The Contract with K Street

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POLITICS DECEMBER 4, 1995

The Contract with K Street

When 367 Republican House candidates signed the Contract with America on September 27, 1994, they pledged to create "a Congress that is doing what the American people want and doing it in a way that instills trust." As they stood on the steps of the Capitol, Texas Representative Dick Armey declared, "[W]e enter a new era in American government. Today one political party is listening to the concerns of the American people, and we are responding with specific legislation. We are united here today, over 150 current members of the House and over 200 candidates, united in the belief that the people's House must be wrested from the grip of special interests and handed back to you, the American people."

Few voters in November 1994 knew what was actually in the Contract, but they sensed a commitment to genuine reform. They were wrong. The new Republican House, like the old Democratic one, has followed the dictates of Washington lobbyists and campaign contributors. The companies represented are different--timber, oil and gas, pharmaceuticals and mid-size insurance rather than construction, entertainment and trial lawyers--but the result is just as bad, if not worse. Every major initiative--from tax cuts to Medicare reform--has borne the fingerprints of the special interests whose grip the Republicans had promised to loosen.

Take a few examples. Legislation reducing corporate liabilities for toxic waste was drafted by lobbyists from the American Petroleum Institute. Oil and gas PACs gave $3.9 million to Republicans in 1994 and $1.23 million in the first six months of this year. The Golden Rule Insurance Co. (with $1.4 million given to Republicans over the last four years and more to the Republican National Committee and Newt Gingrich's GOPAC than any other business) wangled a provision in the House Medicare reform bill that allows senior citizens to buy its special insurance programs. The provision will cost the Medicare fund an estimated $2.3 billion over seven years. Another provision in the tax bill, granting tax deductions to owners of these insurance programs, will cost the Treasury $1.3 billion.

Securities firms won radical reductions in capital gains taxes, drug companies won special tax credits for research and development, the Air Transport Association blocked implementation of a fuel tax on airplanes, Archer Daniels Midland and other ethanol producers retained a special tax credit. These firms are all major Republican donors. This year, for instance, Merrill Lynch contributed $500,000 to a GOP-organized coalition to promote the tax bill.

The American Bankers Association, which contributed $680,000 to Republican candidates in last year's election, got the House to eliminate the direct student loan program, which allowed students to borrow from the government rather than securing government-guaranteed loans through banks. The Congressional Budget Office estimated that the direct loan program would have saved the government $4.3 billion over five years from reduced overhead and students $2 billion in charges.

What unites all of these "reforms" is that they have nothing to do with the mandate that Republicans claimed after their November 1994 victory. They don't make government cheaper or more efficient. They don't put money back in the pockets of average Americans. They are exactly the kind of measures that have deepened Americans' distrust of politics and Washington. They represent confirmation of a trend that disaffected voters have already sensed: the triumph of a political system oblivious to ordinary Americans and attuned to Beltway lobbyists, whether of the left or the right.

What House Republicans have done is to take a process of political decline that began three decades ago under the Democrats and accelerate it. The older system, which prevailed after World War II, was far from perfect, but it contained mechanisms by which Congress could, in Armey's words, "listen to the concerns of the American people." These involved interest groups, but the groups had a far different relationship to citizens outside of Washington and to each other, and they represented a much broader range of Americans. The election of 1994 did not revive this older system but furthered the hold of a new one dominated by Washington insiders.

How did this older democratic system work, and what is the system that is replacing it? Of course, America has never been a pure democracy. The country's size and economic diversity have always prevented anything like a system of direct representation. What legislators and executives finally do has always been shaped not only by their individual wills, but also by what Tocqueville discovered when he visited the United States in 1831: a welter of civil and political associations.

Even in Tocqueville's time, American politics took the form of an imperfect system of group influence in which the wishes of voters were represented through participation in churches, businesses, workmen's organizations, protest groups and political parties. Tocqueville extolled these associations as the secret to U.S. democracy, but they were a necessary rather than a sufficient condition for a fully functioning democracy. At its worst, during the post-Civil War Grant administration, this system of group influence meant corrupt rule by "the interests." At its best, during the decades after the Second World War, it meant the democratic pluralism celebrated by Robert Dahl and V.O. Key. What has distinguished the best of pluralism from the worst is the presence not only of large, representative interests groups, but also of a political establishment and a shared framework of political belief.

