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the support of the AFL-CIO, whose precedent shattering pre-primary endorsement he secured in October of 1983. Reeling from imports, high unemployment, and the new assaults by Reagan appointees at the NLRB and Labor Department, however, labor was losing its organizational effectiveness, even among its own confused and frightened members. Many Democratically oriented community organizations, meanwhile, were demoralized and running out of money. Second, the economic recovery changed the calculus of interests among Democratic business groups, particularly among the new arrivals that the and the recession had pulled into the party. In particular, with labor so transparently in decline, many corporate figures were beginning to wonder why they should deal with labor and the poor at all, and not explicitly seek to rearrange the party’s mass base. Free traders who were willing to nod at limited protectionist initiatives at the bottom of a recession now began to question the need to compromise. Military contractors that had flocked into the DBC were tempted to gamble on getting a bigger share of the -budget. As the military producers gained strength, the more ardent supporters of the freeze, cutbacks in military spending, and arms control sought to press their own concerns more vigorously. And with Mondale holding down most of organized labor, other candidates would be tempted to forge alternatives to the old Democratic coalition. . . . In late January [1984] Mondale had opened negotiations with various groups favoring the freeze, and apparently some freeze supporters expressed their willingness to support him \(others, however, including Helen Caldicott, deMondale moved further to the right. Though he preserved links with the freeze and arms control movements, he conveniently forgot his earlier misgivings over the Grenada invasion. Coming out in favor of a tough stand on Latin America, he called for a “quarantine” of Nicaragua, and talked up the “communist threat.” While he did so, the hardest of the hardline Democrats including at length even James Schlesinger gathered round him. So did many of Glenn’s financial backers, including the Stephens brothers of Arkansas and publishing executive Robert Farmer. . . . THE CONVENTION itself proceeded smoothly. With Jackson, New York governor Mario 10 JUNE 13, 1986 Cuomo and others making memorable speeches, it was considerably more radical in its tone than the actual ticket, and brought Mondale a final lift in the polls to a virtual dead heat with Reagan. The tone of the convention and a few incidents in the Mondale campaign itself briefly alarmed some of Mondale’s business backers, who complained to the candidate that “there has been some unfortunate choosing of words” in describing the Democratic Party’s residual obligations to working people and the poor. But they need not have worried. As calls to revive the spirit of the New Deal still echoed in the convention center, he made the final blundering concession to business that turned an uphill struggle into a political charge of the light brigade. Desperate for money and a few favorable press notices, he had made a fatal bargain. By the early summer of 1984, virtually all sectors of the business community were up in arms over the size of the deficits projected by the Reagan administration for the next several years. Though virtually all parts of the business community were involved in this agitation, the protests came most intensely from parts of the business community that were already close to Mondale and the Democrats investment bankers and insurance company executives.* To the Mondale campaign whose economic advisers consisted almost wholly of investment bankers, such as Robert Hormats of Goldman Sachs, or economists with close ties to finance \(including at least one who had actually worked for the Committee for a Responsible Budget, funded in part by the American Council of Life Insurance and closely associated with the Committee agitation about the deficit appeared to be a golden opportunity. Here was a chance for Mondale, at one stroke, to shed the charges of “special interest” domination. By presenting a tough fiscal program and calling dramatically for a tax rise, he could throw Reagan on the defensive and demonstrate his ability to make tough decisions. He could secure support from major parts of the business community and obtain more favorable press notices. In June, agitation within the business community over deficits crested. Led by a ‘bipartisan group of former Treasury Secretaries, more than 100 business organizations descended on Washington to lobby for budget cuts. As the business groups lobbied, Mondale discussed the problem with influential Democrats, and made a tentative decision to make a major public statement. , Investment banker Harry Jacobs, Jr., chair of Prudential-Bache, told the press that “Democrats, as a matter of business policy, need ‘to take a strong and aggressive position on curbing deficits,” and that “as a businessman, that’s a contribution I can make to the Democratic platform.” In July, two investment bankers who were later publicly identified as sources of Mondale’s new “thinking on the need to reduce budget deficits” Robert Rubin of Goldman Sachs and Roger Altman of Lehman Brothers traveled to his Minnesota home to discuss the tax plan. At the convention, Mondale announced he would raise taxes, if elected. To the immense relief of Reagan strategists \(who later confessed their anxiety that Mondale would steal the tax turned aside pleas from many leading Democrats for a sweeping endorsement of tax reform. In this, Mondale was at least practicing the virtue of consistency. Because the “fair tax” and other reform proposals in the air threatened the special treatment of capital gains that was so important to investment bankers, and the unique advantages enjoyed by real estate, neither of these key Democratic business constituencies had any enthusiasm for the reform issue. In abandoning it, Mondale merely confirmed the alliance with Democratic business elites that his promise to raise taxes had already signaled. But the costs were high. Though Mondale appears to have thought he might gain the whole world, all in fact he had done was sell his own soul, and that of his party. The investment bankers and insurance company executives in the campaign were, of course, gratified. Even if *Why investment bankers and insurance executives? Basically because, under Reagan, budget deficits had soared and were projected to rise even more over the next five years. No one in the business community liked these deficits, but various parts of the business community faced quite different situations as they sorted out their interests in the campaign. For example, weapons producers \(for whom budget deficits show up intensive manufacturers \(whose supply of lowwage labor would be affected by cuts in social Reagan with the expectation that massive cuts in social spending would follow the Presidential re-election. Investments bankers and insurance executives, however, work in industries dependent on investor confidence in long-term bonds. Because perennially growing deficits erode such confidence, those executives were markedly more likely to contribute to Democrats in 1983 and 1984. For more details, see Chapter 5 and the statistical appendix to Right Turn.