international analysis and commentary

Economic dilemmas and the presidential race


Approximately two months before election day, the US economy continues to struggle, the debt continues to rise and unemployment remains sky high, so much so that no president since Franklin Delano Roosevelt has ever won reelection with this many people out of work. Speaking at the annual economic conference in Jackson Hole, Wyoming, a deeply concerned Federal Reserve Chairman Ben Bernanke said the Fed plans to be “forceful” in its efforts to support the recovery and made the case for yet more intervention.

Under almost any other circumstance, this election would be a slam-dunk for the party out of office, currently the GOP (as it was the case with the 2010 midterm elections.) Yet, the race for the White House between President Barack Obama and Republican nominee Mitt Romney is tight and will probably wind up staying that way until the end. There are several reasons for this. The President continues to be viewed as more likable than Romney (by a 23% margin as per the latest USA Today/Gallup poll) and many Americans – 68% according to a Gallup survey from June – still blame the administration of former President George W. Bush for the ongoing crisis. Most importantly, however, is the fact that, in an election cycle so dominated by economic concerns, the range of policy proposals offered by Republican candidates does not square the circle when taken as a whole.

At the Republican National Convention, which took place in Tampa, Florida, at the end of August, party leaders and delegates alike were intensely focused on the struggling economy. Reminders of the difficult situation facing the US today were everywhere, starting with the giant digital debt clocks hanging in the convention hall and ticking away in real time at every dollar being added to the federal debt. “I’m very worried about the debt,” said Marjory Milone, a delegate from Illinois and a Republican who voted for Obama in 2008, “because of what it does to the future of my children.” This was a typical refrain heard in the corridors of the Tampa Bay Times Forum, where the RNC was being hosted. According to an analysis by the Washington Post, “work,” “business” and “jobs” were the three most-used words by convention’s speakers.

In his acceptance speech, Romney promised, among other things, to create 12 million jobs in the next four years (note that, in a forecast published in August, Moody’s Analytics predicted the creation of 12 million jobs by 2016 regardless of who sits in the White House), put the country on a path towards fiscal responsibility by reducing the deficit, and kick-start growth by cutting taxes. Simultaneously, he

also pledged to increase defense spending and to protect entitlements, while criticizing Obama for proposed cuts to the Pentagon budget and for $716 billion in Medicare savings that are part of the President’s healthcare reform. “I am running for president to help create a better future,” said Romney, “A future where everyone who wants a job can find one, where no senior fears for the security of their retirement, […] where every parent knows that their child will get an education that leads them to a good job and a bright horizon.”

Campaigning, of course, is the easiest part of politics, particularly for the challenger to an incumbent president. Romney has not been running the country these past four years and therefore has little in the way of legislative record to defend. However, it is hard to imagine how his administration might accomplish at once all these commendable but contradictory goals. The truth is that, once in office, any president must face the realities at hand, undoubtedly more complicated than a stump speech. The governing agenda thus ends up being dictated by circumstances, and by only the very top priorities of an administration. The impression one gets listening to Republican officials and delegates in Tampa is that for the GOP, priorities go something like this: tax cuts, deregulation, defense spending, job creation (if they want to stay in the White House for a second term,) balancing the budget and, finally, saving whatever bits of existing entitlement programs there’s money left for.

“Personally, I think the first order of business is to leave all the Bush tax cuts in place,” said James Kline, a delegate from West Virginia and a lobbyist. “The second order of business is to reduce regulations, and then we must cut programs we don’t need.” Kline, for example, indicated that he would be in favor of privatizing social security. Anil Mathai, a fellow delegate from Colorado, spoke along similar lines. “We need an immediate balance budget amendment,” he said, “then we must reduce taxes and spending across the board, based on low risk areas for our country [i.e. no reduction in the defense budget.]” Mathai also agreed that entitlement programs must be shrunk, because, he said, “everybody has to make shared sacrifices, including seniors.”

Whether or not one agrees with them, these are honest takes on the US budget problem, if very conservative. In order to make the math work, an administration that proposes to cut taxes and increase military spending (which, as of 2010, was taking up around 20% of total outlays,) while also balancing the budget, must necessarily be ready to attack social programs like Medicare and Social Security (which, together, comprised over 33% of government spending.) “The current trajectory for both Social Security and Medicare is not sustainable,” said Aspen Gorry, of the conservative-leaning American Enterprise Institute, in an email interview from Washington.

Unfortunately for Romney, while attractive to conservatives, these options are largely unpalatable to the majority of the electorate. According to an Associated Press-GfK poll from August, 53% of voting-age Americans would raise taxes before

cutting Social Security benefits for future generations. In a Kaiser Foundation survey also from August, 58% of adults, and 55% of Republicans, said they want Medicare to continue to function as it does today, as a guaranteed-benefit plan where all seniors are fully covered by the government (Romney’s running mate Paul Ryan has proposed to turn it into a voucher system in order to reduce costs.)

It is a real quagmire for the GOP ticket. As a result, both Romney and Ryan have recently started blurring the details of their economic plan, fudging the specifics of how they intend to cut the deficit, and abandoning their pledges of “tough talk” to give themselves fully to more traditional, and increasingly unrealistic, campaign promises. As the race for the White House enters its final stretch, we will hear decidedly less substance and more rhetoric from Romney and Ryan (and most-likely from Obama as well.)

For those who desire a sneak-peek of what a Romney administration might look like, in particular if the GOP manages to take control of both houses of Congress, it is advisable to follow a suggestion made by Virginia Governor Bob McDonnell at an event organized by Politico on the sidelines of the RNC. McDonnell recommended getting acquainted with the work that has been carried out across the country in the last couple of years by the new wave of Republican governors, Wisconsin’s Scott Walker, Ohio’s John Kasich, New Jersey’s Chris Christie and, obviously, McDonnell himself. It is a group of fiscal conservatives already famed for their efforts at lashing public spending, reducing workers’ benefits, undermining unions, and privatizing as many government activities as they can. “We have to have the courage to say that there have to be reductions across the board,” said McDonnell in Tampa, “and the courage to see them through.”