It is hard to remember now what counted as an interest group forty years ago. Instead of hundreds or even thousands of groups, there were only a handful that mattered. The AFL-CIO, formed in 1955, represented a third of American workers and a majority of private-sector blue-collar workers. Businesses were represented by organizations like the Chamber of Commerce, the American Farm Bureau and the National Association of Manufacturers and by a few trade or professional groups like the American Medical Association. The NAACP represented black Americans. The National Council of Churches and the National Catholic Welfare Conference represented many Protestants and Catholics. Political parties worked through state organizations and through urban political organizations like Chicago's Daley Machine. The Democratic Party, the premier political party of the era, managed to unite Machine Democrats (and the white ethnics they represented), Southern Bourbons, Texas oilmen, Wall Street liberals and labor unions. The party's very looseness, and its independence from a formal governmental role, was its strength.

Many of these organizations and associations had offices in Washington and exercised their influence through lobbyists, but they were also directly linked to their members outside Washington. In the 1950s, workers did not view union leaders and the leadership of the new AFL-CIO as distant bureaucrats more interested in Washington salon life than in the welfare of their locals. The main business and consumer groups had active chapters around the country and raised their money through membership dues rather than direct mail. They were representative institutions rather than what we have come to call "inside the Beltway" groups.

Many of these groups and associations, such as the AFL-CIO and the National Association of Manufacturers, had conflicting interests on a range of issues, but they were united through a political establishment, which occupied the gray area between the political associations and governmental power. This establishment, which included leaders from business, finance, the media, labor, universities and the churches, worked through organizations like the Council on Foreign Relations and the Committee for Economic Development, think tanks like the Brookings Institution, foundations like Ford and Rockefeller and commissions set up by Congress or the president to address such problems as the solvency of the Social Security system or the missile gap with the Soviet Union.

Largely through the efforts of this postwar establishment, Americans came to support the Marshall Plan, the liberalization of trade and a neo-Keynesian fiscal strategy. Establishment organizations were also critical in winning national acceptance of the early civil rights movement. They served as orchestral conductors that transformed the cacophony of interests and associations into acceptable initiatives on behalf of the national interest.

To do their job, however, the establishment conductors needed a score--a shared conception of the national interest. In the postwar period, the conception was a synthesis of cold war mission and domestic egalitarianism--"cold war liberalism." It was a broad kind of liberalism rooted in the New Deal's concept of social security and collective bargaining and in Henry Luce's vision of an American Century. It stretched from Arthur Schlesinger to Dwight Eisenhower. While it excluded left-wing Communists and right-wing anti-Semites, racists and isolationists, it included most Democratic and Republican leaders.

This postwar pluralism came under attack in 1956 from C. Wright Mills in The Power Elite. Mills charged that behind the appearance of plurality lay a unified and unaccountable elite. He had a point. Establishment groups were dominated by upper-class Americans with Roman numerals after their names. But the policy elite also included civil rights leaders like the NAACP's Roy Wilkins and labor officials like the United Auto Workers' Walter Reuther and was closely linked to more popular civic and political associations.

Most of the major legislative and executive decisions from 1945 through the 1960s reflected the influence of popular as well as elite organizations. It would be impossible, for instance, to explain the passage of Medicare in 1965 or the great civil rights acts of 1964 and 1965 as the result simply of upper-class manipulation. And lesser measures--from minimum-wage increases and public works bills to John Kennedy's trade and tax bills--were marked by accommodation between business, on the one hand, and labor organizations, small business groups and urban machines on the other.

While most Americans did not participate actively in the pluralist system of group pressure, they felt represented within it and did not exhibit the kind of systemic disaffection so common today. From 1948, when Henry Wallace challenged Truman with the help of the pro-Communist left, to 1968, when segregationist George Wallace ran as an independent, there were no significant third-party challenges. Mills derisively called the '50s "the great American celebration." In retrospect, he was probably right.

Some groups--like Southern blacks--were formally excluded, and others--like the women who read Betty Friedan's The Feminine Mystique--felt increasingly unrepresented in the mass organizations of the older pluralism. But in the 1960s both groups appeared to be finding a place within the system--blacks through Martin Luther King's movement and women through NOW, which Friedan founded in 1966 as a mass organization closely linked to the labor movement.

