUL IN SOUTH AFRICA: as "the next Theodore White." also pro Terrence M. O·Sullivan ••. .... •• . •••.••.. . • . • ...• . . . • ... • ••.•.••.• 16 vides a thorough examination of the devel opment of the conservative movement and IN MEMORIAM, Charles E. GoodeU. 1917-1987 . .. .. •••.••.••..•.•• 18 a sharp analysis of the Reagan presidency. About the former he says that conserva REVlEWS: Moorhead Kennedy, The AyaloUah ;n tire Cathedral: tives have been more interested in their Alfred w. Tate .•• . . •• .• . •.•.•.• .. ..••. . ••••..••• . • . • . •...... •. 19 movement than in the welfare of the Re publican Party and in reference to the latter THE CHAIRMAN'S CORNER: he claims that the administrntion is leaving COlIStitutioMl Con/rottUlliOIl: The NtIliolUll Security Council, a past that conservatives must now defend. 1M COlIStitrdion, and the Rule 0/ Law: Representative Jim Leach also pro Jim Leach ...... •. . •.. •...... 22 vides commentary on the iran-contra scan dal and states that the issue provides a WASffiNGTON NOTES AND QUOTES ...... •...... 24 constitutional confrontation. A Forum edi torial questions the confrontational strat egy the White House has adopted on a num ber of issues since 1984 and suggests that a more consensus-ori ented approac h mig ht be more practical over the rest of the president's term . Ripon Forum editorial board member Alfred W. ]late reviews for mer Iranian hostage Moorhead Kennedy's book The Ayatollah ill the Cathedral and concludes that Americans must first exam ine the cultures of the Middle East before waging a sensible foreign policy there. Such reasoning is not " blaming America flnt," but rather a step toward developing RIPON/orum a common-sense forei gn po licy. Only by
understanding others, Tate argues, can we U1M: William P. McKenrit ~ ",. i ... ( ritidsm and in_ion in the S17.50 ror ~uc:kIl4. >en'icemcn.!'eKe accurately determine our own interests. M~ F.di4J;: Dak E. Curtis Rtpubl;(ln Party M a nu ~ ript ~ and C"'l"'. ViSla and other V(Jlunl«n. In this issue, Ripon Forum editorial EtIWriIII Soan: photosrIphi an: ~id lCd . bul do nOlI o.m.eas. add S6. Pk_ allow fi~ Daniel 1. Swillingcr Dale E. Cunii ~nl the views u the Socidy un· .....,tu. roraddress dwtSC" board member Steven Kli nsky also pro AlfrN W. Tau SlI:ven B. Klinsk y ItH 100 mltd. The Ripon Society lrw; .• William C, Gem E. Meyer Darla Alwood vides an insider's view on Wall Street Corunts an: ropyrighiCd 1987 by the CIoban. pm.idenl, ;.. Rc:publinn re COfIS"luurt: Christine Smith mergers, and two Mark O. Hatfield Schol Dair" Ripon So;idy, Irw;., 6 IJbrary Coon . scum and poIky organi~ion ",hose ,obr D~ : R(Ibey Graphics S.E .• Wtil!ini\Ofl. D.C . 2000), memben an: busi .... », acadcml<; , and ars, Jamie McLaughlin and Terrence proI'essio/lal men arid womcn. It Is O'Sullivan, present their work which was THE RIPON FORUM (lSN Second c lass pos~ and fees paid 01 hcadqlW1Crcd in WasltinlllOll. D.C., (0)5.5526) i$ published bi·moothly in Wuhinllton. D.c' and addiliorW mli]· ",ilh Naliona l Au odalc mcmbers spo nsored by th e Ripo n Educational jill I'o$tmI$tcr. Send Iddtes5 1987. otrlCCS. throughoul the UniiCd States. The So. Fund's Mark O. Hatfield Scholarship. ((Wises 10 Ripoo Fonam, 6 lltmry cl<;ly is wpporte 2 ~PONFORUM . MARCH1~ PROFILES AND PERSPECTIVES A Conversation with SIDNEYBLUME RIPON FORUM: Perhaps the central politics of the conservative movement. tenet of your book can be fou nd in this RIPON FORUM: Can this mythology be statement: " Reaganism is the popular ex challenged? For example. you write in pression of a sectarian worldview, that of a your book: " Reaganismcannot be dis rising policy-and opinion-making elite proved by history or events. To believers, the Counter-Establishment. " Could you the flaw s are in the world, not in the doc- elaborate upon that idea? trine. " BWMENTHAL: We saw in the recent BUJMENTHAL: It's challenged most of State of the Union message a reiteration of all by events, which don' t stop and will not President Reagan's mythology. He always accommodate themselves to fixed, pla expresses himself in simple language. One tonic categories. Movements that are myth is about a pure free market in which based on ideology can also become pris government can be completely banished oners of ideology. Instead of becoming a and a perpetual equilibrium reached. The driving force, ideology can becomeajusti second is a myth of community where per fication of unintended consequences. The fect harmony exists because we're all greatest example in the 20th century is Americans. Class or race conflicts don't communism. occur, and all problems can be resolved if Ideology can limit you if you don' t Sidney Blumenthal's The Rise of the Coun we simply believe the same things. Con change with circumstances. For example. ter-Establishment : From Conservative flict is due to outside agitators, or so-called President Reagan is now saying pretty Ideology to Political Power describes the special interest groups. much what he's always said. He is not development of the modern conservative The third myth is about demonic moving political society, al though events movement. and the Washington Post stab power, which explains why wedon't live in are. He is no longer in control. He is being writer states that conservath'es should be Utopia. The demonic power is govern controlled. credited with promoting the thesis that ment , which destroys incentive. The One of the great weaknesses of mod ideas mLllter. But the former New Republic fourth myth is about restoration, or the em conservatism is that it is a radical right reporter says that the much-heralded real· idea that by smiting the dragon of govern ism and not conservatism in the ignment in American politics is primarily a ment somehow the lost worlds of the past continental or English sense. This is a con shift among elites. Blumenthal. author of can be recreated. In one way or another, servatism that was born yesterday, which The Permanent Campaign, also providej,' Ronald Reagan always talks about these makes it American. The movement began an analysis of the Reagan presidency, and themes. in the 194Os, and has been l ivingoffth~ in claims that Ronald Reagan has preached These myths also happen to fit the te llectual capital of "The Remnant. " The four myths during his career as conserva doctrines of the modem conservative Remnant comprises seminal thinkers of tive spokesman. In this interview with movement. The free-market myth fi ts vari the right such as Friederich vo n Hayek, Ripon Forum editor Bill McKenzie. the ous schools of thought, whether monetar Russell Kirk, Whittaker Chambers. and author presents that argument. and also ist or supply-side, and the myth of James Burnham. They propounded the provides his predictions about thefuture of community fits the New Right's quest for movement's original doctrines. and the the American conservative movement. the return oftTaditional values. It fits the ri ght has only elaborated upon them . They idea that once we really were a whole have not altered the doctrines, the biggest place. not a diverse pluralistic nation. The threat to which has been the reality of the myth of demonic power fits the efforts to Reagan presidency. The past is no longer slash government spending, to make bal myth . The right now has a record toex ancing the budget an absolute principle, plain, and even if conservatives refuse to and to deregulate industries regardless of accept responsibility for Reagan's actions, results. The restoration myth is left to the others will charge this responsibility to them. mPONFORUM . MARCH/~ 3 oriented. servative movement who have served in RIPON FORUM: Let's return to the idea the Reagan administration? of the Counter-Establishment. Could you BLUMENTHAL: That's their mentality. ex plai n more about that? They bring a bitterness to Republican poli BLUMENTHAL: Historicall y, the con tics. The reason things haven' t worked out servative movement has been intertwined is that the liberal establishmem and the with a powetful resentment agai nst a lib press have betrayed them. The Senate was eral establishment that conservatives be lost because of moderate Republicans, or lieve runs the universe. This is a vulgar because the Republican Party didn' t stand Marxist concept of power, that somehow up for passion or principle, as they under there is a central committee of the ru ling stand it. class that directs events and people. RIPON FORUM: In The Rise o/rhe To a large degree, the conservative Counrer-ESlablishmem. you write: "The movement is based on resentment of the contin uing influence of the conservatives liberal establishment and fear of chaos must mean the continuing demise of Re from the lower orders. Conservatives per publicanism, the ideological end of the ceive the Jatter to be in league with the lib historical party." Could you elaborate eral establishment against the rising lower upon this? middle class. They have thus constructed a BWMENTHAL: On the level ofprinci counter-establishment to supplant the lib pie, conservatism is not Republicanism. eral establishment , and in effect created a As J understand it , in the classically con "shadow liberalism." That tenn, in fact, servative sense, Republicanism stands for was first suggested by one of Ri pon's the accumulated traditions, customs and founders , John Saloma, in his book beliefs of an institution. The Republican RIPON FORUM: Is the nature of ideol Ominous Polirics. Party always believed in women's rights, ogy such thai it prohibits growth and But the conservative movement is equality before the law for all races, and an change? now returning to its roots, which is not essential role for the national government. BLUMENTHAL: It might be the nature necessarily good for the movement. All of those beliefs fly in the face of mod of ideology, if one considers ideology Ronald Reagan had rechanneled ils pas ern conservatism. In fact. the conservative something different from ideas. Ideology sions by pUlling resentment in service of a movement has systematicall y sought to can be an expression of both one's cultural greater optimism, even though he used re displace those Republican principles, and political understanding. It can also be sentment in his primary campaigns, par which certainly go back to Lincoln, and a closed system of belief, particularly ticularly against the Republican Party for sought to replace them with ideas that may when it's connected toa political move "selling out" on such issues as the Panama be traced back to Calhoun. ment. Ideas, on the other hand, can be Canal Treaty. But with his ebullient per RIPON FORUM: Is the conservative open-ended. sonality, Ronald Reagan can at once be movement strong enough to warrant the tilt The difficulty conservatives face is Goldwateron the inside and Roosevelt on to the right by so many 1988 GOPpresi that they have a number of ideas that do not the outside. dential hopefuls? work together logically, but which they Now the winds of optimism are being present as a coherent ideology. This is blown away. The onset of the [ran-contra more than a theoretical problem because scandal, the loss of the Senate to the Dem the ideas are connected to real political ocrats, and the aging of Reagan have "The onset ofthe I ran forces and groups. This is particularly true caused the " politics of resentment" to re contra scandal, the loss of within the Counter-Establishment, where turn. This was seen most starkly in the ideas are at odds with each other. For ex brief presidential boomlet for fonner the Senate, and the aging ample, neoconservatives clash with the White House Communicati ons Director Old Right over social policy, and supply Pat Buchanan and the way in which the Re ofReagan /mve caused the side economists are in contlict with the pUblican fie ld has been drive n to the right. 'politics ofresentment' to monetarists over deficits. Without leader RIPON FORUM: What happens when ship to hold the different segments to the "politics of resentment" resutfaces? return. " gether, the movement fragments. What will be the relationship of conserva RIPON FORUM: What holds move tives to the Republican Party? ments together: shared belief or a cult of BLUMENTHAL: Even though Ronald personality? Reagan has been in office for the entire BLUMENTHAL: I'm not sure a majority BLUMENTHAL: It can be common be decade, conservatives act as ifhe's never of Republican primary voters are conser lief or it can be a magnetic figure. It can been president . They act as if they've al vative ac tivists or responsive to those ap also be the enthusiasm or passion of its ac ways been a despised opposition with no peals. Perhaps a quarter to a third are, and tivists. Conservatism has had all three ele access to influence. si nce this is not adecisive amount, the ments, but now it does not. It has a RIPON FORUM: Not even through Pat right must always promise damage. confused leader, and the movement is dis- Buchanan and other members of the con- RIPON FORUM: Ifa candidate doesn't 4 RIPON fORUM. MARCH 1987 do so and so, the n they will do such and which is why he lost the presidency. But a has been some consensus, but not absolute such? Dewey presidency would have spared the consensus. The only way we will ever have BWMENTHAL: It's morelhan a litmus nalion certain things. some consensus is when people accept test. which means that if)Qu don't support RIPON FORUM: Such as? conflict. my position, I won't support you. What the BLUMENTHAL: Much of the Red Scare RIPON FORUM: You also write of right says is: if you don 't support this posi and McCanhyism. Dewey took a strong Ronald Reagan's mythology: "The poiO( , tion , I will demonize yo u. And further stand against that in 1948, which is why he he demonstrated , was to get people to par more. 1 will demonize you as someone won the Oregon primary. He was a strong ticipate in the myth-making." Has he been who is unpatriOlic and un-American. civil li bertarian, although he made it diffi successful in doing such? Have 'A-'e partici That is a profound difference and a cult for people to like him . He was ad pated in myth-making? phenomenon people find very hard to ac- mired, not liked. BWMENTHAL: