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BLANKLEY: President Obama’s next two years
A choice between free-market principles and more class warfare
In the last week or two, an eccentric debate has been dividing Democratic Party pols and commentators in Washington: In 2011, should President Obama strive to be more like Harry Truman in 1947 or Bill Clinton in 1995?
Apparently, they have given up on Franklin D. Roosevelt or Abraham Lincoln as plausible role models for the president. They should be careful. The way the economy seems to be going, a year from now they could be down to deciding between Jimmy Carter and Herbert Hoover as role models.
The point of this debate is that in 1947 - after Democrats were crushed in the 1946 midterm election - Harry Truman was defiant and, if anything, moved to his left and nonetheless won an unlikely re-election in 1948. (Truman opposed Republican tax cuts and removal of price controls; he vetoed the union-weakening Taft-Hartley Act and was overridden; he proposed national health insurance and moved aggressively on civil rights.)
Mr. Clinton, of course, is famous for having triangulated between the Republicans and the Democrats after the GOP thumpingly took back the House and Senate in 1994, moving to the center right; signing the Republican welfare reform bill, which he had vetoed twice before his reelection bid in 1996; agreeing to the Republican-proposed balanced budget, which he steadfastly opposed; proclaiming that the era of big government was over; and, in his nomination acceptance speech at the Democratic National Convention in Chicago, bragging about signing into law 14 items that had been in the Republican Contract With America.
But 2011 is not 1947 or 1995. The primary challenge for the president and Congress today is not to be seen getting one up on the other party, nor is to be seen supporting their base at the ideological barricades. It is to restore the immediate economy to reasonable health, bring down unemployment rates below 7 percent (preferably below 5 percent), see the housing market begin to recover, and induce businesses to start investing voluntarily some of the $2 trillion to $3 trillion it is fearful to invest in the current market.
If none or little of that happens in the next two years, the voters may unleash their justified wrath at both parties’ politicians - from the president and the House speaker on down.
So, from the president’s perspective, he should place a high value on getting his policy right and implementing as much as he can by pressuring the GOP to pass it. But what is his economic policy?
Recently, the word has been floating around Washington that the president secretly would like to see the full George W. Bush tax cut extended because he thinks raising taxes in a recession may be counterproductive. From a free marketer’s point of view, that is a good development. But what good will keeping taxes lower do if the administration otherwise is hostile to business and free markets?
For instance, the president just announced a seven-year ban on offshore drilling - thus killing hundreds of thousands of jobs and multibillions of new salaries and profits. It also forces us to spend yet more money in the Middle East instead of here in America. Is that supposed to encourage business to increase its investment during the current administration’s government?
The White House has let it be known since the election that what it can’t pass of “cap-and-trade” through Congress, it would consider trying to bring online through the Environmental Protection Agency’s regulatory process. With the threat of higher costs for energy coming in the dark of the regulatory night without even a chance for business to protect itself by gaining the support of the elected House or Senate, does that let loose the animal spirits of business to start investing in jobs and economic activity?
Does the president’s stout rhetorical argument these past weeks that anyone making more than $250,000 a year is rich and can easily absorb a big tax increase encourage an investor to believe the president has any idea what economic reality is like?
I have the feeling that even if the Bush tax cuts are extended for two years, if the economy does not come bouncing back, this White House will ask, “What more do the businessmen want? We gave them their darn Bush tax break; they owe us their big investment.”
Tax cuts - or in this instance, no tax increases - are vitally useful in creating an economic environment in which investors and big- and small-business people feel safe investing again. But low taxes are not sufficient. When they come at the same time that the White House continues to trumpet class warfare, I fear this dreary economy will continue to founder.
The president needs to think very hard. If he believes the best bet for the economy (and his re-election) is a full Reaganite embrace of free markets and low taxes, he should switch comprehensively to such policies and rhetoric. He will get GOP support, and such policies will become law.
If he still believes in his liberal class-war policies, he might as well do what his left wants him to do: Attack, attack, attack the GOP and hope the economy gets better by intervention of providence or some other miracle.
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