In the tumult of the late 1960s, the pluralist system began to break down. The Vietnam War, the struggle for civil rights and the loss of American economic supremacy had a corrosive effect on the cold war liberal consensus and on the establishment organizations that sustained it. The elites divided sharply over Vietnam, and the foreign policy establishment split irrevocably. America's loss of economic supremacy had an even more subversive effect, casting doubt upon the country's ability to carry out the mission of the American Century. Gone was the optimism that underlaid American consensus. And gone also was the easy truce in industry, as American business, suddenly engaged in a fierce struggle for markets, spurned cooperation with labor and fought the expansion of the welfare state.

Outside the South, most Americans supported the first phase in the civil rights movement that climaxed in the Civil Rights Act of 1964 and the Voting Rights Act of 1965. But as advocates of black power gained ascendancy, and as the civil rights agenda shifted from equal access and political rights to affirmative action, many white Americans saw blacks as seeking a kind of privileged entry into society that neither they nor their parents had enjoyed. The debate over busing, quotas and affirmative action obscured the promise of economic and social equality that lay at the heart of cold war liberalism. Equality increasingly came to be identified with racial equality.

The elites split accordingly. Foundations like Ford, which had first courted controversy by funding black community control of education in New York's Ocean Hill-Brownsville neighborhoods, found themselves challenged by conservative foundations like Bradley and Olin. Think tanks like Brookings found themselves challenged by new institutes like Heritage and American Enterprise. The AFL-CIO leadership--previously welcomed into higher circles--was snubbed by new organizations like the Business Roundtable. Just as there was no longer any agreement about America's mission in the world, there was no agreement about its mission at home either.

During these same decades, the civic and political associations that had sustained the older pluralism suffered heavy damage. The Democratic Party fractured over foreign policy and race. The labor movement collapsed, declining by the 1990s to less than 15 percent of American workers and only 11 percent of those in the private sector. Other organizations that represented the working classes and poor fared no better. King's movement fell apart, and the NAACP was crippled by scandal. Community organizing, which thrived in the '70s, atrophied and never produced, as some of its proponents hoped, a national movement that could complement the labor movement. In effect, the working classes and the poor lost much of their effective representation in national politics. At the same time as the old postwar pluralism was crumbling, a new system, based on Washington's K Street, was emerging. At its heart were business lobbyists and lobbies--spurred by new regulations and trade conflicts. From 1961 to 1982, the number of corporate headquarters in Washington increased tenfold. The number of lobbyists and lawyers in Washington tripled between 1973 and 1983. In the 1970s, the American Petroleum Institute alone employed more lobbyists than the AFL-CIO. In the '80s, foreign business money from Japan and other trade rivals poured into Washington's K Street. In 1989 alone, the Japanese spent $150 million on Washington lobbyists. By the '90s, businesses employed about 10,000 lobbyists in Washington.

Decades earlier, business leaders like Robert McNamara or Paul Hoffman had aspired to be national leaders--to speak for the entire nation and not simply their own firm or industry. But the new business lobbyists and organizations served narrow policy agendas. Former high officials thought nothing of representing foreign companies that were out to win market share from embattled American firms or lobbying for outlaw countries like Libya. The single-minded quest for profit also transformed the function of the nonpartisan think tank. Businesses began using economic research to rationalize purely self-interested policies. They threw money into the American Enterprise Institute, the Heritage Foundation and into pseudo-research organizations like the Council for Capital Formation. While the older institutions like Brookings had attempted to remain above the factional fray, the new think tanks boasted about their connections with Republicans.

Business also sought to strengthen its influence through campaign spending. According to calculations by the Center for Responsive Politics, 80 percent of the contributions to national candidates in the 1992 elections came from industry, whether through political action committees or individual contributions. In 1994, 69 percent of total PAC contributions and 89 percent of Republican PAC contributions came from business groups.

Some business spending canceled itself out. Since businesses often lobby against each other--AT&T, for instance, against the Baby Bells--business contributions didn't necessarily guarantee a clear outcome and have even provided an opportunity for other organizations to hold the balance of power. But corporate lobbying and campaign contributions have guaranteed that, on issues that clearly divide business from consumers or labor, business would prevail. That first became apparent in the Carter administration when the AFL-CIO lost on labor law reform, consumer groups lost on their plan for an Office of Consumer Representation, and business succeeded in transforming Carter's progressive tax reform plan into a capital gains tax cut for business and the wealthy.