A 101 of people be Dwight Ei senhower. of course, acted lieved in what he said before he said it. as a true conservative: he conserved the Ronald Reagan gave voice to it , and he is a New Deal. But since he proposed noth ing very believable perso n. Even though vir "Ronald Reagan has a new, the moderate Repu bl ican enterpri se tually every public opinion poll shows that was vi rtually subsumed by Nelson Rocke people don', agree wi th his policies. they view ofwhat Utopia would fel ler and his philanthropic view of po li still give him a positive rating as president. tics. Everything was reduced to mere They believe in him as a person, at least look like, and he promises problem solving. This was nOl simply " me they did until the lran-conlra. arms scandal . it. Ofcourse, that Utopia to-ism," it was technocrati c. Then Barry In attempting to perform an act that Goldwater came along and oreered passion would have made him look strong, namely never existed-ever. and principles. Moderate Republicans cuuing a deal with Ihe Ayatollah, releasing might learn from that . and al low the right the hostages, and supporting the contras. . .Th ere never lWS an to serve as an inspiration. But moderation the president was exposed. It made him by its nafOre , is not something that is easy look weak. He was broUght down to earth, America like that. " to arouse passion . and detai l once again became cruciaL Rea RJPON FORUM: Let's retum to Ronald gan was placed on the kil ling fields offact, Reagan, a man who has captured the imag where he has nOl prevailed. The press pre ce pt without responding. As a result , peo ination of man y, ifnot most, Americans. vails there. ple tend to accommodate the right . even In The Rise ofth e Counfer·Establishment, RIPON FORUM: What should we look though they don't believe in their cause. you write: ;' Reagan's crusade is mythic for in our next president? This is more than the politics of rese nt battle for a Restoration." What do}Ou BWMENTHAL : The next president ment; it is the politics ofintimidation. mean by that? can't promise magic. The person must RIPON FORUM: What effect will this 8WMENTHAL: Ronald Reagan has a master the details of the job. The realities have on the institution of the Republican view of what Utopia would look like. and are goi ng to be harsher. Ronald Reagan has Party? he promises it. There was a past in which used up all the magic and created realities BLUMENTHAL: The question is who Utopia existed, but it was upset bybig gov that can't be deal! with merely by saying stands for Republicanism, and who's will ernment, Democrats, special interests, certain things. ing to uphold the traditions in the Republi . Republican re gulars , and the li beral estab RIPON FORUM: Jack Kemp is qUOIed in can Party that are at the same time lishment. Of course , that has never been your book as saying: "There are many, progressive and conservative. the case---ever. But Ronald Reagan thinks many wonderful people on the New Ri ght . RIPON FORUM : The conservative that if we all believe and support eyery but unfortunately. in certain instances, it's movement has been successful in electing thing he says we can actual ly achieve a res· coming to anelementoffear. Fear. Resent a president and in setting the national [oration. That is the ideaof "back to the ment. I would rather have a campaign that agenda for the last six years. What do future" as politics. It is signi ficant that he is nOl based on a negative." What does this moderate and progressive Republicans mentioned "back to the future" in his 1986 mean? The New York congressman has have to learn from that movement? State of the Union and talked about it in often been touted as an heir to Ronald Rea BLUM ENTHAL: The conservative precisely Ihis sense. gan 's standing in the conservative move movement offers idealism and conviction . RIPON FORUM: Since we're only two ment. It also offers a belief that ideas can make a years away from the end of the Reagan BLUMENTHAL: Jack Kemp is an apos difference. Moderate Republicans rub presidency, one might assu me that if the tle of optimism, but the political circum against this in the closest proximity, and restoration is going to arri ve. it has already stances of the Republican nomination this may raise the question of their own done so. Is this [rue? Has the restoration ar demand resentment. He has th us been ob principles and convictions. It also should rived? liged to say "bravo" to Pat Buchanan for make traditional Republicans examine BWMENTHAL: The restoration can attacking Republicans who 've criticized their own recent political history. I wou ld never arrive because the past that he talks the president 's handli ng of the lra n-contra suggest going back [Q Dewey, for example. about never existed. There never was an scandal. He's also been obliged to issue RIPON FORUM: Thomas Dewey? America like that . This is a country that salvo after salvo against the striped-pant BWMENTHAL: Yes, the fonner New has slavery written into its Constitution. It betrayers in Ihe State Department. as if York govemor was a passionless person, has been acommunity of conflict . There Conlinued 0 11 page 6 RIPON FORUM. MARCH 1987 J that had any resonance in the electorate . In rienceand background , which was unique, votes around such a program. It may de fact, it only has resonance in the Counter has dissipated and can't be replicated. pend on some future chaos, where there is Establishment and the conservative elite. As an imellectual movement, lhere is social disintegratio n. Then, the politics of Kemp is bending against his nature, and no such thing as neoconservatism. There polarization can prevail. Every wound in conservatives know that. He lends cre are neoconservatives who have ideas, but American society can be picked, anddi dence 10 many things they say, but he is not they don' t even agree among themselves. visiveness among groups can be encour with them in sentiment. And when they come into conflict with the aged. This is what Pat Buchanan was RIPON FORUM: Does the right have a Old Right, the result is a profound cultural expert in . It also was the thesis of Kevin candidate? clash with an ethnic and religious subtext. Phillips's book The New Republican Ma BWMENTHAL: Not an ideal candidate, The neoconservatives, moreover, under jority that was influential among the Nixon which only heightens their resentment and stand very little about either Republican or crowd. In it , Phillips assumes a politics of bitterness. Of course, that makes them feel Democratic politics. Their influence as a polarization based on ethnic and racial very comfortable. new class of intellectuals is due to the de hatred. RIPON FORUM: The Rise ofthe Coun· cline of the traditional parties. RIPON FORUM: Ifthe conservative ter-Establishment also explores at length RIPON FORUM: Do}Qu anticipate movemem doesn't become more rounded the development of neoconservatives, who some conservatives recanting the positions at the edges, and docs not engage in self are best known for their hard-line foreign they now hold? critical thinking, what will happen to it? policy thinking. You claim that there will BWMENTHAL: There is currentl y very Will it implode? be no second generation of neoconserva little self-criticism on the right. Instead, BWMENTHAL: It is already implod tives. Why? there is enormous defensiveness. I do ing. That is not a maueroffuture specula· BW MENTHAL: Neoconservatism is not think the right will change, however. The tion. The scandal Ronald Reagan is now a coherent intellectual movement. It is a religious right will become increasingly enduring is basically a product of conser sociological movement, made up largely important and divisive. vative ideology carried into action by such of second-generati on New York intellec The firsl doctrine to be thrown over figu res as fonner National Security Coun tuals. Mostare Jewish, some are Catholic, board may be free market economics. In cil aide Oliver North. Reagan is reaping and very few are Protestants. Also. very fact, the conservati ve movement has the the harvest of conservative ideology, in few are fonner Democrats or liberals. In potential of becoming an authoritarian cluding ils contempt for re gular proce fact, most were once Trolskyites or cul populism whose program is really national dures of government and the rule of law. lural radicals. They li ved in a very rarified corporatism. It is significant that in 1980 That has been especiall y damaging to a left-wing sectarian world and have bro ught Pat Buchanan originall y supported John president who has ignored detail and the all those habits to bear on the right . They Connally, the voice of the corporate state. precise duties of his office. • are bound together by their common expe- Of course, it is very hard to gather TIIE RIPON FORUM S ubscribe Now to the Ripon Fo rum o Yes! Send me a full year of Ih e /lipon Forum for only "Requlred readlng for progressive $25 Republicans"-TIME Magazlne o Enclosed is a contribution to th e Ripon Society: "Positioning itself to be the voice of the Party's $ - --- Future"-The Boston Globe ead by Members of Congress, leading jour Name R nalists, politica l acti vists, and especially those in teres ted in the direction of the Repub Address I\P!. /I Ii can Party. The Ripon Forum brings you six issues a year filled with fresh & provocative d e bate on CUy Siale Zip the s ubjec ts of o ur day, profiles o f outstanding (optional) mains tream Republicans, boo k reviews, and polit ical n ews fro m around the nation. The Ripon Forum. The only magazine o f its Occupation kind. Don' t miss a n issu e. Political tnleresls/Activities Please ma ke c hecks payble to: THE RIPON SOCIETY 6 Library Court. SE Washi ngton, DC 20003 Phone ' 6 RiPON FORUM, MARCH /9Kl "MERGER " .• An Insider's Perspective BY STEVEN B. KLINSKY he deni zens of Wall Street-of and others predicted that thi s purchase which, I suppose, I am one-have would put the nai l in the coffin of corporate T long watched thei r brethren in buyouts generall y. Was hington with a mixture of fascination "The question ofstiffer In the safe harbor of hindsight , it is and horror. Now the citizens of Washing regulation or prohibition clear that the commentators were com ton, and the rest of the nation, are watching pletely wrong. Under Forstmann Little's Wall Street with the same em()(ions. ofco rporate acquisition is g uidance, the Dr Pepper Company " Merger mania " has swept the coun adopted a new corporate strategy and try and its real or potential targets-CBS. high on the ageru:la ofthe achieved great success. The company's U.S. Steel, Gulf Oil, Goodyear, RCA past acquisitions, which had was ted have reached unheard of size and social next Congress. " money and management time, were un import. As a result , the question of stiffer wound . Canada Dry was sold to the R.J. regulation or prohibition of corporate ac Reynolds Company. The bottling compa quisitions is high on the agenda of the next Lin1e purchase, the company had pursued nies were sold off one by one, mainly to Congress. Accordingly, some inside per· a stralegy of usi ng the soda division 's prof other bottlers who could greatl y increase specti ve on the social benefits and ills of its to buy businesses thought to have faster effi ciencies and profits through economics such acquisi tions and somc recommenda growth . As a result, over Ihe years the of scale. The proceeds of these divestitures tions on appropriate public policy seem company had acquired the Canada Dry were used to repay most of Forstmann Lit warranted. soda busi ness and fou rteen sofl drink bot tl e's acquisition debt. To begin wit h the positives, some tlers around the country. Unfortunately, At the same time, the remaining Dr well thought out corporate acquisitions are instead of providing new opportunities, Pepper soda brand was substantiall y im highly beneficial for all concerned: for the these ventures provided only new prob proved. Corporate overhead expense was buyer, the seller, the company acquired , lems. The bottling operati ons, in particu trimmed but, despite the high debt levels, the company's personnel and the nation's lar, were unprofitable and the whole, en producti ve marketing and advertising ex economy. This is possible because some larged company was less successful than penditures were sharply increased. Full buyers are "good ;" that is, some buye rs the soda busi ness alone. In 1983 , faced management attention was directed toward add value to the companies bought , either with these problems and with increasing strengthening the brand franchi se. By through management skills , strategic posi competition from the industry giants 1985 , the company's unit sales and market tion or material resources. To illustrate th is Coca Cola, Pepsi Cola and Philip Morris's share were at record levels, earnings and concept, I would immodestl y tum to the 7-Up brand-the Dr Pepper company de reve nues were up 50% from 1983, and Dr well publicized acquisition of Dr Pepper cided to sell . Afler a wide number of cor Pe ppe r soda had passed the much Company by my partners at Forstmann porations expressed no interest, the com wealthier 7-Up brand to become the na Little & Co. in 1984. Dallas-based Dr Pep pany was shown to Fors tmann Little who tion 's third most popular soft drink. In per Company had for one hundred years acq uired it in a friendly transaction for a 1986, with the success of its effort s sold Dr Pepper brand soda. This soda total consideration of around $650 million proven, Forstmann Little resold the Dr brand had a loyal group of customers, par in January 1984. Pepper Company. lis profit was over $200 ti cularly in the Southwest, and had consis At the time this acquisition was million, or over eight times its in itial tentl y generated a stable, although slow made, it was the largest "leveraged" (i.e. equity investment in two and a half years. growing, cash flow. Prior to the Forstmann debt-laden) buyout in corporate history. The bulk of these profits went to For Accordi ng to many learned commenta stmann Little's investing partners-pri Steven B. KlinsJ..y, II graduate 0/ Hllrwlrd tors, it was also the most