With Mexico on the verge of financial collapse and Congress balking at helping a neighbor, President Clinton struck out on his own Tuesday with an emergency Mexican rescue package of nearly $50 billion in U.S. and international funds.
In advocating a hastily arranged package that includes $20 billion from the U.S. Treasury, Clinton scrapped his unpopular $40 billion loan-guarantee plan for Mexico that was stalled in Congress.
But Clinton has wedged himself into a political corner: If his new plan fails, he will shoulder most of the political blame. If it succeeds, few voters are likely to remember.
In addition to the U.S. contribution from the Treasury Department’s Exchange Stabilization Fund, the president persuaded the International Monetary Fund to put up $17.5 billion in loans and the Swiss-based Bank of International Settlements to provide another $10 billion. Canada, Brazil, Argentina and other Latin American countries also are pitching in a total of $2 billion.
Clinton’s decisive move resulted from Congress’ reluctance to approve the president’s initial loan-guarantee plan. Officials said they feared that, without the emergency aid, Mexico might have defaulted soon on some of its short-term debt coming due.
While Democratic and Republican leaders in Congress strongly supported his aborted loanguarantee plan, rank-and-file members were largely opposed. And polls indicate rescuing Mexico is unpopular with voters.
On the other hand, with this action Clinton answered criticism that he is incapable of being decisive, and that could prove to be a political and diplomatic plus. Secretary of State Warren Christopher said it was “a critical test of American leadership” with the rest of the world.
Although he has been hailed by some as “the trade president,” Clinton may be ending up on this issue with neither the support of Main Street America nor the respect of the business leaders and Establishment figures who have applauded his earlier trade initiatives.
Clinton was not the only political leader bruised by the proposal’s collapse. The Republican congressional leadership was embarrassed by its inability to muster the rank-and-file Republican votes it had promised for the plan. And they may soon be under attack by their more protectionist colleagues in a party that has been increasingly split over trade issues.
Sen. Phil Gramm, R-Texas, now in pursuit of the Republican presidential nomination, lost no time Tuesday attacking the administration’s plan, even as his rival, Majority Leader Bob Dole, R-Kan., defended it.
But Clinton’s neck was out furthest. And the setback is all the more bitter because of the way his administration had made trade initiatives one of its signal accomplishments.
Clinton’s victories on the big NAFTA and GATT trade treaties showed he would stand up for his convictions - even at the risk of alienating his trade-union base. Those successes also showed that he could prevail in a pitched legislative battle.
But this was the kind of test of strength that a president would be wise to avoid. Some allies thought Clinton could have done better by offering Congress a fully formed rescue bill, and bypassing any negotiation with congressional leadership. That was what then-President Reagan did to get his tax-cut program through when it was clear the Democratic leadership was more strongly opposed than many Democratic members.
Others, including some congressional Republicans, thought Clinton’s team had done about all it could to promote the rescue plan, considering the intensity of protectionist feeling - and suspicions the deal would mainly help Wall Street.
Yet even with warnings of global crisis and an all-star supporting cast of former presidents and countless economic experts, the administration’s team could not get close enough to success to even risk a vote.
Clinton had cried fire in a crowded theater - and no one left a seat.
“I don’t know if I could have even have rounded up the 68 Democrats who voted for NAFTA,” said Rep. Bill Richardson, D-N.M., who was charged with vote-counting for the Democrats. “And the more we waited, the more votes we lost.”
Many in Washington’s governing class will take it as more proof, if more was needed, that the weakened Clinton administration is secondary to congressional Republicans in running of the country.
The failure will “be taken as a sign of an administration that doesn’t completely have its act together,” said Lawrence Chimerine, chief economist at the Economics Strategy Institute, a Washington think-tank. “That isn’t completely fair, maybe, but that’s the way it will be taken.”
Pointing to polls showing Americans nearly 4-1 against a rescue, administration officials argue that the new plan demonstrates Clinton is willing to tackle unpopular issues. And the public, they argue, will come to see that.
“This is the president showing determination,” said one senior White House aide. “He identified a problem, called Congress to action, and because they couldn’t act, he quickly said he still must move forward.”