 

But business wasn't the only new player in national politics. The social and political movements that began in the late '60s spawned new groups and the expansion of old ones just as the older pluralism was splintering. These included environmental organizations like the Sierra Club and the Environmental Defense Fund; women's, gay rights and abortion rights organizations; groups favoring gun control; free speech lobbies like People for the American Way; good-government organizations like Common Cause; and constituent lobbies like the American Association of Retired Persons (AARP). The rise of these groups helped inspire a backlash. Beginning in the late '70s, socially conservative groups like the Christian Voice, the Conservative Caucus, Concerned Women for America and the Eagle Forum also gained clout and numbers. Altogether, the liberal and conservative social-interest groups field about 3,000 lobbyists in Washington.

Many of these new groups looked on the surface like mass organizations. AARP, for instance, boasts more than 30 million members, a legislative staff of 120 and seventeen registered lobbyists. But, with the exception of those few organizations like NOW that were rooted in the older pluralism, these new groups have a much more tenuous relationship to the public than the groups that dominated the politics of the 1950s. They don't have active memberships; and they're driven by their staffs, many of whom are self-appointed or control the boards of directors that appoint them. Membership is merely one means of raising money through direct mail. Members may get certain services in exchange for their contribution, but they are not necessarily entitled to a say in the future of the organization.

These (mostly liberal) interest groups are also dominated by the affluent. According to a 1990 survey, the typical donor was a professional or manager with an income between $50,000 and $100,000, which meant the top 21 percent of Americans. Most of the wage-earning classes don't give to these organizations and don't feel represented by them. (That's true as well of many conservative lobbies. Christian right organizations have a decidedly upper-middle-class membership and, unlike older church groups, don't see their role as being tribunes for the poor.) Even those liberal groups that claim to champion the interests of working people and the poor don't have a membership base among them. Ralph Nader's public interest groups primarily attract college students and recent graduates. And the Children's Defense Fund--unlike the old National Welfare Rights Organization--has its base among social workers rather than their clients.

Together, the growth of these business and social-issue lobbies has created a phenomenal, and unprecedented, concentration of power in Washington. In 1994, for instance, residents of Washington gave more money to national candidates than residents of any other city, even though Washington itself only had a single uncontested congressional race. More PAC money emanated from Washington than from the rest of the country put together.

 

Until this year, the liberal issue groups have had far more money and members than the conservative ones--NARAL, for instance, spent more money in past elections than all the pro-life organizations put together. Of the top ten single-issue or ideological PACs in 1992, only one, the National Rifle Association, was clearly identified with the right. The rest included the feminist Emily's List and Women's Campaign Fund, the Sierra Club and the League of Conservation Voters, NARAL and the Human Rights Campaign. That accounted for their success in repealing efforts by social conservatives to roll back Roe v. Wade or to gut environmental laws. From the mid-'70s through 1992, Washington was dominated by a de facto alliance between conservative business groups and liberal social-issue organizations. In some cases, the ties were formal. Business provided much of the funding for NOW's Legal Defense and Education Fund, the Children's Defense Fund and the National Wildlife Federation.

The power exercised by these two kinds of lobbies has created the great paradox in American politics: every president since Carter has gotten elected on the basis of populist-sounding economics (even Bush: remember "read my lips"?) and a moderate or even conservative approach to social issues (from Carter's "born-again" Christianity to Clinton's "new covenant"). But once in office each of these administrations has inevitably fallen under the sway of Washington's business conservatives and social liberals. Even Reagan was forced to abandon the social agenda on which he was elected.

Perhaps the most glaring symbol of their real clout came with Clinton's victory in November 1992. Clinton won, of course, on the slogan "Putting People First," but his first two decisions were to remove the ban on gays in the military and to renege on his promise of a middle-class tax cut in order to concentrate on reducing the budget deficit. Both decisions reflected the influence of these lobbies. Not surprisingly, voters have felt cheated and deceived.

Americans' perception of this new system of power cannot be reduced to partisan terms. To some, it is the "liberal elite," but to many liberals or populists it is a "business elite." Both perceptions are valid depending on who is in office at the time. What Americans see is not simply certain outcomes they don't support, but a process of reaching these outcomes from which they feel alienated and estranged.