foolish. Dr Pep marily the pension funds of some of the Law School alld Han'lIrd Busilless School, per Compan y's 1983 net income of $21.5 nation's largest companies. As the Wash· is D general partner 0/ Forj,·tmallll Little million appeared too weak to pay even the ingloll Post re ported, Forstmann Little had and Co. Dlld a membero/the Ripon Forum interest on the acquisition's debt, much spun pepper into gold. editorial board. less the debt principal. Forbes Magazine Continued on page /0 RJPON FORUM. MARCH 191f7 7 EDITORIALS AFTER A DISASTROUS FALL, WlllTHER THE WlllTE HOUSE? n case you hadn', heard already, after sion or consensus, as some respected Re frontation suggests a principled competi six years of sitting on top of the politi publican senators were predicting wou ld tion between the president and Congress, I cal pyramid. the Reagan administra be necessary. Rather, the rhetori cal guns with Congress appropriately on the spot ti on has fallen down to toil among the were aimed at Congress and loaded with for making the final decisions. On the bud sullied . ordinary mortals for ils final two more of the same "make my day" am get, for example. Reagan has consistently years. The events which bring it to this munition. sent spending plans to the Hill that reflect state-thc Daniloff affair. the confusion Remember, this was before the Iran the priorities he campaigned on: more de creating superpower summit. the loss of controversy fla red up. but after events had fense and deep cuts in domestic spend ing. thc Republican Senate. and of course, the combined already to weaken Reagan con- It doesn', mailer to admi nis tration officials whole Iran fiasco-are a string of setbacks thaI his budget is "dead on arrival," or that that defy the legendary Reagan good luck. the resulting deficits are enormous-if The Teflon has fi nall y scratched off. Americans want more than they are willing One columnist tried to relieve thc to pay for, then let Congress face up to the carly wimer gloom by reminding us how tough decisions , as it should . we used to laugh al such fumbles by Presi Confrontation has also won the presi dents Ford orearler. But Che vy Chase and 'I\. 'make my day' attitude dent a few victories, most notably on keep Johnny Carson aside. serious implications ing tax rates low, and aiding anti-commu remain for the White House, and worse. could befatal-in ni st rebels in Nicaragua. Call Congress a for the entire Republican Party. bunch of spineless wimps if you dislike the For the sake of argument, let's set reverse, " policies, but again, they are free to shape aside the Iran mess for a moment. Back the debate and make the fi nal decisions. before that sorry episode came to light, the Ski llful confrontation won th ese victories chief question facing the president and his for Mr. Reagan. advisers was how to make the best of a Aggressive confrontation is also the difficult situation. II was conceivable then surest way to shatter fi xed perceptions and (and still is) mat skillful management and siderably. There was cause to weigh con battle pervasive Democratic Part y ar communication would allow the president sensus versus confrontation as a strategy: rogance. Most congressional Democrats to ride out these setbacks and continue to the Reagan White House had mastered will gladly paint Republicans as the cold fra me the debate, even against a hostile both approaches to government in its six hearted economists and tell you that con Congress. The question was merely how. years, with the fonner under chi ef of staff tinued subsidies and import protection are A few days after the election, the James Baker and public relations guru the answers to our fann and trade prob president and his chief of staff, Donald Michael Deaver, and the laller under Re lems. Regan , came out charging with a two-year gan and right-wing communicati onsdirec Now, there are no easy answers to our agenda centered on the theme of making tor Patrick Buchanan. agricultural headaches, but is it unreason America "more producti ve": by eliminat There is even an inside-the-Beltway able to search for an alternative to exces ing more unnecessary spending and grant consensus that Baker-style wheeling-and sive government subsidies? Our open mar ing the executive more budget authority: dealing, combined with Reagan 's consis kets do lead to lost jobs, but the problem is by escalating the war on crime and drugs; tently tough rhetoric, served him better. our competitors's protectionism, the defi by pursuing a space-based defense doc But under what already appeared to be the cit-induced strong dollar, and policies that trine and support of anti-communist insur worst of circumstances, the White House block greater innovation and productivity. gencies; and by protecting low lax rates seuled on a go-for-broke agenda and strat On these two issues at least, an unyielding and removin g obstacles to business egy for its fi nal two years in office. position creates the needed debate that growth . There are, of course, some strong ar compromise would lose by default. And apparentl y, the president's am guments in favor of a confrontational strat There is a flip side to this last idea, bitious agenda would rely nO! on persua-. egy. On broad constitutional tenns, con- and that is that confrontation stimulates 8 RIPON FORUM. MARCH 1987 debate or creates a perception of action he will lose a showdown over this sound and its frighte ning connection to the con- without actually helping to resolve a prob environmental bi ll in the first months of tras. lem. Confrontation rests almost ex 1987, with practically no innuence over If the president takes the "imperial" cl usively on public relations sk ills and the provisions of the new bill. An innexi approach to defense spendi ng, aid to the good luck, while consensus requires a ble position on South Africa in 1986 dealt contras, or any other of his cherished pri mastery of substance and details. him out of the game in a similar way. Too orities, he ris ks raising the stakes and los The hypocrisy of raili ng against defi great a faith in the preside nt's ab il ity to ing big, reinforcing the growi ng lame cits while doing noth ing of value to help prevail led to the disastrous Iran anns deal duck image. Restoring the Iran fiasco to red uce them is a good example. Talking our survey of events, a "make my day" to ugh to the Soviets about amlS control attitude could be fata l- in reverse. may be appropriate, and appears to give The administration's key challenge Reagan the moral high ground . But tough therefore, is to restore a saner balance be talk alone isn' t sufficient to slow or reverse tween confrontation and consensus in its the anns race. "The administration's key remaining two years in office. Despite Finally, an unyielding style of gov very difficult circumstances, the admin ernance has a very dangerous corollary: it challenge is to restore a istration should concentrate on forg ing a ra ises the stakes of the debate, and in cases consensus on the difficult issues Reagan where the public strongly disagrees with saner balance between has raised. Doing so will require full use of the president, it even removes him from confrontation Reagan's strong communications skills the debate altogether. A perfect ill ustration and advisers who bener understand when is what happened over the Clean Water and consensus to fight and when to yield. Act. In the last days of October. Congress The sensible public wo uld welcome unanimously approved and sent to the in its remaining such overtures from Reagan, and reward preside nt an eight-year, $20-biUi on exten him with some deserved popu larity. More sion of the law to clean up polluted ri vers two years." over, forging a consensus on spending, and lakes. The president had requested defense, and foreign policy would fore only $6 billion for four years, and pocket stall Democratic desires to bypass the ve toed the bill , knowing full we ll that Con president and bl unt the tendency toward a gresscan easily override his veto next year. confro ntational demagogic agenda of their As this goes to press, it appears li kely own. • BUDGET SNAFU: It 's the same old president's Office of Management and authority to its own budget offi ce to review song: after 12 years under the budget re Budget (OM B). budget proposals and cut wasteful spend forms of 1974, Congress remains unable to Unless lighming strikes somewhere, ing before the final congressional vote. A make fiscal decisions rationally, and has congressional Democrats wi ll likely aban floor amendment 10 restore spending not even bothered to meet its own plan ning don G-R-H goals and leI the law die adealh wo uld be necessary to save any pet proj- deadlines. The administration has doubled mourned only by the most ardent anti ects. the trouble by repeatedly offeri ng massive government me mbers of Congress. Such a move wo uld offset the some spending cuts that Congress cannot bri ng We have a better idea, however. To what omnipotent power of the president's itself to commit. In the meantime, the debt begin with , we like the defi cit-reduction OMB , give a de facto line-item veto to an burden on our children grows geo initiatives proposed by the moderate arm of Congress (where it belongs), and metricall y and fi ngers a- plenty point. House ·'92 Group" and former Senate take the heat for proposing un popu lar tax Faced with a situation in which bud Budget Committee Chairman Pete hikes. which many members of Congress get balanci ng was supposedly impossible Domenici. In the last two years, these Re would support if only someone else wo uld by mere huma ns, lawmakers in 1985 publicans have defined the ultimate con offer them. adopted the infamous Gramm- Rudman sensus by combini ng spending freezes The Ripon Society has always argued Hollings Ac t, which still req ui res across with a wide array of moderate spending that the Constitution requires Congress to the-board spending cuts when the budget cuts and revenue increases to spread the get the defi cit under control by itself deficit exceeds specific targets. Origi burden as widely and fairly as possible. wi th no tricks, buck-passing, or dema nally, the cutting authority was invested in Be)Qnd that, we support fu ndamental goguery. G-R-H is based on the ugly no the top official at the General Accounting revision of the budget process itself. Con tion that the constitutional process doesn't Office (GAO). But the Supreme Court gress should streamli ne the number of work. This is a fu ndamental crisis which struck that provision as an unconstitutional committees involved (and th us cut back can be solved by unclogging the budget delegation of authorit y, and congressional the profusion of deadlines), adopt biannual process and strengthening Congress's han leaders refuse to give the authority to the budgets, and consider granting increased dle on the nation's pocketbook. • ~PONFORUM.MARCHJ~ 9 MERGER MANIA Continued from page 7 he poin! of this example is not to and Maxwell House coffee. is one of the well run when bought by a manager with a T praise the Dr Pepper transaction spe country's most able consumer products desire to make the business grow, hi s life cifically. Forstmann Lillie is not the only companies. Its purchase on-up seemed a savings on the line and an interest payment company to make a good acquisition and, certain success. Yet , Philip Morris's at coming due. The jX)int is not that debt is in fact, the Dr Pepper profit returns range tempt to have 7-Up compete directly with good, but that a buyer may be good even about in the middle of Forstmann Little's Coke and Pepsi failed and brand 7-Up lost though he relies on debt. own investment experience. The transac· market position and profitability under tion does, hQ\.\·ever, illustrate a number of Philip Morris's ownership. Recently. principles which public officials should Philip Morris resold 7-Up at a loss and at a similar analysis holds true with "as keep squarely in mi nd when considcring price less than the Dr Pepper resale com A set stripping." The original and true further regulation of corporate acquisi manded. sense of this phrase is the destruction of a tions. Third, no regulator can tefl. at the business to get to its hard assets; the equiv First, corporate acquisitions can be start, a good acquisition from a bad ac alent, for example, of tearing down a good. The Dr Pepper transaction, from all quisition. Certainl y, if a concern ed con house to sell its materials as scrap. This is perspectives, was sociall y positive. The gressional committee could have blocked an indeed socially undesirable because it de· acquisition in 1984, it would have blocked stroys the business's intangible "going Fors tmann Little's debt-burdened, seem concern " value; that is. the val ue from ingly doomed purchase of Dr Pepper Com skill and labor that turned the pile of bricks "The Dr Pepper pany. Jus t as certainl y, if a committee into a fine house in the first place. Such wanted to promote sound acquisitions, it "asset stripping" is justifiable only where transaction illustrates a would have promoted old Dr Pepper Com the business is ruined be)Ond repair and, in number ofprincipl es pany's "synergistic" purchases of bottlers fact. is only common in bankruptcy situa and Philip Morris's unleveraged bU}Qul of tions. Regulators and commentators, how which public officials 7-Up. The committee, of course, would ever, frequently confuse this negative "as have been badly mistaken and this great set stripping" with something potentially should keep squarely in li kelihood of mistake is exactly why Con quite positive: the restructuring and mind." gress must not make itself the arbiter of streamlining of a patchwork conglomer good and bad takeovers. ate. There are indeed many acquisitions The key 10 a good or bad acquisition which, like the Dr Pepper transaction, are is the skill and resollrces of the buyer. A foUQ\.