How Bush lost the libertarians.

In 1997, Cato Institute President Ed Crane flew to Austin, Texas, to have dinner with George W. Bush. Bush was still governor of Texas, but his star was rising in the national GOP firmament, and Crane wanted to make sure he had the governor's support for the libertarian institute's signature policy idea, Social Security privatization. The meeting, Crane said later, was an unqualified success, with Bush telling Crane, "This is the most important policy issue facing the United States today." Four years later, Bush's 2001 budget speech to Congress strongly emphasized Social Security privatization, leading Cato's Michael Tanner, who oversees the think tank's efforts on the issue, to declare gleefully, "Bush hit all the right notes. ... [He was] on solid ground with this approach." Tanner had even more reason to celebrate when Bush named five Cato scholars and affiliates to the 16-member Commission to Strengthen Social Security. From Cato's shining glass edifice on Massachusetts Avenue in Washington, D.C., the Bush era was shaping up as a time of plenty.

Oh, how things can change in three years. These days, Cato is on the outs with the administration. From its deficit spending to its regulatory record to the Iraq war, the Institute charges that the administration has betrayed conservative values, bankrupted the government, expanded federal programs, and made the world less safe. Were it not for the occasional, wistful nod to the Reagan era, Cato's policy papers, TV appearances, and columns could be mistaken for those of the left-wing Economic Policy Institute. In fact, Cato staffers and scholars are so fed up with Bush that many say they will sit out the election--or even vote for John Kerry. "Most people at the Institute have no plans to vote for the president this time," said one member of the Cato policy staff who spoke on the condition of anonymity. "There will be some votes for Kerry inside the Cato Institute this year."

Of course, given that Cato has only a few dozen staff members, Bush doesn't have to worry about losing the think tank's vote this November. To be sure, Bush's nascent "ownership society" agenda, which is said to include renewed efforts at social security privatization, could win back some at Cato (see Jonathan Chait, "Up and Away," page 22). But, judging by the depth of the animosity toward him at the Institute right now, it will take a lot more than a stump speech to do so. Moreover, its antipathy is indicative of a growing belief among the GOP`s fiscally conservative constituencies- not just libertarian ideologues, but big-business executives, small-business owners, virtually any voting bloc concerned with fiscal restraint--that Bush has been an abject failure. And, in a close election, that could make a difference.

Though Cato takes pains to portray itself as politically unaligned, its philosophy (unfettered markets, minimal government, balanced budgets) and the careers of many of its senior staffers-Chairman William Niskanen and senior fellow Doug Bandow, among others, held high-ranking posts in the Reagan administration--put it squarely within the Republican camp. While the Institute initially backed Steve Forbes in the 2000 presidential primary--Crane even penned a column alleging that parts of Bush's platform "could have come straight out of the Progressive Policy Institute"--it greeted Bush's win with optimism, not only because of his talk on Social Security but because of his early tax cuts. "We had a brief wave of enthusiasm in the first six months," says one staffer. "He came into office with almost no political capital, and he spent it all on tax cuts. We saw that as a good sign." And, though Cato is traditionally averse to military intervention abroad, it supported Bush's decision to invade Afghanistan.

But, by late 2002, people at the institute began to sour on Bush. His Social Security commission had done almost nothing since its creation, even as a privatization bill driven by Cato was making its way through the House. In an affront to the "starve the beast" strategy espoused by Washington's more aggressive fiscal conservatives, Bush was cutting taxes while increasing deficit spending, a double sin in Cato's eyes, because he was not only expanding government but doing so in a fiscally irresponsible way. Cato scholars watched as a cavalcade of big-ticket legislation crossed the president's desk-No Child Left Behind, the prescription-drug benefit--while the deficit surged to a record high. Niskanen even declared Bush's 2005 budget "a fraud" concocted by "borrow and spend Republicans." Cato scholars never expected a perfect president--after all, they had even parted ways. from time to time, with their demigod, Ronald Reagan--but they were particularly galled to see such policies endorsed by a man who, during the campaign, declared, "My opponent trusts the government. I trust you." "It's certainly the case that Bush is more disappointing, given the way he campaigned against Al Gore," says David Boaz, Cato's executive vice president. And spending was only one of Cato's grievances. Its scholars chafed at what they saw as a new threat to civil liberties in the USA Patriot Act, a violation of the First Amendment in the McCain-Feingold campaign finance reform, and a betrayal of the GOP's free-trade ethos in Bush's 2002 steel tariffs. Even on Cato's pet issue, federal regulations (it publishes an entire periodical advocating regulatory rollbacks), Bush has proved disappointing. According to a recent Cato report, Bush-who has supposedly made his mark as an anti-regulatory crusader-has actually overseen an increase in the growth of federal regulations, including a 2 percent increase in the number of new regulations issued in 2003.

