StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Moderates? Republicans?

26 Apr 2011
Posted by Andrew Samwick

The way Ezra Klein tells it is largely the way I remember it, too.  Antecedents of President Obama's policies -- an individual mandate in health insurance, cap-and-trade on emissions, and some willingness to raise taxes to close deficits -- can be found in Republican policies of the George H.W. Bush era.  I supported them then and support them now, though in a way that comes from the right side of the political spectrum rather than the left.  More specifically:

  • I would implement the individual mandate as a default into Medicaid with a fairly rapidly rising premium schedule collected on the tax form as income increased, rather than explicit subsidies for the purchase of health insurance.
  • I would take cap-and-trade under the presumption that the permits are auctioned off rather than given away, and I'd prefer a comprehensive fossil fuel tax to either version of cap-and-trade.
  • I would start my budget policy changes with letting the Bush-era tax cuts expire for everyone and cutting defense spending by at least 10%.  I would then move to the entitlement programs, phasing in increases in eligibility ages and other benefit reductions linked to income.  The small piece of the federal budget that's "non-defense discretionary" would also see reductions, but that's not where the heavy lifting can be done.  I wouldn't stop until the budget was in balance on average over the business cycle and the debt-to-gdp ratio was projected to remain steady at a number not larger than about 60 percent.

But I am not a dictator, don't think I should have the only or final word on this, and would expect to have to compromise.  I don't find Obama's policies to be beyond compromise.  Transported to a different era, Obama would have been a Rockefeller Republican -- actively using the government's powers to try to solve public policy problems and willing to go to the voters to get more revenues to do so.

The place where I disagree with Ezra's reasoning is here:

The normal reason a party abandons its policy ideas is that those ideas fail in practice. But that’s not the case here. These initiatives were wildly successful. Gov. Mitt Romney passed an individual mandate in Massachusetts and drove its number of uninsured below 5 percent. The Clean Air Act of 1990 solved the sulfur-dioxide problem. The 1990 budget deal helped cut the deficit and set the stage for a remarkable run of growth.

Rather, it appears that as Democrats moved to the right to pick up Republican votes, Republicans moved to the right to oppose Democratic proposals.

What was not wildly successful was the impact of the 1990 budget deal on President Bush's re-election campaign.  If politicians are not rewarded at the polls for the choices they make, don't expect other politicians to make similar choices.  The first move to the right wasn't by the Democrats.  It was by the Republicans on issues of tax policy.  More recently, this dynamic has been at work -- on issues not related to tax policy, the Republicans are moving to the right to oppose proposals that were previously part of their platform.

tribalism and #winning, shorn of real-world policy

"What was not wildly successful was the impact of the 1990 budget deal on President Bush's re-election campaign."

Well, yes. Policymaking is not a relevant concern.

I guess everyone was just predisposed to be mad in 1992 because the economy went south, but it's darn strange that "no taxes anywhere ever" became the one fixed, unmovable GOP belief.

Reagan repeatedly raised taxes to address the deficit problem; Eisenhower, as close in time to 1990 as the election of Reagan is today, considered a Democratic tax cut proposal at a time of deficits to be a near unpatriotic effort to buy people's votes.

What happened? How did Republicans decide that determining tax levels isn't a matter of raising appropriate revenues without harming economic growth, but instead a matter of unquestionable dogma? Was it simply because Bush lost, so "balancing budget" = "loser" in the minds of Republicans?


wrong lesson

Republicans learned the wrong lesson from the Bush budget compromise of 1990. Bush lost in 1992 because of high unemployment caused initially by high gas prices. High gas prices were the result of the start of a series of policy disasters in Iraq and adventurism in Asia. We are still in Iraq (who knows why?) and it is still costing us a lot of money.

Bush was clearly out of touch on domestic issues. His lack of response to unemployment, the slow response to Hurricane Andrew left the majority of voters feeling (correctly) that Bush did not care about their economic problems. Ross Perot jumped in and took the Independent vote. Clinton won with less than a majority of votes. Clinton won reelection by a lot because the economy was doing very well.

Bush was a victim of his own policies. He had appointed inflation hawk, Greenspan to chair the Fed and Greenspan held interest rates too high in order to fight high commodity (oil) prices rather than fight unemployment. Bush did not believe in using fiscal policy to fight unemployment so he was done in by his own hand. It wasn't the no new taxes pledge. It was the unemployment that was the difference.


Of course

I would then move to the entitlement programs, phasing in increases in eligibility ages

That makes sense, because everybody has a job that requires the same amount of physical exertion as a college professor.

Krugman has a post explaining why your position is wrong. It's probably the 3rd or 4th he's done.


Thanks for post

Andrew -

Thanks for drawing attention to this - the article's title itself "The shocking truth about the birthplace of Obama's policies" is awesome itself and led to .... spontaneous laughter. ALWAYS a good thing and frequent with CG&G posts. Cheers,




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