\'Cd by divestitures. But. like the old original sellers of Dr Pepper received a good buyer, with thc right plan and abili Dr Pepper Company, most conglomerate large market premium and a price more ties, will benefit ever}Qnc. A bad buyer holding company structures provide no than 20 times the earnings of thcir troubled will hurt eve[}Qnc. Unfortunately, no reg economic be nefit worth preserving. In company. The buyer madc a substantial ulator can effectively enter the mind of stead, many require additional layers of profit, most put to cxcellent use funding each buyer and correctly judge him and his expensive corporate overhead and dilute corporate pension benefits for tens of thou strategies. management foc us. Therefore, no "going sands of working people. The banks who Given this blindness, proposcd reg financed the purc hase received high inter ulations tend to focus on the easily ve r est rates and complete repayment. The ified, but ultimately irrelevant , issue of the national economy received operating effi buyer's acquisition techniquc. Was debt "Some regulators have ciencies and stronger businesses: stronger used? Were junk bonds used? Was the ac by distributing Dr Pepper's Canada Dry quisition friendly or unfriendly? Is there a called for the elimination and bottling operations to strategic buyers dependcnce on "asset stripping"? All of ofhi gh debt-level in and stronger by the improved perfonnance these questions miss the point of the eco of the flagship Dr Pepper brand. Needless nomic value the particular buyer will add acquisitions. The effect of to say, millions of tax dollars were col to, or subtract from. the company ac lected by the government at every step of quired. this ill-advised approach the way. Some regulators. for example, have Second, corporate acquisitions can called for the elimination of high debt lev would be to eliminate be bad. Again in hindsight , Dr Pepper els in acquisitions. The effect of this ill many ofthe best buyers ... Company's own acquisitions of Canada advised approach would be to eliminate Dry and the bottling operations were un many of the best buyers: the entrepre successful. Corporate assets and manage neurs, managers and employees generall y ment time were spent which could have seeking to buy their own companies. Al concern " value is destroyed or productive been better used elsewhere. A related ex though forced to borrow, these buycrs jobs are lost when divestitures are made ample is Philip Morris Company's acquisi often add a level of management drive and and each of the conglomerate's operating ti on of 7-Up, which was completed a few attention that the richest corporation can divisions continues its business indepen years before Forstmann Little's purchase not match. Many corporate cats and dogs, dently. Value is added because each prop of Dr Pepper. Philip Morri s, wi th products suffering from neglect in a giant holding erty is placed with the individual buyer such as Marlboro cigarettcs. Miller beer company. have become ex traordinarily who can best utilize it and the extra man- /0 RJPON FORUM, MARCH J987 agement cost of overseei ng a large and ners and with its lending banks. The credit diverse group of properties is eliminated. markets-through the analysis and review Again . the technique when applied by a of numero us independent and profit good buyer will be good. In fac t, it is minded investment officers-made the de "These regulations will not frequentl y the only answer to bad acquisi termination that Forstmann Little and its tions made by conglomenaes in the past, plans for Dr Pepper warranted the neces SlOp corporate and , if anything , should be encouraged . sary fina ncing. Similarly. the success in acquisitions, even past acquisitions and product development put the old Dr Pepper Company and Philip unfriendly ones. They Morris in the position to make their pur "Even if the emphasis on a chases. Buyers who succeed (such as For merely insure that an Slmann Little and, overall. the Philip Mor free market is accepted, ris Company) arc in a posi ti on to make acquirer is not a vandal. " there still are at least four further and larger acquisitions. Buyers who fail are eventually cut off from new public policies which credit or dissipate their own assets until they are out of the marke!. Decisions thus could be rightfully made are much more analyticall y astute play." instituted ... than the aclions of a central regulator could An enlightened poli cy would elimi ever be . nate this secret stock accumulation period. Preferably, raiders should not be able to buy more than a token amount of shares ven if this emphasis on a free market without disctosing th eir intentions to The strongest regulatory criti cism E is accepted, however, there still are at eve ryo ne. In reality, this policy could be fall s on hostile takeovers fi nanced with least four public policies which could be easil y enfo rceable. Raiders generall y junk bonds (that is, pu blicly traded debt ri ghtfull y instituted; changes which would knoYl their intentions when they slart their for companies with extremely weak credit strengthen the operations of the capital accumulation programs. The current dis ratings). My own finn , Forstmann Little, markets rather than distort them. closure document---<:alled a 13·0 fonn has never made a hostile takeover and has Th e f irst policy change shoultl be is brief and easy to prepare but in fact, even never used j unk bonds. In fact we are stricter disclosure reqlliremell1s jor corpo a one sentence press release would suffice. strongly on record that. as another critic rOle raiders. Under current law, a raider If a raider had somehow " stumbled " into a has stated, junk bonds will li ve up to their does Il(X have to publicly disc lose his in large stock position before his hosti le in name. However, even in this area, a regula tentions to acquire a company until ten tentions were formed , a one-year mor tory ban would be ill-advised . Despite days aft er he has accumulated 5% or more atorium between the time of accumulation shareholder's rights and annual board elec of the target company's shares. The raider, and the lime of the raid would be adequate tions. most public companies are about as give n this benefit of surprise attack , can to establish his desire to comply with the democratic as the Soviet Politburo and often acquire 20% or more of the entire law. It is important to note that this rule most corporate presidents si mply serve un company during the period of secrecy. The would not stop a buyer (even a hoslilc til retirement and then transfer p RIPON "·ORUM. MItRCH 1987 II REVENUE SHARING: Looking Beyond a Forsaken Option BY JAMIE MCLAUGHLIN n October I, 1986 local govern for public sector needs, Revenue sharing ments received their last federal provided a middle ground because it would O paymcOi under the General Rev "The loss oj/he revenue return federal surpluses to the public sector enue Sharing program, a legislati ve plan rather than directly to the individual tax which was passed under Richard Nixon sharing program means payer. and was hailed widely at the time by nearly that new burdens have This idea was discussed extensively all Republicans. But the program has now throughout the mid-I 960s, and Michael become a victim of Reagan administralion been placed on already Reagan of the University of California· budget cutbacks, and the rcsull has been Riverside claims mat the Ripon Society that new burdens have been placed on al severely restricted local was pemaps the most prominent national ready severely restricted local revenue organization to back the concept in its sources. revenue sources." early stages. In 1967 the bi-partisan Ad Without Slate legislati ve action to visory Commission on 100ergovernmeOiai ward local revenue diversification, essen Relations also recommended its use, and tial services delivered by America's towns as 1803, the United States Congress ear by the time Richard Nixon became presi and cities will be eliminated dispropor marked five percent of the revenue from dent in 1%8 national associations repre tionately. which in tum will affect the most the sale of public lands for distribution to senti ng governors, legislators, counties needy. And while the concept of revenue the states in which such land was located. and ma}Qrs had endorsed the idea. In 197 1 sharing, however va lid, is unlikely to re Later, in 1837. the Surplus Distri bution and 1972 President Nixon made it a pri turn , the public challenge to which it re Act was enacted, which claimed that any ority, and in 1972 the Stale and Local Fis sponded remains. It is thus up to states to federal surplus of $5 million or more must cal Assistance Act was passed. react on behalf of their "dependents," be returned to the states. (Some $28 mil namcly local govemmeOl s, to meet this lion , not an inconsiderable sum back then, abandoned federal initiative wi th state-de was distributed before the program was rived responses. terminated due to a financial crisis.) he intent of the Act, which was re But, first, to understand why revenue The revenue sharing idea lay dormant T newed by Congress in 1976, was sharing was dismantled. one must examine for nearly a century, and whi le it reap mul ti-faceted. For example, it sought to the underpinnings of the program and the peared on occasion, the most recent legis make state and local revenues more re criticism that later surrounded it . The orig lative history of revenue sharing began in sponsive to economic growth. It also inal federal general assistance programs 1958. Wisconsin Republican Melvin Laird sought to build up the efficiency and fiscal began in the 19th century, when, as early introduced a revenue sharing bill then in independence of state and local govern· the U.S. House of Representatives, and ments, increase progressivity in the aggre Jamie McLaughlin is a Republican state even though the bill received lillie atten gate federal-state-local tax system, and re senaror in Connecticut who has been tion . the concept was soon advanced by duce economic inequalities and fiscal chairman of the Connecticut Senate Fi· Walter W. Heller of the University of Min disparities among states. Moreover, it was nance Committee and is now the Commit· nesOla. designed to stimulate state and local tax tee's ranking Republican. Senator As chairman of the Council of Eco efforts and to ensure that the plight of McLaughlin also is th e first recipient of a no mic Advisors during the Kennedy and local, especially urban, governmenlS Ripon Educational Fund Mark 0. Hatfield Johnson administrations, the Minnesota would be given full weight and considera Scholarship, and is currently enrolled in economist presented a plan for revenue tion . Ha rvard University's John F. Kennedy sharing. In part, his reasoning was politi There were also several other pur School of Government Master in Public cal. Federal surpluses existed at the time , poses to revenue sharing. First, the plan Administration Program. The text of this and liberals in both the Kennedy and John was an attempt to eliminate competition article is at/apted/rom his work as a Mark son administrations feared th at surpluses among neighboring jurisdictions for fed 0. Ha tfield Scholar. would lead to a tax cut and not to spending eral categorical grants. It also was de- 12 RIPON FORUM. MARCH /987 signed to mInimIze federal "red tape," would be fu nded at 50 percent of the Fiscal s these trends conti nue, local govern and to prov ide local governments with Year 1986 General Revenue Sharing pro A ments will be seeking more aid from more flexible and responsive methods to gram, with interstate and intrastate for their state legislatures. They will be seek raise reve nues. Implicit was the program's mulas designed tochanncl funds to fiscall y ing additional revenue sources, more di intent to return decision-making powers to burdened urban centers or poor rural juris rect state aid, and a loosening of restric state and local government units. dictions with low fiscal capaciti es. ti ons imposed by state constitutions on But even in the 1970s criticism rose or course , this plan alone cannot re local taxing authority. over revenue sharing. Much of the rancor solve the fiscal woes of local governments, The latter is particularly important. stemmed from the fact that the plan lacked nor could any general revenue shari ng as local governments often have relied on clearl y-articul ated policy objecti ves and postscript. In fact , in June 1986 the Na the property tax as their major source of did not have adequate performance meas tional League of Citi es (NLC) pointed out revenue. or course, the property tax has ures. For example, 0110 G. Stolz, a key the serious consequences confronting mu never been popular since it has been Treasury Depanment counsel during the nicipal finance. In a NLC survey of 660 broadly perceived as regressive. In fac t. it enactment of revenue sharing and a noted cities and towns, 56 percent of the re has contributed to local public support for scholar on the subject. once claimed that spondents expected spending to exceed non-property tax alternatives-chiefl y citizen in volvement in reviewing the per sales and income taxes. Local govern formance of revenue sharing and com ments in 26 states use the sales tax and in II pliance by local decision-makers were the states local governments are al lowed to use program's most important elements. But an income tax . revenue sharing. Stolz predicted, would "The challenges are not Other local tax sources include taxes require "a new American Revolution of on cigarettes, alcohol, motor fuel . util democratic panicipation in the local deci insunnountabLe, but states ities. and motor vehicle licenses. In addi sion-making process. " One of the reasons tion, the use of " user fees" and special such never occurred was that the program must immediateLy assume assessmentS is increasingly being applied lacked a formal approach to involvi ng lo the primary federaL roLe in to a wide range of goods and services, but cal citize ns. alone they do not provide a substantial Revenue sharing also proved to be an maintaining essential enough source of revenue for local govern uncontroll able budget item, and during ments. times of deficit spending there were no public sector objectives." If local revenue diversification is to "revenues" to share. Moreover, critics ar be seriously considered by state legisla gued that revenue sharing violated a funda, tures the system's design must be un i mental constitutional principle: the author fonnly applied to avoid economic distor ity to collect taxes should not be separated tions and inefficiencies. And reve nue from the authority to spend revenues. (Op sources must be advocated nOl just to pro ponents said that the program also tended revenue from taxes, federal aid and all vide funds. The revenue should meet the to prop up obsolete or defunct units of other sources combined . Only 15 percent broad standards of efficiency, equity, ex government and th at the absence of expected surpluses, and 29 percent ex pandability, and acceptabili ty. Further "strings" or controls invi ted wasteful and pectcd to have balanced budgets. Perhaps more, they should meet the following superfluous spending choices.) Alan Beals. executive director of the NLC , tests: In pan, these criticisms are valid and put it best: "Those who expect cities to I . be easily administered with high com have prove n to be somewhat compell ing in continue absorbing the impacts of cuts and pliance expectations; light of current budget deficits. But it is cancellation of key federal aid programs 2. provide gfO\Nth potential and possess unfortunate that a program that provoked had better look again. because in many the abili ty to respond to economic so much debate and possessed so much cities. the bucks aren't there ... The belt trends; promise has been forsaken without more has been tightened to its limit." 