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Rudy's Big Apple Baggage

By Kimberley Strassel

Here's a little nugget from the past, a tale that may offer some insights into the next stage of the GOP presidential race, and the fortunes of front-runner Rudy Giuliani:

The date is the mid-1990s, and Republicans have swept Congress with their Contract with America. A top promise is greater fiscal responsibility, and a crucial element of that is a vow to pass a line-item veto and give the president the power to weed out pork. In 1996 Republicans are as good as their word, and grant the opposition's Bill Clinton a broad new power to strip wasteful spending.

Mr. Clinton is enthusiastic, and in August 1997 uses his tool for the first time to strike down a special-interest provision tucked in a bill. That provision gives New York hospitals a unique right to bilk extra Medicaid money, and the veto is expected to save federal taxpayers at least $200 million. Quicker than a Big Apple pol can say "pork," New York officials sue, challenging the line item veto's constitutionality. That suit, Clinton v. City of New York, goes all the way to the Supremes, which in 1998 put the kibosh on veto authority.

The kicker? The guy who brought the suit and won--or, rather, the guy who helped stall one of the more powerful tools for reining in government spending--was none other than former New York City Mayor Rudy Giuliani.

That's a story largely lost to history, but don't be surprised if it, and other Giuliani-in-the-City financial tales, start to figure more prominently in this race. The former mayor is leading the field, in part because he has kept the emphasis on his terror-fighting credentials and, more recently, his "fiscally conservative governance." It's smart strategy, designed to deflect attention from Mr. Giuliani's bigger weaknesses on abortion or domestic partnerships. The question is whether the same New York political culture that shaped and defined the mayor--and left him vulnerable to attack for his social views--will also cause him heartburn on the economic front.

Especially since the question of just which GOP candidate can claim the title of Biggest Tightwad is a growing one. Republicans had to pack their congressional bags last November in no small part because of voter disgust over their spending largess and earmark abuse. Primary voters want a leader who'll revive the GOP reform agenda--wield the veto pen, cut discretionary spending, enact budget reform, slice programs and reform ballooning entitlements.

Mr. Giuliani isn't alone in wanting to give cultural conservatives something else to think about. John McCain never really got past his attack on Christian conservatives, and many of those same folks are suspicious of Mitt Romney's commitment to their religious causes. Better to change the subject, which is why all the candidates are focusing increasingly on economics.

Enter Rudy, who has elevated "fiscal discipline" to a top promise, claiming "the strongest record" of any candidate--"Republican or Democrat"--on that issue. His op-ed this week in the Financial Times led with the line: "Washington needs a hefty dose of fiscal discipline." The phrase tops his list of issues on his Web site, where he notes that he cut the size of NYC-funded government by 20% and got rid of wasteful programs. He's promised his own vetoes.

Yet if this is music to many American ears, it's semi-Swahili to New Yorkers who've seen the mayor at work. In the aggregate Mr. Giuliani did some remarkable things, particularly in his first term. He inherited a city in decline and his fix was to curtail the growth in government (his initial budget slashed spending by $700 million), cut taxes, slash the payroll, and privatize state entities. He did this while beating down crime and facing an entrenched political machine.

Yet no one should forget Mr. Giuliani came up through the big-city system. It's tough to be principled in a town defined by crushing social costs, all-powerful unions and party machines. Harder still when you are the only Republican in 50 miles. For all of Mr. Giuliani's initial reform fervor (it eventually waned), he was a master at parochial politics, at throwing idealism under the double-decker tour bus if it meant getting more for the Big Apple--no matter who paid for it.

Take the line-item veto. For decades New York had taken advantage of a special program that allowed it alone to reap extra federal Medicaid dollars. The city's broken health system was dependent on this booty, and its loss would have required painful change. Mr. Giuliani instead sued, portraying the issue as us-against-them. When he won, his press release declared it a "great victory" for "the people of the city, the state and the constitution of the U.S." No mention of the other Americans who got to float NYC's bills.

Here's another one: Out-of-city residents had long complained about New York's onerous commuter tax, and in 1999 the state legislature moved for repeal. Rightfully so, since it was unprincipled and bad economic policy. Yet it gave New York City $360 million a year, which is why Mr. Giuliani fought (unsuccessfully) against its end. Or take Nafta, which Mr. Giuliani complained would be bad for New York.

Mr. Giuliani's campaign doesn't deny this record, but notes this is what politicians do. "As mayor, he made his decisions based on what was in the best interest of New York, as president he'd make his decisions based on what's best interest of the entire country," says Michael Boskin, Mr. Giuliani's top economic adviser.

But you can bet Mr. Giuliani's competitors will have fun with it, and he's got competition. Mr. McCain's campaign is struggling, but the Arizona senator won't be shy about comparing his fiscal discipline bona fides with the rest of the field. This is a guy who first authored line-item veto legislation in 1987, is notorious for publicly humiliating even his GOP colleagues over their earmark pork, and who, in the past few years alone, has voted against the farm bill, the highway bill and the Medicare drug bill.

Mr. Romney too is out there plumping his anti-spending credentials, recently unveiling TV ads in Iowa and New Hampshire entitled "I Like Vetoes." He gets specific, promising to cap non-defense discretionary spending at inflation minus 1%--and to veto any bill Congress sends that exceeds the limit. His campaign has noted that as Massachusetts chief, Mighty Mitt used his line-item veto power more than 800 times.

Nasty as this may get, whenever GOP candidates are duking it out over who is most responsible with money, taxpayers win.

Ms. Strassel is a member of The Wall Street Journal's editorial board.

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