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Fiscal apocalypse now

By J Bradford DeLong
Created 28/03/2006 - 09:09

J Bradford DeLongJ Bradford DeLong is Professor of Economics at the University of California at Berkeley and a former Assistant US Treasury Secretary. Previous Webdiary articles include Semi-rational exuberance [0], Eyes wide shut on global warming [0], and Europe's free riders [0].

by J Bradford DeLong

As support for President George W Bush in the United States has crumbled over the past year, perhaps the most surprising element is the revolt of economists and observers of economic policy. Last week, Peggy Noonan, a speechwriter for both President Reagan and the first President Bush declared in the Wall Street Journal that had she known what George W Bush’s fiscal policy would be, she would have voted for Al Gore in the 2000 presidential election.

“If I’d thought [that George W Bush] was a big-spending Rockefeller Republican... I wouldn’t have voted for him...,” Noonan wrote. Bush “did present himself as a conservative... [and] conservatism is hostile, for reasons ranging from the abstract and philosophical to the concrete and practical, to high spending and high taxing...” And then she falls into near-complete despair: “Mr. Bush will never have to run again, and he is in a position to come forward and make the case, even if only rhetorically, to slow and cut spending. He has not. And there’s no sign he will...”

Noonan is not quite correct. George W Bush presented himself not as a normal conservative, but as something he called a “compassionate conservative,” thus preserving a certain amount of ambiguity. Some focused on the “conservative”: they expected the Bush administration’s fiscal policy to keep a tight rein on spending and to eliminate many programs in order to finance significant tax cuts.

Others focused on the “compassionate”: they expected Bush’s fiscal policy largely to eschew tax cuts and to adopt largely Democratic spending priorities, including expanded federal aid to education and a prescription drug benefit, thereby showing that Republicans could run a more cost-effective version of the social-welfare state. Still others interpreted “compassionate conservatism,” as the commentator Andrew Sullivan put it, as a “smokescreen... necessary for any vaguely successful retrenchment of government power in an insatiable entitlement state.” They expected tax cuts to be followed by a fangs-bared attack on social-welfare spending once deficits reemerged.

As a result, in 2000 and 2001 nobody was really sure of the Bush administration’s policy direction. Was it traditional fiscal conservativism? Was it to do what Democrats do, but do it better? Was it to “starve the beast” by pumping up government debt to the point that social programs would have to be cut?

The first two priorities, if well designed and well implemented, are certainly honorable goals for a government to pursue. The third is less honorable, and likely to fail: it relies on the dangerously weak premise that the party in power’s political adversaries will be more public-spirited and less ruthless when they return to government.

Of course, conservatives and Republicans could hope that their own favorite policy priorities would emerge as the administration’s preferred strategy. Or they could be content with whichever of the three strategies that they expected to see, agreeing that, in any case, fiscal policy was always going to be much better than it would have been under Democratic rule.

But then a strange thing happened: the Bush administration did not order any of the three options that were thought to be on the menu. It chose something different entirely: big tax cuts, yes, but tax cuts that were badly designed from a genuine supply-side perspective aimed at boosting growth, as well as Democratic domestic spending priorities, but very badly implemented. Moreover, the Bush administration combined its policies with an extraordinary reluctance to veto anything coming out of Congress, and, after the year or two that it took for this to become obvious, an inability to restrain Congress at all.

What emerged was neither traditional fiscal conservatism nor Democratic policies without Democrats nor starve-the–beast populism, but something that has no name. An exchange between two characters in a scene from the movie “Apocalypse Now” captures an anti-ethic that characterizes the Bush administration’s policies as well:

Willard: “They told me that you had gone totally insane, and that your methods were unsound.”

Kurtz: “Are my methods unsound?”

Willard: “I don’t see any method at all, sir.”

It is not that Republicans and conservatives think that the Bush administration has adopted the wrong method, but that they don’t see any method at all that has driven them into their (late) fiscal-policy revolt. And that is why so many of them now wish that they had had a different candidate to vote for back in 2000.

Copyright: Project Syndicate, 2006.

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