3. have a tax universe diverse cnough to mention of its original intent . One wonders To some degree. state legislators are provide a consistent base of revenue whether the admi nistration's reasoning is becoming aware of the dilemmas local during periods of economic downturn ; pure fi scal exigency, or a retreat from the governments face. For instance, the State 4. be applied uniform1 y without creating challenge of equalizing fi scal disparities in Local Task Force of the National Confer competitive c ha nges in the mar the federal system. ence of State Legislatures addressed this ketplace. Of course, there are some current problem recently when it reported that proposals that attempt to meet the chal state legislators must place a higher pri With those aims in mind, I would recom lenge of equali zing fiscal disparities. Con ority on state and local issues. " The time mend the followi ng measures: sider the Targeted Fiscal Assistance pro has come for states to change their altitude 1. states should give local governments gram. the chief sponsors of which are toward local governments." the task force broadcr discreti on in raising revenue by Senator David Durenberger, R-Minn., and said. " [States1 should stop considering remov ing certain constitutio nal and Representative Bob McEwen, R-Ohio. them as just another special interest group statutory tax limitations; Their plan is designed to provide general and stan treating them as panners in our 2. statcs should seek to foster a more co purpose funds to local governments based federal system of providing services for operative role with their local offspring on measures of need and fi scal capacit y. It citizens. " Continued on page 18 RIPON FORUM , MARCH 1987 13 LETTERS TO: The Editors RE: August 1986 Ripon Forum The Ripon Educational Fund is now accepting Sum Congratulations on thc August 1986 mer applications for the Mark 0. Hatfield Scholarship Ripon Forum. It was far more realistic than usual. I fou nd both the interview on the Fund. Scholarships will begin in June 1987, and recip Sandi nistas and the article on climate ients will be expected 10: change excellent. Of course, thc piece on judicial review was characteristically na+ Produce a paper ofpubli shable quality (lful ive. A president is naturally going to sup pursue interests which reflect the spirit (lfuJ in port men of his general philosophy more terests oJSenator MarkO. Hatfield. This in often than he would his opponents. c1ud,~s work on issues ojHur (lfuJ peace, civil Learned Hand was perhaps the outstand libe/ties, the environmelll wuJ the 1Ul/UreoJ ing jurist of his time, but he was never governmelil. appointed to the Supreme Court because of his views. If interested, please send research proIX'sais, writing sam By thc way, I think you devote en ples, and curriculum vitae to: tirely too much attention to thc Religious Right. They are imprisoned by thcif own Hatfield Scholarship ideology. Keep up the good work, though. Ripon Educational Fund Discussion of environmental issues and 6 Library COtllt S£ foreign policy, even if you're wrong, is WashillglOl1, D.C. 20003 necessary, We have to contemplate the hard real ities of those subjects. R.C. Wilmot STATEMF.• l vr OF OWl'I'ERSIUP, MAt"'AGEMENT AJ'iD CIRCULATION: Dem'er, Colorado L. Tilk d Publication: Ripon Forum. 2. Dale c:l FiLing. Febuary 1. L987 . 3. FreqUoCncy c:l l5Sue: Bi.Monthly. A. No. d issues published annually. 6. B. Annual Subscription Price: $25 . 4. CompitlC Mailing Address d Known Off~e c:l Publication: 6 Library Court. S.E .. TO: The Editors Washingtoo. OC 2()))3. S. ComplelC Mailing Address c:l the Hcadquan ers Of General Business OffICeS d the Publi ~hers: 6 Librnr)" Coon . S. E.• WasIlinglon. DC 2()))3. 6. Name RE: November 1986 Ripon Forum and Address c:llhe Publisher. The Ripon Sociely. Incorporated. (, Library COUrt. S.E .• Washington. DC 20003. Name and Addre" d Ed il0r. William P. McKenzie. 6 l ibrary I just chanced upon the November Coun. S.E .• Washington. DC 2O:Xl3 . 7. o...""r: The RiJlOll Society. Inc .• 6 Library Coun. 1986 Ripon Forum and met Diane Rav S.E .. Washinglon. DC 20003. 8. K"",,·n bondholders. mortgages. and OIher security itch's educational concern for the vast mid holders .....· ning H. I certify !hat the Statements made by me above are COf"reCI and complele: Wi lliam P. McKenlie. J4 RIPON FORUM. MARCH 1987 MERGER MANIA Continued/rom page /I employment), the hostile buyer can Cltlract a vandal profiting fro m the creation of fear deposits at a below market rate of interest a ransom-his "greenmail." In the case of and tunnoil in the marketplace. should be prohibited from investing such the "greenmail" technique, mere is no Third, procedures to protect smaller, deposits in the junk bond market. Other possibility that the raider can be a good, less sophisticated shareholders shoultl be wise, the savings bank's shareholders re value adding buyer since there is never an strengthened. Insider trading abuses ceive the rewards of speculation while un acquisition. Rather, the profit the raider should cominue to be vigorously pros fairly shifting the risks of such speculation makes is a direct subtraction from the ecuted by the Securities and Exchange to the taxpayers. Finally, the principle of value of the target company and to the Commission. The SEC's recent success in independent buyers and sellers (3 second direct detriment of the other shareholders. the Bocsky case illustrates that current en criteria for a free mark et) should be pre Even worse, many of the greenmailers forcement arrangements are adequate. served. Too often, junk bonds seem to be may only be bluffing in their threats to Also, in contrast to current law. if an ac sold back and forth among the junk bond acquire the larget, hoping that they will be quirer gains corporate control by a "street customers of the same investment bank, bought off or that a friendly buyer will sweep"-that is, by rapidly buying up and too often old junk bond linancing for outbid them and pay a profit on their large blocks of stock previously accumu one acquisition seems to be repaid by re shares. For example . in November and lated by the leading arbitrageurs a nd sale to a new company financed with fresh December of 1986, onc debt-laden raider money managers-then the same purchase junk bonds , issued by the same investment began simultaneous attacks on the Gillette price shou ld be paid to the OIher share bank. The risk is that, as in the classic Company, CPC Corporation and Trans· holders who, unlike the arbitrageurs, are Ponzi scheme, the self-dealing hides prob "'-'Orld Corp.; acquisitions p<>(cnlially total not large enough to negotiate directl y with lems even as an expanding pool of new ling almost 57 billion in purchase costs an acquirer. Arguably, also, acquisitions investors are attracted by their forerunner's and many, many times his own net worth. by street sweeps (which have been accom apparent economic success. The correct CPC and Gillette bought out his stock plished in less than half a day) shou ld be ing forces of a free and knowledgeable positions at over a $50 million profit and banned entirely in favor of the slower. but market are avoided until the hann done is Transworld Corp. gave him a special op more procedurally fair, tender offer pro extremely large. This problem of related tion to buy their Hilton Hotel chain. Yet it cess. By law, such tender offers last at least pany dealing is a difficult one to police, is unclear whether he had the financial 20 business days, providing an opponu but one which deserves further study. wherewithal and desire to buy anyone of nity for competing buyers with higher bids In sum, the key to a good acquisition these target companies, much less all to surface. Also, tender offer regulations is the value added by the buyer once the three . Ironically, the target companies require that all shareholders be treated acquisition is complete. The best regula which pay "greenmail" are often shown to equally. tion of corporate acquisitions is an effi be vulnerable by their ac ts of appeasement Fourth, certain adjustments can be cient, free marketplace. The risk thai well and , with much of their stock still held by made to promote mark.et efficiencies. One meaning regulators will uninte ntionally unhappy arbitrageurs, are frequently at change, which would actually promote ac and harmfully deslr0Y that marketplace is tacked again by other raiders. quisitions, is reinstatement of the "Gen so great that it seems best not to adopt new There are several possible policy re eral Utilities" tax doctrine and the preser· takeover legislation at all. If new policy is sponses to ··greenmail." The restriction vation of the related concept of "mirror adopted, however, the four regulatory on stock accumulation discussed above is subsidiaries." These decades-old doc approaches outlined could lead to a purer, one answer because the raider would have trines were challenged in the 1986 tax re more efficient capital market and more no shares to sell back. More to the point, fonn bill as a revenue generating measure. equitable results. • companies should be required to deal with They hold that a buyer's tax on the resale of all shareholders on an equal basis, dis a conglomerate s hould be the same Ripon-Bow tributing any benefits or market premiums whether the conglomerate is resold in one pro rata. No one should specially profit by piece or whether each division is resold Conference buying up all the hoses in town and then separately. Under the new tax act , there The Fifth Transatla ntic Confer· seuing Cit y Hall on fire. Finally, bluffing will be almost twice the tax due if the ence of the Ripon Educatio nal (and raids in general) could be sharply conglomerate is resold division by divi fund and the British Conservati ve reduced by requiring hostile bidders to ac sion. However, as in the Dr Pepper exam Party's Bow Group will be held in tually have in hand their needed acquisi ple, economic value is oflen added exactly tion financing before their attacks are by such divisional sales; by unwinding Washington, D .C. from July 8-12 , launched. (A mere letter from a raider's past acquisition mistakes and by placing 1987. Subjects to be discussed in investment bank claiming high confidence each business unit with ils most efficient clude intemationa1 trade, constitu that such financing can be arranged should owner. The new tax rules act essentially as tiona1 governance, the anns race, be he ld insufficient because such assur the conglomerate preservation act of 1986, a nd Third World development. ances can be painlessly withdrawn.) As and such diSlOrtion of the economic mar Conference registration is $200, with the proposed ban on stock accumula kets throug h tax policies should be tions, these regulations will not stop cor avoided. and preregistrations can be sem 10: porate acquisitions, even unfriendly ones. The Ripon Educational Fund, 6 They merely insure that an acquirer is in free market may also be enhanced in Library Court S.E., Washington , deed an acquirer, rising or falling with the A two other ways. First, savings banks D.C. 20003. value he adds to his acquisition, rather than which rely on federal insurance to obtain mPONFORUM.MARCH/~ " THE LONG HAUL IN SOUTH AFRICA BY TERRENCE M. O'SULLIVAN hen Americans discuss South port commissioned by the Anglo-Ameri Africa, the imminent dO'Nn can Corporation, perhaps the most inf1u W fall of the apartheid regime is enti al business congolomerate in South commonly assumed, both by those who "Four scenarios have Africa, projects another 50 years of white welcome that prospect and by those who domination. Observers have been predict dread it. But one of my strongest realiza been suggestedfor South ing the fall of the Afrikaner government tions during four weeks of travel in that Africa'sfuture. " almost since it gained control 38 years troubled country was that the situation ago. So while the examples of the Phillip there is unlikely to change overnight, and pines and Haiti may provide hopeful ex that no matter what the U.S. and other amples of peaceful transitions, a major western nations do, it could drag on for transfer of power in the near future is prob many, many years-possibly .decades. And Afrikaners have more than just ably the least likely scenario of all. Now that stronger U.S. sanctions political or cultural dominance at stake; With thai background, what are the against South Afri ca have been enacted, it nearly 40 percent of Afrikaner adults are possibilities for the future in South Africa? may be valuable to look at some of the directly or indirectly employed by the gov· One noted