The campaign dance of hollow promises
If you weren’t already hopelessly cynical about American politics, here’s the perfect chance for you to wake up, slowpoke. The presidential campaign is running full bore, meaning there is virtually no chance of hearing constructive conversations about policies that will affect our lives for years to come.
‘Tis the season of partisan exaggeration and simplification, multimillion-dollar super PAC distortions, and bold, inspired lack of specificity, particularly when it comes to jobs and the economy, a centerpiece of this election.
President Obama can’t seem to explain in any detail what he’d do differently in a second term, nor why, if congressional Republicans beat back his job-creation proposal in the first term just for the sheer toxic fun of it, we should expect anything different in Round Two.
And Mitt Romney? He’s now promising 20% tax cuts across the board, fellow Americans, and please don’t ask for details on how he’d pay for them. Mitt’s still too busy trying to nail down where he stands on Obamacare, settling for the moment on calling it an abomination with some good features. It would be so much simpler if he hadn’t developed a nearly identical plan as governor of Massachusetts.
I feel kind of insulted by all of this, as if the candidates are treating me like a big dummy. But just in case they’re right, I thought I would check in with a few California economists to get their better-informed take on the proceedings.
Well, it turns out they feel pretty much the way I do. UCLA economics professor and Hoover Institute fellow Lee Ohanian said there’s been “woefully little” about economic specifics from either side.
“There’s not much incentive to provide a lot of detail, and one reason is that many people are not interested in hearing it or don’t want to spend the time to digest it,” said Ohanian. “On the other hand, it’s a little bit of, whatever you say can be used against you.”
I don’t think I’ve ever written a more depressing paragraph.
Putting people back to work in a new economy would require better education and training for them, Ohanian said, but neither candidate has sold him on a workable plan. He’d like to hear a conversation about removing immigration hurdles to draw more foreign entrepreneurs to our shores. And now is the time to ask whether the federal government can continue to support price controls for, say, the sugar cane lobby, while coming up short on infrastructure and education spending.
Ohanian, who says that, as a Hoover fellow, he has the ear of Romney strategists, said he thinks Romney will prevail in November due in part to the desire for a shakeup among those who’ve been out of work long term. And he thinks the Romney plan for lower taxes “in principle is a reasonable thing to pursue.”
Ahhh, but economists don’t all wear the same glasses. When I brought up the GOP tax cut mantra with Chris Thornberg of Beacon Economics, he saw a big fat piñata.
“Arthur Laffer made a mistake in terms of his economic analysis,” Thornberg said of Ronald Reagan’s supply-side, trickle-down guru, “and it cost this country hundreds of billions of dollars — a debt we’re still paying off. It amazes me that anyone would continue to listen to that.”
The very idea that you can stimulate the economy over the long term with lower taxes is fundamentally flawed, said Thornberg, when so much of that extra pocket change gets spent on goods produced overseas. Over the short term, he said, that kind of stimulus is likely to add to the trade deficit, which only compounds our problems.
“In a perverse way, you could say we’re borrowing money from China to stimulate the Chinese economy,” said Thornberg.
And he said the idea that here in the U.S., income taxes discourage economic investment “is a bastardization of reality.”
If your stimulus plan is little more than tax breaks, Thornberg went on, that doesn’t pay for building roads, fixing bridges, and offsetting crippling local and state government cutbacks.
“Today, because of tax cuts, 71% of [gross domestic product] is consumer spending,” said Thornberg, noting that this is a higher rate than ever before. “That’s not a good thing. We as a nation need to save more and invest more, not spend more.”
Thornberg had nits to pick with Obama too, saying that even though his initiatives were blocked in Congress, “I don’t think most of what he was trying to do” would have been particularly effective. Foreclosures, Thornberg said, were not nearly the drain on the economy Obama perceived them to be. And Obama, of course, extended the tax cuts, which Thornberg sees as bad policy.
But as for the GOP charge that government spending under Obama is out of control, Thornberg said the “vast majority of the deficit is driven by tax cuts, not spending increases.”
As candidates throw accusations at each other, it’s easy to get the impression in a dumbed-down campaign that a president can single-handedly fix whatever ails us. But that’s not true, said U.C. Berkeley economics professor Barry Eichengreen. The growing influence of global forces is a major factor, and then there’s the other obvious impediment.
“If Congress doesn’t pass a bill, a president can’t wave his hands and make policy or create jobs,” said Eichengreen, who liked the Obama jobs plan Republicans crushed like a cockroach. “What he can do is tell Congress what he has in mind and try to extract hope for cooperation.”
Cooperation? Good luck, professor.
If such a world did exist, Thornberg said, and he were in charge of the GOP, he’d say to Democrats, “I will give you the revenues you want, but you will give me the increases in efficiencies I want.” Namely, more school accountability, public employee pension reform, more efficient government services, and business-friendly tort reform.
Hear, hear. Sounds rational, reasonable and responsible.
And totally out of the question. At least until after the election, if even then.
The view from Sacramento
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