But the tipping point was the invasion of Iraq. As early as December 2001, Institute scholars were writing op-eds urging the administration not to go to war against Saddam Hussein; when it did, Cato was one of the first think tanks to warn that the lack of postwar planning would doom the reconstruction effort. In October 2003, several Cato foreign policy experts joined the Coalition for a Realistic Foreign Policy, co-organized by its director of foreign policy studies, Christopher Preble. Today, Cato is unabashed in its calls for an immediate exit from Iraq, a view encapsulated in a March USA Today op-ed by Preble titled "WISEST MOVE: LEAVE SOON." The Institute's link to its Iraq Web page reads "EXIT: IRAQ." Indeed, when it comes to the war, Cato sounds like The Nation--in a March Chicago Sun-Times op-ed, Cato fellow Stanley Kober even called out the administration for not listening to its international critics and failing to retain international support. "The idea of a preemptive war against a sovereign country was a mistake," says Crane. "Things over in Iraq are just a mess. We had Al Qaeda on the run, and that's where ninety percent of efforts should have been directed." Not surprisingly, when the administration went looking for think-tank staffers to help man the Coalition Provisional Authority, it skipped over Cato while heavily mining the Heritage Foundation and other more politically malleable conservative establishments.

These various strands of criticism--on spending, civil liberties, the war--have come together to convince many Cato staffers that the best vote this fall might be for Kerry. For one thing, there is a growing belief at the Institute that the Republicans--not just Bush, but the congressional leadership as well--have sold out traditional small-government conservatives, spending lavishly to woo cultural conservatives and big business; Cato op-eds note that, during Bush's first three years, nondefense discretionary spending has increased 20.8 percent. Since last summer, scholars have chafed against the administration's fiscal profligacy in op- eds with titles like "OVERSPENDING IS NOT FISCAL RESPONSIBILITY," "THE BUSH BETRAYAL," and "WHAT FISCAL DISCIPLINE?" In contrast, New Democrats may not always talk the small-government talk, but Cato staffers note that, under Clinton, the Democrats reined in government spending and deregulated a broad swath of industries. "Perhaps we are being unfair to former President Clinton," wrote Cato fellow Veronique de Rugy for National Review Online in 2003, pointing out that Clinton reduced nondefense discretionary spending. At the same time, there is a more philosophical, and more cynical, pro-Kerry argument that has gained credence within the Institute-namely that the best way to limit government spending is to divide the parties' control between the executive and the legislative branches. And, given the GOP's advantage in Congress, the best way to affect such a division is to pull the lever for Kerry. In April, Bandow outlined this view in a widely syndicated column (originally published in Fortune), arguing that "the biggest impetus for higher spending is partisan uniformity, not partisan identity." Therefore, he urged his conservative readers, "Vote Democratic."

So far, Cato's criticism hasn't affected its donor base, a veritable who's who of banking, telecom, and media corporations and executives. If anything, its largest donors are enthusiastically behind the Institute. "They love us for sticking to our limited government principles," says Susan Chamberlin, Cato's director of government affairs. That a large number of conservative businesspeople are questioning whether Bush deserves to be reelected is a significant problem for the White House. in June, Cato board member Tucker Andersen announced at a Club for Growth dinner that he would withhold both his vote and his contributions from Bush, adding later, "I would be surprised if more than half the people in the room actually wrote checks for him." Pete Peterson, the august chairman of the investment bank the Blackstone Group and a bellweather for Wall Street conservative views, recently told The Nation that "I've been a Republican all my life, but I'm going to wait and see. ... I think there's a considerable group of Republicans who think of themselves as fiscally responsible and are very concerned." Even Fred Smith, the FedEx CEO (and Cato board member) once mentioned as a possible Bush Cabinet officer, has been playing down his ties to Bush while emphasizing his long-running friendship with Kerry; meanwhile, he has donated heavily to Democratic Senator Chris Dodd's reelection campaign.

It might be a smart move. While the Bush administration hasn't gone after Cato for its anti-Bush rhetoric, it's a good bet that Cato scholars won't be appointed to another White House advisory group anytime soon. The think tank might get a friendlier reception if Kerry wins in November.

Clay Risen is an editor at the New York Times, and is the author of A Nation on Fire: America in the Wake of the King Assassination.

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