South Afri can authority, Dr. potenlial paths that country could take, as ernment. Government employment ha s Klaus Nurnberger, ethics professor at the well as how the perceptions of South Af represented a kind of social welfare sub Uni versity of South Africa, has described ricans could affect changes there. sidy for the substantial percentage of the fo ur possible scenarios for his country's Columnist Charles Krauthammer re white population that was rural and poor in future: cently called the U.S. debate on policy the past. Thus, unlike the English-speak I) Unchallenged Domination: the toward South Africa "appallingly self ing whites, who have traditionally owned white regime is able to contain the pres centered," and nowhere is this clearer than most of the businesses, Afrikaners have a sure for change through a mixture of re in our underestimation of the Afrikaners's very deep economic Slake in maintaining pressive laws, political subterfuge, and pennanence and uniqueness as an African absolute political control. brute force; " tribe," The Afrikaners (like the Ameri Not even the African National Con 2) Successful Black Re\'Olurion: the cans) have lived on their continem for over gress (ANC, the leading black anti· white power center rapidly deteriorates 300 years, and have evolved with fewer apartheid group) apparentl y believes the and is overthrown by an organized revolu and fewer direct ties to their Dutch, Ger Afrikaners to be an illegitimate colonial tionary force: man and French Huguenot past. Most of occupier. Afrikaners feel they won their 3) LOllg-lerm Slruggle: the white re the major South African tribal languages current dominance fair and square, and gime is no longer able {o maintain decisive have a separate word for "Afrikaner" and resent the idea they should just hand over control but (he opposition lacks the "white" (all other Caucasians), From their what they fought for so long on the bat strength to oust it. The conflict degener fierce struggle against the British in the tlefield and later at the ballot box. ates into a drawn-out civil war analogous Anglo-Boer wars at the end of the last So the Afrikaner cannot be wrinen off to those in Lebanon, Chad , and Northern century, Afrikaners even consider them in planning for a post-apartheid South Af Ireland ; selves the firs t African people 10 gain inde rica. Though there arc estimates that as 4) Comparatively Peaceful Evolu pendence by driving out a colonial power. much as ten percent of the white popula tion: a gradual buildup of pressure fro m tion may emigrate in the next fifteen years, blacks, aided by the international commu most whites have no place to which they nity, forces progressive concessions from Te"ence M. O·Sullimn. a former Peace can "escape." unlike fonner colonial s in the white power structure. As black pres Corp volunteer in Africa. is the recipient of Kenya, Zambia, and Zimbabwe/Rho sure increases, white power yields, bring a Mark O. Hatfield Scholarship. Mr. desia. ing about a transition to block rule with O'Sullivan spent four weeks in South Af The ANC reportedl y gives the cur white participation. Suggests Professor rica last year at work on a study of that rent regime a " lifetime" of at least ten Nurnberger: "Once Blacks have acquired country. more years, and a private, unreleased reo parity and profi ciency in governing the I' RIPON FORUM. MARCH {9$7 country, the ques ti on of color may lose yo un g acti vist even flatly told me, " the some of its political significance. ,. ANC has failed us." a significant sign of The first scenario, unchallenged how little powe r the o ldest and most domination, seems the most likely for at widely known opposition group may least the near future . The South African yield. "The most likely outcome government has already shown a disturb Thus the second scenario, successful ing ability and confidence in draconian black revolution, is highly unlikely in the is some combination of tactics, including mass arrests, banning. near futu re. Most of the present unrest has prolonged corif/ict with an torture, and press censors hip. erupted from the undirected frustration of During the current state of emer ';the children " or "comrades" as they are eventual transition to gency, invoked last June in anticipation of call ed , }oung people who are unemployed the tenth anniversary of the Soweto upris or oul of school because of boycotts. The majority rule. " ings, South Africa n securit y forces have children genu inely seem to bel ieve it is effectively scaled off the black townships only a matter of a few years before they and headed off mass unrest. It is conse r succeed in making the country " un gover vatively estimated that over 25 ,000 people nable." Despite their virtual lack of leader have been arrested since June. And in De ship (most of the viable leaders have been cember, President P. W. Botha cracked imp ri soned or gone into hiding) or an y down even harder with harsh new restric sophisticated political strategy, the chil President P. W. Botha's Nationalist tions on organized resistance and news dren represent the most significant mass Party has held power since 1948, based in coverage. resistance to the government at this time. the Afrikaner majority of whites. To the These tactics , perfected over years of And unfortunately, in the current envi ron left of the Nationalist Party is the Pro repeated use and enhanced by a wide ment , their kind of political ac tivity is cer gressive Federal Party (PFP), composed spread system of government infornlers. lain to gTOW'. mostl y of English-speaking white liberals have hobbled the major anti-apartheid The third scenario, a drawn-out civil and publicly committe d to e nding groups-the ANC, United Democratic war, is perhaps the most frightening. A apartheid . The PFP is the " official" op Front (U DF). the Pan-Africanist Congress prolonged military struggle would bring position in Parliament, and has grown (PAC), the Azanian People's Organization misery to millions of people, and devastate since 1948 when the PFP's most fa mous (AZAPO), and various emerging labor the economy of the entire region for gener member, Mrs. Helen Suzman, was a lone unions. The while regime has been SO suc ations. voice against apartheid . cessful that the average blac k. eve n in In a provocative and morbidly fas There is also a seed of resistance from more sophisti cat ed urban areas like cinating art icle in the March 1986 Atlarttic Afrikaners to the left of Botha within his SOY.'eto, has surpri singly liule idea of what Monthly Conor Cruise O'Brien postulales own party. The "New Nats." as they are each of the major anti-apartheid groups that the prospect of genocide in such a called , have slowly begun to press for a sta nds for or has done. si tuation would ultimately force the two more pragmatic approach to government At this poi nt . not even the 75 -year-old superpowers into rare, cooperative mi li refonn, and while hardly liberal in the true ANC appears to enjoy the loyalt y of a tary intervention under the auspices of the sense of the word, reflect a softening of majority of bl ac ks, few of whom have evcr United Nations to hal t the killing. O'Brien attitudes among many younger Af seen its classic " Frecdom Cha rtcr." One fcels that this might someday be the lesser rikaners. of several ev ils, as the Ame ri cans and So In many respects, though, Botha's viets confront what could otherwise be governme nt faces its most potent chal come a highl y volatile face-off belween lenge from the far right. The Conservative themselves. And he suggests that this may and Herstigte National Parties (HNP) have "Travelingfor four weeks be the only kind of pressure to fi nally bring emerged as staunch defenders of the status the Afrikaners to the bargaining table. quo, have grown from defections in in South Africa, I realized The last scenario, a relati vely peace Botha's coalition, and will brook no com that no maner what the ful evolution , is cenainl y the most desir promise. In fact, the Conservatives and able for all concerned , but the most diffi HNP openly advocate apartheid and have U.S. and other western cult to achieve. As explained above, there opposed- at times viole ntl y-most of are immense forces working agai nst that Botha's " moderate" reforms in recent nations do, the South result both inside and outside the country. years. Many Soulh African political ana Obviously, me scenario which does lysts fee l that in the long-awaited general African conflict could drag evolve for the South Africans wi ll depend election , recently scheduled for April of on for many, many years on how each of the country's (Xl"''C r centers this year, a far right coalition could win deals with the transition. The major anti enough seats to replace the PFP as the possibly decades. " apartheid organizations and the chi ldren official opposition in Parliament. have already been noted. The extent of A "wild card" among competi ng white adaptation will large ly be deter power groups is the increasingly indepen mined by the interplay among the white dent South African Defense Forces, which pol itical parties. could stage a mil itary coup to preserve RIPON FORUM. MARCH 1987 17 REVENUE SHARING IN MEMORI AM, CH AR LES E. (Continuedfrompage /3) GOODELL, 1927·1987. some or all of apartheid . In recent years, and stop regarding them as just another Charles Goodell started the decade of the mil itary has made unilateral moves special interest group; me 19605 as a member of me GOP "truth seemingly in direct opposition to govern 3. states should create targeted revenue squad" that followed John F. Kennedy ment policy. such as its covert violation of sharing programs. so that all distribu around the country in protest of the presi the 1985 Nkomati Accord with Mozambi tions are bundled unifonnly; dential candidate's liberal politics. The que. 4. states should take the initiative in re Jamestown , New York native ended that In some regards. apartheid is most fonning local property taxes , and im decade, however, as an arch-cri tic of the entrenched in the military. At any one pose upon and assist local governments Vietnam War and as the senator who first time, up to one-quarter of South Africa's with uniform assessment practices; introduced legislation to halt the war's }Qun g white males are on active duty, pa 5. states should assist local governments funding and to wimdraw U.S. forces from trolling the townships or baul ing the left in by providing technical assistance in im Vietnam. For his actions, Goodell earned Namibia and Angola . And the military plementing user charges toward a more the enmity of the White House, the occu indoctrination of these young minds ac efficient benefit-based system; pant of which was Richard Nixon, who tively promotes racism , in an effort to mo 6. states must fonnalize their intergovern had been a friend of Goodell in the latter's tivate them to fight the enemy. the "ka mental relationship with their local gov early congressional days. ffir"- whether he bea fore ign soldier. or a ernments by creating an emity with leg Goodell , who died in January of a fellow citi ze n prOlesting in one of the black islative standing and the capacity to heart attack, remained undaunted. even townships. assess, assist and evaluate local fisca l mough it led to the loss of his Senate seat . In conclusion, very few informed administration and direction; He had been appointed to that post by principals in South Africa would predict 7. states should reevaluate the tax..exempt Governor Nelson Rockefeller after Rohert the imminent collapse of the current re status of property and redefine eligibil F. Kennedy's death. In 1970, however. gime . The American perspective. which ity for this status. Organizations should James Buckley ran on the Conservative tends to ignore the history and resulting be eliminated that do not meet a mini Party ticket and defeated the GOP incum mentality of the Afrikaners, makes it par mum criterion for multi-municipal , bent. Buckley even had the support of the ticularly difficult to predict the future of county or regional service significance; White House, as Spiro Agnew cam mat country- whether or not we impose 8. states should consider removing con paigned against his fellow Republican sanctions. stitutional and statutory inflexibilities Goodell and called his beliefs " radiclib And as Professor Nurnberger points that prevent local governmem reorga ideology. " out, the likely evoluti on of South African nization. Moreover, states should en The former five-term congressman society wi ll not fall into neat . recognizable courage extralocal jurisdictions, per was not a radical . of course; he merely patterns. The most likely outcome is some haps th rough annexation. State aid sought to exercise his right to dissent, a combination of prolonged conflict with an could perhaps be linked to reorganiza very Republican principle. In fact , Good eventual transition to majority rule. given tion goals. ell believed deeply in the Republican Party that black pressure for change is partly The challenges are not insunnounta and its potential to be a diverse grouping. violent , partly non-violent, and white re ble, but states must immediately assume He worked with a number of young Repub ac tion is partly repressive, partly adaptive. the primary federal role in maintaining the licans in the 19605 to ensure the success of Whatever internati onal policies arc viability of essential public sector objec their peers. In 1965, for instance , he was pursued, the South Afri can government is tives. A static view of the federal system instrumental in the election of a Michigan unlikely to go quickly or quietly. The Rea and the inability to come up with a new congressman named Gerald Ford to the gan administration policy of "constructive role for states will only restrict local gov post of House minority leader. The Navy engagement" clearly failed to foster sig ernment's abilities to react and provide key ve teran also had been key to Ford's elec nificant change. Nonetheless, we must not public services. And with dependents on tion to the chainnanship of the House Re judge the success of