Gingrich and the House Republicans successfully appealed to this alienation. According to Ruy Teixeira of the Economic Policy Institute, the greatest shift toward the Republicans in 1994 occurred among lower-income voters who had not graduated from college--precisely the people left out of the new system of power. But once installed in their new suites, the Republican House leaders largely ignored their mandate: they merely changed a few of the components in this new system in Washington without changing the system at all. After successfully wooing the outsiders they quickly made a Faustian bargain with the insiders.

In the year leading up to the 1994 election, the House Republicans had courted three different kinds of groups. First, within the universe of Washington business interests, they appealed to those that opposed Clinton administration policies or feared action from a Democratic Congress. These included oil and gas interests, mining and timber, tobacco companies, pharmaceutical and medium-sized health insurance firms, commercial banks, securities firms that specialized in derivatives and hedge funds, airlines, defense contractors and the small, independent businesses represented by the National Federation of Independent Business.

Secondly, the Republicans sought support from social-interest groups that had been alienated by Clinton's support for abortion rights, homosexuals in the military and gun control. These included the National Rifle Association, the Christian Coalition and other groups identified with the religious right. Thirdly, the Republicans appealed to distinctly anti-Washington movements. These included Perot's United We Stand--with its support for lobbying and campaign finance reform--and the movements for term limits and property rights.

Once in power, the Republican House leaders moved to consolidate and broaden their business support. Gingrich and Bill Paxon, chairman of the National Republican Congressional Committee, let it be known that lobbyists who continued to contribute to Democrats would not be welcome in Republican conclaves. To attract support, the House leaders organized coalitions to back specific legislation. They set up Project Relief to promote regulatory reform, a Coalition for Our Children's Future to back their budget plans, and a Coalition for America's Future to support their tax bill. These efforts were wildly successful. More than 350 business groups joined Representative Tom DeLay's Project Relief. According to Nancy Watzman of the Center for Responsive Politics, the business PACs associated with Project Relief contributed $5.36 million to Republicans during the first six months of 1995. By comparison, they gave $2.6 million to Republicans in the first six months of 1993.

In exchange for such largess, the House Republicans allowed the lobbyists to draft legislation. Project Relief member Gordon Gooch, a lobbyist for petrochemical companies, wrote the first draft of a House bill establishing a moratorium on new regulations. Peter Molinari, a lobbyist for Union Carbide, and Paul Smith, a lobbyist for UPS, revised Gooch's draft. (UPS's contribution was particularly egregious. The Occupational Safety and Health Administration gets more complaints from UPS workers than from any other company. But UPS, which contributed more to candidates in the last election than any other company, got the Republicans to prohibit OSHA from even researching the ergonomic injuries that many UPS workers suffer.) Similarly, large sections of a draft from the American Petroleum Institute made their way into a bill rewriting Superfund legislation sponsored by Ohio Representative Mike Oxley, the chairman of the House Commerce subcommittee on hazardous materials.

 

When the Democrats controlled Congress, they had solicited advice from business lobbyists, but the Democrats also had to listen to lobbyists from environmental groups, consumer organizations and the AFL-CIO. Democratic congressional staff attempted to craft bills that would appease or accommodate each of these interests while often favoring business. But during their first year House Republicans have listened only to business lobbyists. When Representative Bud Shuster, the chairman of the House Committee on Transportation and Infrastructure, established a coalition to rewrite the Clean Water Act, he drew upon the Chemical Manufacturers Association and other business groups but specifically excluded even the tamest environmental and consumer groups.

The House Republicans have also allowed lobbyists free rein in House meetings. Lobbyists have been allowed to sit on the dais in the committee sessions--something that never happened under the Democrats. When Democratic members--and even reporters--have sought briefings on legislation, they have been referred to lobbyists. We haven't seen such a brazen connection between business lobbyists and Congress since Jay Cooke and the railroad interests roamed the Capitol after the Civil War.

The social-interest groups that backed the Republicans have also gotten a little of what they wanted. The Christian right didn't nail down school prayer, but it has won some anti-abortion legislation. The NRA got hearings on Waco to divert public attention after the Oklahoma City bombing spotlighted the NRA's incendiary rhetoric. And the property rights organizations have been cheered by "takings" legislation that is really designed to help out the timber industry. Meanwhile, the House Republicans have spurned those individuals and movements that favored political reform--that wanted to loosen the grip of the special interests. Term limits legislation, now a threat to Republican rule, was defeated in the House. Campaign finance reform has been repeatedly put off.

