He writes:
Posted by DeLong at November 9, 2004 01:06 PM | TrackBackFT.com / Comment & analysis / Comment - The economics of a second term : Ideological and partisan politicians know that elections are... about... taking the reins of power and using them to realign the balance of interests in society in their favour.... The "Bush II" agenda will not be constrained by bipartisanship, fiscal discipline or even economic reality, because the ultimate motivation is not economic but ideological - to shrink government and weaken Democratic opposition. The three big economic initiatives promised by Mr Bush should therefore be seen for the political thrusts they are.
First and most importantly will be the push for partial Social Security privatisation... to win over Wall Street - the one big business sector besides Hollywood that has continued contributing to Democrats as much as Republicans - by offering the fees that go with managing hundreds of billions of dollars in private accounts.... [T]he transition costs of such a programme will present a budget shortfall of 1.5-2 per cent of gross domestic product a year for 10 years. Some will claim this just moves to the balance sheet an off-balance sheet liability that would be reneged on in future. Try telling that to bond markets, which will be asked to absorb another $200bn (£108bn) a year in government paper on top of today's deficits.... Turning US debt into a new class of emerging market bonds may erode America's future, and its ability to fight terror, but it also offers profit opportunities to one-time political fence-sitters.
Second, the tax cuts of the Bush first term... will be made permanent... convince high-income voters that any shift away from Republican majorities will come at their expense....
The third initiative is the pursuit of tort reform.... Its political motivation, however, is the crassest: trial lawyers and their lobbies are the second largest contributors to the Democratic party after organised labour. Cut jury awards, and you cut funding for Democrats.
We should not, like Claude Rains' character in Casablanca, be "shocked" that politics is going on here. If Mr Bush's planned economic initiatives also promoted the general welfare, their dual use of locking in supporters would be welcome. However, the Bush administration is putting its political staying power ahead of economic responsibility.... Markets tend to assume that the US political system will prevent lasting extremist policies so, even now, observers discount the likelihood of the Bush administration fully pursuing - let alone passing - this economic agenda. If the thin blue line of Democrats and the responsible Republican moderates in the Senate bravely fulfil their constitutional role, perhaps the damage will be limited. If not, we can foresee the US economy following the path to extended decline of the British economy in the 1960s and 1970s and of Japan in the 1990s...
Spit it out, Adam, and tell us what you really think...
Seriously, I'm optimistic that most of the Bush agenda won't get done, partly because there is real opposition. Hard to see all of this happening in the next two years. Beyond that, Bush and Cheney are lame ducks once the next Congressional elections are history, and I can't see obvious successors.
Posted by: Jim Harris at November 10, 2004 06:20 AMI keep seeing the claim that the Republican Party goal is to "shrink government and weaken Democratic opposition."
This is clearly not true. The only steady employment-growth area under the Bush administration has been government jobs. The push for block grants is also a form of inefficiency, since it creates a superstructure on the state level while in no way ameliorating the need for the local structure. (Let us for the moment ignore the question of whether block grants create efficiency or enhance cronyism.)
Forget the deficit; that's reversible. What the Republican--note: NOT conservative--plan is is to Starve the States. Require less services and higher taxes at the LOCAL level, and leverage an increasingly-undeserved (see Nassau County, Orange County, etc.) reputation for fiscal responsibility to promote and strength the party at the "grass roots" level.
Failing to distinguish between "starve the beast" and "starve the taxpayer" is the reason the Dems fail to capitalise on the (reality-based) results of those policies. (It's also the reason I can't support the Ancestral-Party-in-Name-Only, but approaching likeminded voters didn't work for the Dems in 2004, and it won't work going forward.)
Posted by: Ken Houghton at November 10, 2004 07:26 AMI wish I shared Jim Harris's optimism. The "need" to revise the AMT for 2006 will give cover to the Personal Financial Asset Ownership Act of 2006.
If you thought the pork in the last corporate tax cut bill was large, wait until you see the Midterm Election Pandering Bill.
Posted by: Ken Houghton at November 10, 2004 07:31 AMKen,
I don't see the "only steady employment-growth area" in the government employment stats. From March of 2003 to July of 2004, there was no net gain in government employment. The Federal government turned increasingly to private contractors to perform functions previously done by government workers. Last year, private employment in the DC area, driven mostly by government contract, vastly outstripped public sector hiring. I am not assuming that DC area private hiring was driven by government spending. That is what was reported in the Post last month.
Bush wants to maintain government spending, but use it to provide money to private sector interests. Government functions will now be arranged so that tax-payers have to provide lucky political contributors with a profit. The old GOP (and economist) favorite about the virtues of private enterprise in won't go away, of course, but between the behavior of the Enrons of the 1990s and the Halliburtons of the 2000s, I see little reason to think we'll get more for our taxes under Bush's privatized government than we did from the old public public sector.
Public sector employees were intentionally made not beholden to any politician, for obvious reasons. Politicians have resented it ever since. Bush has substituted private workers for public, so they can be made beholden to politicians.
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