current policies too their hands, it is not an issue local govern publican Conference in 1963 . quickly, given both complexity of the ments can ignore. • The bond with the future president problems in Soum Africa and me undenia remained solid: Mr. Ford appointed his ble resilience of Soum African whites. An congressional colleague to head the panel expectati on of quick results could lead us responsible fo r reviewing the clemency to ignore or undervalue important steps Whats ahead in the appeals of Vi etnam War draft resisters. toward democracy (such as me recent , in Ripon Forum: The former senator carried out that duty dependent efforts by multi-racial groups in with the ethos that guided his life. Perhaps Natal Province at creating a democratic • The Political Appointment the words of Oliver Wendell Holmes , Jr., model of provincial government). The suc Process: Origins of Irangate expressed some 100 years before, best cess of any U.S. involvement in South • Alfred W. Tate on Garry Wills's summarize that force: " I mink that , as life Africa hinges on our ability to understand America is ac ti on and passion, it is req uired of a me complex dynamics at work there , and man that he should share the passion and • Reagan and the Judiciary to respond sensit ively and non-dog ac ti on of his time at peril of being judged matically. • not to have lived." • J8 RlPON f"ORUM. MARCH J9B7 REVIEWS AN AMERICAN HERO BY ALFRED W. TATE Moorhead Kennedy, The Ayatollah in the Cathedral. New York: Hill and Wang, 1986. n elderly Vielnamese was once lack of cultural self-awareness. He claimed ne who has paid a considerable per asked what he thought of Amcri· it precluded us from recognizing that other O sonal price for our ineptitude over A cans. The time was 1967, the cultures. other ways of being human. have seas is Moorhead Ke nnedy. Assigned to place was the city of Danang in what was intrinsic value. Thus ",'C could not com the economics section of the U.S. Em the Republic of Vietnam, and the response prehend that other cultures at the very least bassy in Tehran when it was taken over by was an incisive commentary on U.S. for have the right to make their own mistakes, Muslim fu ndamentalists on Sunday. eign policy then and now. "You mean if need be to fail on their own. and are not November 4 , 1979, Kennedy and his fe l we ll , of course, " he replied. "but you have necessarily threats to us. low hostages were held by the Iranians for no culture ." The sorry litany that is the history of 444 days. The Ayatollah in the Cathedral He went on to explain that he knew U.S. foreign affairs over the past twenty re presents his refl ections on that ordeal, its that as a people we have created a disti nc years proves these observations to be even aftermath , and the lessons he bel ieves are tive body of literature, music and art. He to be learned from this experience. He has knew as well that we possess unique politi some important things to say. cal and legal insti tutions. and even a lan What Kennedy asks is that some basic guage whose idiom is in many ways pecu questions to which pat answers are as liarly our own. He was aware, in O(hcr sumed be reopened. He believes the neces words , that Americans have produced all sity for doing so fo llows fTom his convic of the trappings which taken together con tion, which Ihe news of the past few stitute a "culture." months should only reinforce, "that we all What he meant, he insisted. was that need to grow up internationall y, to mature Americans do not "have" their culture in in important ways if our nation is to ad the sense of its being something they arc dress Middle East terrori sm effectively, conscious of possessing. Thus they are and to grow in other ways. too, in order to unaware that their culture would be differ offer a foreign policy worthyof lhe best we ent if the context which produced it had represent." That this will require more been different. Because of this collecti ve self-recognition than Americans seem ca lack of awareness, Americans tend to ab pable of and how this might be gained is solutize the amalgam of values the histor the basic the me of hi s book . ical expression of which their cuilure rep Ke nnedy begins by distinguishing resents. Such a tendency, the Vietnamese bew.'Cen "\\'Csternization" and the impart concluded, allows Americans 10 react to ing of a particular set of ideas and values it other cultures in only two ways. They must entails on the one hand, and "modern iza inevitably be seen as inferior. To the extent tion" with the tools and technology it they exhi bit a desire to become like ours. more true now than then . And unhappily brings on the other. Because the latter de they may be perceived as good and worthy they are not true simply of the great major veloped in the context of the fo mler, west of assistance. If they show any desire to ity of Americans who have little time for erners tend to ignore this distinction, and retain their own integri ty, hQ\.\'Cver. they critical reflection on our national experi he admits it can be argued that you cannot can only be viC'A-'Cd as evil and to be sup ence and no immediate responsibility for have one without the other. What Kennedy pressed. its direction. Although in this regard he insists is that "traditional elements in the This particular Vietnamese attributed exceeds his predecessors only in degree, it Middle East, however, believe that a sepa the folly the United Stales was in the pro is precisely this deeply ingrained attitude ration is possible. that they can incorporate cess of committing in his country to such a of know-nothingism that has led our cur the lools of the West while rejecting its rent president to perpetrate the concatena values." Only if this is recognized can the Alfred W. Tate is a member of th e Ripon tion of catastrophes that has characterized source of our difficulties in the Middle Forum editorial board. his administration's foreign pol icy. East be recognized. RiPON FORUM. MARCH 1987 19 exporting are deeply threatening to many here as wel l. It is also anOlher one of those "What Kennedy asks is questions we have been unwilling to ask "The metaphor in the ourselves, but Kennedy warns "we had that some basic questions beuer look into the mirror that terrorism booKs titlejuxtaposing the holds up to us fo r what it tells us not about to which pat answers are the terrorists' shortcomings but about our title ofa fundamentalist assumed be reopened. own." Muslim cleric with a AnOlher of the issues Kennedy be That asking such questions lieves must be reopened is the Uni ted symbol for the seat of States' adamant refusal to negotiate with will require more self terrorislS. This doctrine, attributed to liberal religion inAmerica Henry Kissinger, precludes not simply the recognition than paying of ransom in any hostage situation, captures the most Americans seem capable but of entering into any negotiations with important point Kennedy hostage takers or their agents whatsoever. ofand haw this might be The rationale is that if denied even the makes. " opportunity to present their demands. ter gained is the basic theme rorists will have no motive to take hostages ofthi s book." in the first place, The Daniloff affair and the Iranian According to Kennedy. Kissinger's arms scandal reveal this doctrine may well theory is flawed because it fails to distin have been promulgated primarily for pub guish between terrorists's immediate de lic consumption. Unfortunatcly, outrage ressured by the forces of both wester mands, what they are reall y after, and what over the way in which these negotiations P nization and modernization under the they might be will ing to sellie for. The were pursued may obscure the need 10 Shah, Kennedy maintains, Iranians found refusal to negotiate is principally an effort exami ne the possible fallacy of the doc themselves disoriented and required to to deny terrorists a forum in which to make trine ilself. Even more unfonunately. the think and act in new and strange ways. public their up-front demands and has resulting furor may also delay the inevita They were expected to perform unfamiliar proven historically to be inevi tably ble realization that terrorism will continue tasks according to unfamiliar norms and doomed to failure. Moreover, such a re to be a fact of life until the complex root made to feel ashamed of their inability to fusa l heightens the impact of what Ken causes of the crisis in the Middle East are transform themselves into perfect western nedy calls "the Deed," "a semi-mystical, addressed, ers. Many Iranians were frightened by the almost ritualistic, often self-sacrificial rapid and radical changes being forced on concept" which underlies and reconciles them seemingly overnight. and Kennedy all the objectives of terrorist activity, As a fter his ordeal in Iran ended. Ken believes the revolution in that count ry can result, the " no negotiation" doctrine may Anedy resigned from the Foreign Ser best be understood as their reassertion of in fact contribute to the incidence of such vice to become executive director of the their cultural identity. Not surprisi ngly, activity and, by precluding the considera Cathedral Peace institute, He rapidly be given the role religion plays in any society, ti on of altern ative demands which could came disaffected with the anti-nuclear the revolution's vchicle was a revival of possibly be accepted , may also contribute movement, and his reflections on his expe Islamic fundamentalism, and the violence to its violence when it does occur. riences with the peace movement and its against Americans that accompanied it is leaders make up the second half of the indicative of both the magnitude and book. source of the threat westernization was per Of particular interest are the reasons ceived to pose. "Ifthe cause ofwestern he offers for the collapse of the nuclear This explanation of what is going on freeze movement. One he says was the in Lran and throughout the Middle East civilization in the last half simpli stic and e motional nature of its raises an interesting question. The Iranians approach to the very real problem it was reacted to an influx of contemporary west ofthe twentieth century altempting to address. While this accounts ern values by retreating into a simpler past, for its initial support and appeal , th is also If the course of v,'estern civilization in the represents genuine led over time to the movemcnt's loss of last half of the twentieth century-a course progress, why is that credibility. He contends that another cause in large measure detennined by the United of its demise was the freeze's inability to States-represents genuine progress, why progress being rejected by define its agenda and its resu ltant selecti on is it being rejected so vehemently by a of the wrong question for its primary significant number of the people of that a significant number of focus. "The ultimate issue." Kennedy is region1This is a complex question, but the people in the Middle convinced. "is not the weapons. the hard appeal thai Protestant fundamentalism ware, but the underlying strategic assump which also represents a retreat into a sim East?" tions that, under various sets of circum pler past-has for increasing numbers of stances, might compel either side to use Americans indicates that the values we are them," 20 RIPON FORUM, MARCH 1987 This may well be true, but Kennedy's listening to one another. Through asked is what interests are at stake. Most real problem is with the way in which him, we ascribe our political views to issues involve a multitude of often con personalities affect policy debates and the Almighty and assert them as if flicting interests, and these must be sorted there is no other way to put it-the sinful they were His revelat io n. The out , as must the possible courses of action ness of individuals. What makes the sec Ayatollah encourages us to believe for pursuing them and all the probable ond half of me book most interesting is his that we can trample roughshod on the consequences of such actions. Good inten claim to have found in the U.S. peace common garden decencies mat make tions are never enough and only afler this movement counterparts to Iran's life tolerable for others. And he pre work is completed, according to Kennedy, Ayatollah. The metaphor in the book's title vents us in a variety of ways from should the question be asked: Is what we juxtaposing the titl e of a fu ndamental ist growing up internationally as well as want and the way we plan to ac hieve it Musli m cleri c with a symbol for the seat of personally. morally acceptable? li beral religion in America captures the To grow up will require the resolution of Reading The Ayatollah in the Cathe most important point Kennedy makes. the moral confusion which results. accord dral is finally very saddening. In light of ing to Kennedy, "from an absence of ma the evems mat have intervened since its ture judgment , sometimes defined as the publication, it is like a fun house mirror, inability to cope with ambiguity." accentuating through the very reasonable lthough the same sort of personality For the peace movement, he believes ness of its argument the distortions in the A is to be found on the other side of the one source of this confusion is the failure grotesquerie that our fore ign policy has issue. Kennedy focuses on the leadership to distinguish between the morality of per become. of the nuclear free7.e movement and his fect love expressed in the apocalyptic chal Not that there is much here that is description of the negativism of Dr, Helen lenge to perfection found in the Sennon on new. The Iranian Revolution has been ana Caldicott and others in the anti-nuclear the Mount on the one hand , and the moral lyzed at much greater depth, and so, too, crusade is telling. So is his accoun ting for ity of justice expressed in the hard choices has me psychology of the zealot. While the fervor with which many clergy pursue and distasteful ac tions immersion in hu perhaps not always as accessibly as it is disarmamem and other causes. Denied the man history demands on the other. It here, it has all been said before. What is religious certainty enjoyed