The Republicans, it's true, have supported a bill to change lobbying rules. Representative Ernest Istook's bill, which is backed by Gingrich and Armey, would drastically limit any political activity by nonprofit groups that take federal funds. But the bill, which conveniently overlooks businesses that receive federal contracts or tax subsidies, is meant to paralyze the AARP, the World Wildlife Fund and Planned Parenthood at the expense of their social and business rivals. Istook's bill captures the irony of the entire House Republican effort: it is not an attempt to reform lobbying but merely to strengthen one side of K Street against another.

The Senate does not represent an alternative. In the past, Senate Republicans have solicited advice from a broader collection of interest groups, but this year under Bob Dole the Senate has mimicked the House. For instance, Dole's Regulatory Reform Act, which would have placed numerous legal obstacles in the way of environmental enforcement, was drafted by business lobbyists C. Boyden Gray, Henry Nickel and Turner Smith Jr.

 

Can anything be done to correct this, apart from holding Gingrich et al. accountable? Most of the proposals to reform the current political system do not really address the deepest problems. It's not at all clear that imposing term limits on Congress will make legislators less susceptible to the influence of lobbyists. Term limits may make members of Congress more responsive to local interests; but they may also make them more dependent on K Street's expertise. Other reforms, including proportional representation, could change the composition of Congress without necessarily affecting how it makes decisions.

Lobbying and campaign finance reform could clearly help, but they are no panaceas. Both kinds of reform run up against the constitutional right of free speech. Lobbyists can be asked to disclose their activities but not to desist from them. Candidates can be financed publicly, but nothing prevents private interests from waging their own campaign on behalf of a candidate. If there were campaign reform, these kind of efforts would probably multiply.

Electing the candidate of your choice doesn't necessarily help, either. The choice between Clinton and Dole, for instance, like the choice between Clinton and Bush in 1992, is really between two different but intersecting sections of K Street. Nor are men on horseback like Perot and Powell the answer. What makes these kind of candidates attractive--their remove from the vortex of organized politics and parties--also makes them even less capable of achieving change than a Clinton or Dole.

The problem of American democracy cannot be solved entirely in Washington or in the electoral system. Even if Gingrich, DeLay and Armey wanted to reform Congress, they would have failed. As Tocqueville understood, the key to American democracy does not lie in its system of elections but in its independent civic and political associations and in the structure of belief that sustains and unites them. Short of a dramatic change in our political culture, changing who is in office or the rules for their election won't make a lot of difference.

 

Politics can't be reformed as long as there are no countervailing membership organizations that can represent the 79 percent of Americans who have not graduated from college and have no hope of working as software programmers or corporate middle managers. It's not a question of achieving different outcomes, but of more of America being represented in the process of decision-making. John Sweeney's accession to the leadership of the AFL-CIO may promise more for American democracy than Newt Gingrich becoming Speaker of the House. Or the AFL-CIO's decline may prove irreversible, in which case a different kind of movement and organizations will have to emerge--ones more suitable to the diversified workforce of post-industrial capitalism.

Politics also can't be reformed as long as a spirit of craven individualism consumes the nation's elite. Former high government officials like C. Boyden Gray III think nothing of selling their expertise to drug companies looking to impede the Food and Drug Administration. Think tanks like AEI think nothing of accepting grants from the Japanese Foreign Ministry to turn out ostensibly objective studies on U.S.-Japanese trade. The old cold war establishment certainly can't be revived, but a new establishment--dedicated to public service--will have to emerge over the decade. Otherwise, our politics will continue to be dominated by the culture of lobbyists.

And our pluralist system can't be reformed unless Americans recapture a sense of optimism about their country and its future. That isn't just the job of ministers, psychologists or political scientists. And it is not simply a matter of inculcating good feeling. Political theory arises out of movements for change within the society. It is based upon ordinary citizens banding together to achieve objectives that they cannot accomplish by themselves. A new framework for American politics--a worthy successor to cold war liberalism and the vision of the American Century--can only emerge through the attempt to achieve genuine reform. And that, ultimately, is up to us.

 

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