The presidential campaign
Another fine mess
A useful debate has begun about America’s biggest domestic challenge, but it is comically shallow
Both men’s positions have been contorted by each other’s attack ads. But there is a real left-right division, personified by the two candidates. Mr Obama, who has spent most of his life in the public sector, academia or community work, plainly thinks the state has a bigger role to play—in galvanising the economy when demand collapses (as in 2008) and in moderating inequality. By contrast, Mr Romney, who made $200m or so in private equity, believes that the best thing that government can do is to get out of the way—by cutting taxes, reducing regulations and leaving people to build their businesses.
Good. America needs a serious debate both about the size and scope of government, and how to pay for it. The winner of the November election will immediately be faced with the problem of the “fiscal cliff”—a preset $400 billion tax increase, with the expiry of various tax cuts, and a $100-billion-a-year cut in spending—which could push the economy back into recession. Looming over that is the gaping deficit. And over that, America’s schizophrenia: it taxes itself like a small-government country, but spends like a big-government one.
Free to choose, for better or worse
The rest of the world would gain from such a debate. America has inspired most of the interesting thinking on the role of the state in the past 50 years, from deregulation in the 1970s to New York’s “broken windows” policing. Next week marks the centenary of the birth of Milton Friedman (see Free Exchange). The Chicago economist did as much as anyone to battle Leviathan: driving bureaucrats out of telephone companies and airlines, proposing education vouchers to give parents a choice over their children’s schools and railing against the unintended consequences of state meddling (for example, “rent control” laws that reduce the amount of property available for rent). Friedman was a mentor to both Ronald Reagan and Margaret Thatcher, but his ideas prompted creativity on the left too: Bill Clinton’s New Democrats also “reinvented government”, embracing charter schools and welfare reforms.
So it is sad to report how lacklustre the debate about government is in America. The obvious decline is on the right. This newspaper is hardly delighted that government spending has grown from 34% of GDP in 1980, when Friedman published “Free to Choose”, to over 40% today; but American conservatism has grown so angry that it has become a parody of its former self. Tax cuts are always right (even if they inflate the deficit); government activism is always wrong (even if stimulus helped avert a depression). And the right’s hypocrisy when it comes to spending on conservative projects (prisons, the armed forces, subsidies to big business) is breathtaking. George W. Bush presided over a huge growth in government.
If the Republican Party has moved to the unthinking right, the Democratic Party has moved to the unreforming left. Mr Obama has shown little of Mr Clinton’s enthusiasm for modernising government: indeed, he is unpicking welfare reform, by loosening work requirements. He has presided over a huge expansion of legislation, much of it badly drafted, such as the 850-page Dodd-Frank bill (see article). Worryingly in hock to the public-sector unions, Mr Obama seems to think the public sector is inherently more moral than the private one. Companies are at best cows to be milked, at worst prey to be hunted.
Extremism in the pursuit of liberty—and common sense
Even if clever local experiments continue (see article), Washington is gridlocked. The bipartisan Bowles-Simpson commission produced a sensible recipe for reform: short-term stimulus to jolt the economy, longer-term entitlement reforms to lower the debt and a simplification of America’s crazy tax code. House Republicans rejected it and Mr Obama ignored it. And all this as the baby-boomers are beginning to retire and medical costs are escalating. Sooner or later, America will have to look at rationing health care for the elderly and reforming pensions; but each party rejects the other’s proposals.
Against that background, both parties need to be far more willing to think the unthinkable. Our prejudice is firmly in favour of a leaner state, but the Republicans need to recognise, as their intellectual forebears did from Adam Smith to Abraham Lincoln, that government has an important role to play in a capitalist economy, providing public goods and a safety net. Teddy Roosevelt broke up over-mighty companies, rather than doling out tax breaks to them. Why on earth are people who champion a small state supporting an expensive war on drugs that has filled the prisons to bursting point without reducing the supply of narcotics? But the Republicans’ main problem is taxes. Successful deficit-reduction plans require at least some of the gap—perhaps around a quarter—to be closed by new revenue. If the Republicans got rid of loopholes, they could cut all the main tax rates and still raise more money.
The Democrats’ challenge is more on the spending side. Productivity has been flat in the public sector at a time when it has doubled in the private sector. Mr Obama needs to decide whether he is on the side of taxpayers or public-sector workers (who, if they work for the federal government, earn more than their private-sector equivalents do in wages and benefits). He needs to get serious about cutting back regulation, rather than increasing it; and he needs to spend more time listening to successful business leaders rather than telling them all is fine.
America needs a man who can spell out what he thinks a modern government should do—and then how to pay for it. With luck the debate will push either Mr Obama or Mr Romney to do that. At the moment, neither seems to understand the central domestic challenge of the next presidency.
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