by those who should be noted, although Kennedy does unique is the compelling way in which had the luxury of li ving in simpler times or not, that for so-called "hawks" the same Kennedy has used his personal experi ence who have retreated to the simpler answers sort of confusion arises as a result of their as a ve hicle for reflecti ng on these issues. of fu ndamentalism. they seek its equiv perception that human history consists of a Moorhead Kennedy does not claim to alent in the issues they advocate. They Manichaean struggle between the forces of be a hero, and by the standards by which have become true believers, Kennedy ar good and evil. Both sides are equall y un such things are currently being measured gues, regarding any questioning of their able to cope with ambiguity, and adding to he is not one. Perhaps that is another ques cause as heresy and betrayal. me moral confusion of each is a reluctance tion mat needs to be reopened . But what It is the fanaticism represented by the to admit the reality of human fallibility and ever else he may be, he is a wise man who figure of the Ayato llah that Kennedy iden thus the fact that no individum or faction has thought long and hard about what he tifies as the real source of our troubles. will have a monopoly on the truth on any and his country have done and endured. issue . Unfortunately, no one seems to be The Ayatollah, as I think of him. is Kennedy contends this moral confu listening. America's foreign policy is still far more than one Iranian cleric. He is sion can be dispelled only by rethinki ng in me hands of individuals about whom the that bundle of negative feelings the way in which difficult decisions are most that can be said is that they mean within all of us that prevent us from made. The first question he insists must be well. And mat is remly sad . • • Newly-elected Republican Representatil'es Fred Upton, left. and Ripon Forum editor Bill McKenzie, Fred Grandy. center. visit with Ripon Ripon Society Chairman Jim Leach freshman Republican Representati~'e Society member Deba Leach during congratulates Maryland Republican Amory Houghton of New York. and recent Ripon reception in hOllor of Connie Morella on her election to Friends of the Earth lobbyist David incoming Republic(U!s. Congress. Baker talk during Ripon reCCI)tion. 21 THE CHAIRMAN'S CORNER CONSTITUTIONAL CONFRONTATION: The National Security Council, the Constitution, and the Rule of Law BY JIM LEACH n a few short weeks a political crisis ciais, led to an escalation of misjudg of judgment-the whole Iran-Contra ments . The trouble , as experts in terrorism I affair--has been transfonned into a unanimously hold, is that the practice of constitutional confrontation. "In afew shan weeks a offering official ransom may solve IOOay's The issues of judgment are obvious: political crisis of problem at IOmorrow'scost. Indeed , in Ihis o Ransom should noc be paid for hos instance, at the same time three American tages when doing so pUiS a price on the judgment-the whole hostages were ransomed with arms, three heads of innocent Americans around the more were taken, while the CIA station world. In starkest tenns it represents ap Iran-contra affair-has chiefW'Js murdered, leading to speculation peasement to terroris m , which is es about the possibility that the efforts to pecially inexplicable given the fact that the been transformed into a ransom may have sparked rather than de arms we were offering were to the govern constitutionnl railed the terrorists's decision to end his ment that took hostage our embassy in life . Now the question remains whether the Tehran seven years ago and that, according confrontation. " double billing of Iran won', lead to a call to newly released infonnation provided the for a refund or, worse yet, escalating ter National Security Council (NSC), orga rorist retribUlion. The only thing dumber nized and paid for the terrorist attack that than trying to buy friends with arms is led three years ago to the death of 240 double dealing with double dealers. This Marines at our barracks in Beirut. sorry saga may not be over yet. o The case for tilting toward Iran in its operational as opposed to negocialing au The hullabaloo about Iran would have war with leaq lacks geo-strategic and ethi tonomy and become a mini-CIA, appar passed if it weren' t for the specter of Swiss cal credibility as does the case for offering ently under the assumption that the closer bank accounts, of public officials taking anns instead of grain as alms for rap decisions are made to a popular president , the Fifth Amendment, of what appears to prochement. the less accountable policymakers be be an escalation in the prosecution of an o White House insiders apparently come. illegal war in Central America. stretched arms export laws at the same o And, finally, the specter of an ad On a scale of one to 10. we had in time other Americans were being pros ministration implicitly urging American Watergate a 10 on the problem of illegality ecuted by the Justice Department for trad citizens to violate the Neutrality Act and tied to personal ambition. In the leanian ing with lean . explicitly begging foreign governments to Nicaraguan connection we have a one. On o The NSC has taken on powers nOC contribute through a secret Swiss bank ac the other hand, with the exception of one of envisioned by Congress or American count to the prosecution of an illegal war in the impeachment charges rejected by the heritage. In Iran, it has preempted the tra Nicaragua stretches the dignity of the pres House Judiciary Comminee-that related ditional role ofthe State Department and in idency, if not the law itself. to Cambodia- Watergate had little to do Central America that of the Department of There is, of course, a case to be made with the issue of war and peace. Here al Defense. It has taken on unprecedented that there is less here than meets the eye, issue is nOI only the rule of law, but the thai a compassionate effort to see the re separation of powers function of the Con Jim Leach is a member a/Congress/rom lease of a CIA station chief, using Israeli stitution. The Boland Amendment, after 10lWJ and chairman 0/ the Ripon Society. intennediaries rather than American offi- all , represents the antithesis of the Gulf of 22 ~PONFORUM.~H/~ , Tonkin Resolution. It was designed to cir inability to participate directl y in events vigilant American press is responsible for cumscribe rather than give license to exec themselves. the cascade of policy reassessments in re utive ac ti on. The " bully pulpit ," of course , re cent days. The reason we have a crisis in foreign mains with the executive. The American In fac t, one of this year's Pulitzer policy accountability in America today people , while frequently preferring the Prizes must go to an obscure Lebanese stems in part fro m the nature of the issues po li cy attitudes of Congress, over publication which no American I knaw and the ti mes. in part from the aberrational whelmingly want the president , not Con reads. Wit hout its revelation of the arms roles being played out with a stunning lack gress, to run foreign policy. for hostage trade, American foreign pol of historical perspective by the pri ncipal icymakers would still be standing tall actors in the executive and legislative albeit in quicksand. Frankly, the surprising branches of our government. news to me is nO( that illegality has oc We also have a frustrated Congress, curred-anyone who has foll RIPON FORUM. MARCH 1987 2J WASHINGTON NOTES AND QUOTES Election Notes chairmanship of Citizens for America, a We commend the choice. She is an articu nationwide grass-roots lobby that pro late and tireless speaker for the party, and Despite the loss of Republican con motes the president's agenda. Where are has made closing the gender gap one of her trol of the Senate, mere are new moderate the heirs of Jacob Javits and Thomas personal priorities. and progressive Republicans faces on Cap Dewey? Once again, the Ripon Forum salutes itol Hill worth noting. Among the Repub Next door, a quiet storm is building just-retired Gov. Lamar Alexander of Ten licans elected to Congress, we welcome that could split Vermont 's progressive nessee. Last issue we noted his leading Senator Christopher " Kit" Bond in Mis GOP. Former Gov. Richard Snelling, a role in the National Governors's Associa souri ; and Representatives Patricia Saiki of popular moderate who lost his bid this year tion get-tough report on education reform , Hawaii; Fred Grandy of Iowa; Fred Upton to unseat incumbe nt Democrat Sen. " Time for Results." Now we're pleased to of Michigan; Constance Morella of Mary Patrick Leahy, hints that he may try agai n see he has received the National Wildlife land; John Rhodes UJ of Arizona; Amory in 1988, assuming that progressive Repub Federatio n 's Nationa l Conservati on Houghton. Jr. of New Yo rk; and Curt lican Sen. Robert Stafford retires. That Achievement Award, in the government Weldon of Pennsylva nia. Our regrets to sets up a potential GOP primary battle with category. Alexander was praised for his fri ends and allies we have not yet met. Rep. Jim Jefford s, also a popular pro simultaneous achievement of economic Also, the crop of new pragmatic Re gressive and a Ri pon Society CA B mem deve lopment and environmental protec pUblican governors is overwhelming, rais ber. Jeffords has long had his sights set on tion during his seven years as governor of ing hopes of new party-building efforts at Stafford's '88 retirement. Tennessee. me state level from California to Maine. In Pennsylva nia , House Budget We're especially pleased by the election of Committee Chairman William Gray, a On The Right a former Ripon Congressional Advisory black Philadelphia Democrat, is weighing Board member, John "Jock" McKernan of a run against incum bent Sen. John Heinz, More than a few Republicans barely Maine, and George Mickelson of South another Ripon CA B member. contained a squeal as right-winger Jesse Dakota. And in the Midwest, twO 1986 losers Helms won the vote of his colleagues to In the lillie-noticed but cru ciall y may try again in 1988, with ramifications become top ranking Repu bl ican on the important elections for state legislative for two friends of the Ripon Society: Mis Senate Foreign Relati ons Committee, de seats, results nationwide mirror the near souri Democrat Harriett Woods may take a feating former chairman and moderate draw seen at other levels of government . . third crack at the Senate versus her first conservative Richard Lugar. Committee With about 7,500 seats at stake around the opponent , incumbent Sen. John Danforth; Republicans had already expressed unan country, the Democrats netted only 180 while defeated Sen. Mark Andrews of imous support for Lugar, citing his par new seats, and gai ned only five of the North Dakota may try again versus the tisan loya lt y and legislative ability. But nation's 98 partisan legislative chambers victor of an expected Democrati c pri mary. Helms campaigned almost exclusively on (Nebraska has a unicameral, nonpartisan Labor leader Lane Kirkland has an his seniority rights, and was eloquentl y legislature). nounced that the door is open to GOP supported by none other than the liberal The Democrats now control 68 of presidential hopefuls who seek the mas Lowell Weicker who argued. quite under those 98 cham bers, a clear majority. but sive union's endorsement in 1988. No standably. against elevating popularity officials at the Republican National Com names dropped, but George Bush, Robert over seniorit y. mittee point to the " 1991 Plan " to whittle Dole. and Jac" Kemp have all emphasized And somehow 'A-'C forgot to report the down that number by 1991, when legisla blue-collar outreach. We should also point fo llowi ng exchange, as reported in the far tures begin redrawing the lines of congres out that dark horse or Veep contender right Liberty Report in early 1986. It's so sional districts. Thomas Kean received overwhelming rib-tickling, it's still worth repeating. Senate Repu blicans, now in the mi union support in his 1985 reelection. In a convcrsation with Vice President norit y, continue to be led by people who Add Donald Rumsfeld of Illinois, of George BUsh, the interviewer asked' " (In represent the broad range of Republican Nixon-Ford vi ntage and Bush-like resume 19851 You were named Republican of the thought and styles: Minority Leader (former congressman, cabinet officer, Year by the Ripon Society. Many conser Robert Dole of Kansas; Assistant Minority White House chief of staff, ambassador to vatives feel the Ripon Society is a left Leader Alan Simpson of W)Qming; Con NATO, and corporate executive) to the list wing clement in American pol itics. How ference Chairman John Chafee of Rhode of contenders for the '88 GOP presidential can )Qu identify )Qurself as a Reagan Re Island; Confere nce Secre tary Thad nomination. publican while supporting such a radical Cochran of Mississippi : Policy Commiuee group?" Chairman William Armstrong of Colo General Comments Repl ied Bush: " The Republican rado; and Senatorial Committee Chairman Party should include peoplc with a wide Rud y Boschwitz of Minnesota . Mau reen Reagan, the president 'S variety of beliefs. As Vice President to Insiders report that New York 's 1982 daughter, has been named co-chair of the Ronald Reagan ... I have tried to be a GOP nominee for governor, Lewis lehr Republican Party amid plent y of intern al unifying force among all segments of the man , may be planning to run for the Senate bickering. Be}Qnd gripes about her unpre Republican Party. and I am pleased to have in 1988 against incumbent Democrat dictable temper and predictable charges of the support of these groups. The Ripon Daniel Patrick Moynihan. Lehrman, who nepotism. Ms. Reagan has also been ac Society is not a left-wing, radical group. spent millions fro m his own pocket in '82 cused of ideological heresies: being a Some of its members are among the Presi and came withi n a hair of defeating Mario strong advocate for women's ri ghts. and dent 's strongest supporters ." • Cuomo, recently stepped down from the keeping her views on abortion to he rse lf. RIPON FORUM. MMCH J9K?