Jack Kemp: Activist for Capitalism

His vision for growth that will empower the poor has thrust him into the spotlight. INTERVIEW

BY last Saturday, half the Republicans in the United States House of Representatives - frustrated by a stagnant economy and lack of White House leadership - were spoiling for action, for direction, for a champion.So they wrote President Bush, in a letter signed by 82 of them, calling for "one leader with the energy, enthusiasm, and national clout to tackle our domestic agenda.... "Mr. President," the letter said, "we would urge you to make Jack Kemp your domestic policy czar." As pressure to act on the economy rises, Housing and Urban Development (HUD) Secretary Jack Kemp's profile is rising with it. From White House policy councils to the spare offices of Eastern European reformers, Mr. Kemp has become the leading voice of entrepreneurial capitalism. In the White House councils, he is the increasingly outspoken voice for acting as soon as possible to cut taxes to promote growth - against the judgment of more cautious advisers. "Politics is action," he said in an interview this week, jolting to the front edge of his chair, and taking up an analogy to his professional football career. "If you're not moving forward, then they're moving you back. "I believe in offense," he says.

Kemp's vision In an administration peopled at the top with pragmatists and policy technicians, Kemp is a relentless evangelist for a vision of popular capitalism that he believes can free the world and empower the poor. He is a good-natured, self-described "radical" with an agenda, a vision, a mission that reaches well beyond his role as HUD secretary. It is not altogether the president's agenda. For example, he has tried unsuccessfully to have the administration launch a full-scale war on poverty waged on conservative principles. Kemp does not see his differences with the White House as fundamental. But he is holding back less of his own views these days. His ideas cascade out. On public occasions, he will hand out his written speech to the press, then ignore it, speaking in torrents of fact- and clause-packed sentences of almost academic complexity. His main idea is growth - a fervent, all-encompassing faith in economic growth. Almost everyone in American politics, of course, believes in growth. But not like Jack Kemp. "Of all the people in this city, he's the one you can say has the most consistent commitment to growth," noted House minority whip Newt Gingrich (R) of Georgia to a group of reporters last week. "I think it's very clear that the spirit of Kemp dominates the House [Republican] party," he said. When Kemp begins to talk about growth, his feet come off the coffee table in his office and he almost seems to interrupt himself to clarify: m not talking about creeping growth," he says, fluttering his fingers dismissively. m not talking about 2 percent-a-year growth. I'm talking about a prairie fire." He calls it the "popular capitalism" of the guy who drives a truck, then saves to buy a truck, then builds a trucking company. "With that kind of growth, we would be a majority party," he says. Without it, he adds, the Republican Party will be lost.

Divergent views He is candid that he is somewhat at odds with the White House over the economy. "I think we need to move with dispatch, with a sense of urgency," he told congressmen at a hearing last week. "The president wants to act, but he's discouraged by the way he's treated by the Congress." He has been pitted most directly against chief of staff John Sununu, whose New Hampshire-bred conservatism is of a slightly different stripe than Kemp's. Mr. Gingrich, very much in the Kemp camp, describes Sununu as on the "low-tax, low-spend, growth-later wing of the conservative party." Kemp, of course, leads the growth-now wing of the party. The pillars of the Kemp program: * Cut taxes on capital gains, * Establish enterprise zones of low taxes and other incentives to draw investment to poor areas. * Promote tenant management and eventual ownership of public-housing units. At the heart of his rhetoric and agenda are the poor and poverty. His approach is resolutely conservative, entrepreneurial, market-based. Many are skeptical that his ideas would work nearly as well as he claims. But virtually no one questions the sincerity of his concern about poverty. He has accumulated some goodwill in the black community, whether or not he has won many black converts to the GOP. A profile in the black magazine Emerge called him "the White Knight of the Underclass." Kemp's vision of popular capitalism is that the poor are like the rest of us, neither pathetic nor deficient. They are just caught in a perversely tangled safety net. He is not an anti-government, less-is-more conservative. He believes in safety nets. But the American welfare system has created a separate economy, he says, closer to third world and Eastern European socialism than the market economy that most Americans live and work in. One example of the perverse incentives he finds in the welfare system: A typical single parent with two children can receive $9,196 a year in welfare benefits. By taking a job earning $8,500, this parent loses most welfare benefits, so pay plus welfare adds only $590 a year to the family income. This amounts to 93 percent marginal tax rate for earning money to move off the welfare rolls - the highest marginal rates in the economy, he notes. "We have shattered the link between effort and reward" in this "socialist" economy, he says. Kemp sees his views cutting across party lines, and so do a growing number of Democrats. "Liberals take an elitist attitude that the poor will always be that way, and the best you can do is anesthetize them from the marketplace," he says. But traditional conservatism rubbed him the wrong way as well. "I kind of became disenchanted with the laissez-faire attitude that the poor had a problem with their values." As a Buffalo, N.Y., congressman, he was not interested in representing only the middle-class suburbs. As a former football player on a integrated team, he did not want an all-white party. His mission became to bring growth, opportunity, and empowerment to the poor trapped in communities starved for seed capital. And unlike much of the Bush White House, "I stopped worshipping at the shrine of the balanced budget."

Lower capital-gains tax Most of his views wend their way back to the importance of cutting the capital-gains tax. Lower capital-gains taxes, for instance, would unlock many sales transactions and raise real estate values, he says, which would infuse badly needed cash into state budgets. Not so, says Anthony Downs, a real-estate expert at the liberal Brookings Institution. Real estate, in general, has not seen any capital gains, only losses, since about 1988, he says. "Jack Kemp is a very interesting and charming guy," he says, "but he's a zealot, and he believes regardless of the evidence." Kemp's ideas for enterprise zones and tenant management can work, but cost a lot of public money, he says. Kemp was one of very few true conservatives that found policymaking positions in the Bush administration, says political analyst William Schneider of the right-of-center American Enterprise Institute. "He's a true believer. Bush doesn't like true believers."

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