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Jewish World Review Oct. 21, 2002 / 15 Mar-Cheshvan, 5763

Michael Barone

Michael Barone
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Consumer Reports

Dems have to do more
than complain about the economy |
"The economy, stupid." Democrats just can't get those words of the political philosopher James Carville circa 1992 out of their minds. All summer they hoped that discontent over the economy, and over corporate misdeeds, would push their candidates ahead in the polls. It didn't happen. For most of September and the first half of October they wailed in frustration that Iraq-on which they had called for debate-was keeping voters' minds off the economy. Now they hope that with the Iraq resolution debated and passed, the time of the economy has come. Yet only now has it seemed to occur to them that they have to do more than complain about the economy; they have to suggest at least the outlines of policies that would make it better.

Why have Democrats assumed up to now that the economy-growing sluggishly but no longer in recession-would produce votes for them?

One theory is that the contrast between the surging growth of the late 1990s and the sluggish growth and minirecession of 2001-02 would lead voters to conclude they need Bill Clinton's Democrats and not George W. Bush's Republicans in control of Congress. The problem is that voters don't see it that way. When you ask them to select from a list of those arguably responsible for the weak economy the one most responsible, only about 10 percent pick the Bush administration or Republicans in Congress.

Voters understand that there are two reasons why the growth of the late 1990s is no longer with us. One is the bursting of the high-tech bubble; the other is September 11. Neither was the fault of Bush or the Republicans. Many voters understand that the high-tech bubble burst well before Bush became president; one estimate is that two thirds of the losses from the Nasdaq peak came before Jan. 20, 2001. Both events would have occurred, and would have hurt the economy, if Al Gore had been elected president. And while one can get into a fascinating debate about whether Bill Clinton, Treasury Secretary Robert Rubin, and Federal Reserve Chairman Alan Greenspan allowed the high-tech bubble to get too large, that question is of little interest to the voters.

The second theory is that voters always turn to Democrats in times of lagging growth. They remember Herbert Hoover and the Great Depression of the 1930s and bring in the Democrats to put in government spending programs and (sometimes) tax cuts to spur the economy forward. The problem with this theory is that only about 8 percent of today's voters remember the Great Depression. Fully half don't remember the recessions of 1979-82, which led to Republican losses in the 1982 off-year recession-the last that can be plausibly attributed to this theory (and I think that overstates its relevance).

Today's Democrats seem, or seemed until this week, to expect that this theory should work automatically: If you just say that the economy is not good, people will decide to vote Democratic. So in their much-heralded speeches on the economy in recent weeks, Gore and Senate Majority Leader Tom Daschle said that the economy was not good-and pointedly refrained from suggesting any alternative policies. House Minority Leader Dick Gephardt did the same. What should our economic policies be? "I don't know," Gephardt would say.

He and Daschle would go on to say that Bush and administration officials should meet with congressional Democratic and Republican leaders and put "everything on the table." This is a tactic, not a policy; but it points to a policy, a policy of raising taxes. Gephardt and Daschle certainly remember the 1990 budget summit at Andrews Air Force Base, where in June 1990 the first President Bush agreed to break his "read my lips" promise and support higher taxes. Bush had his reasons, the foremost perhaps being to protect defense spending against further cuts by the Democrats, then with solid majorities in both houses of Congress; but the political damage was severe. And the Democrats got what they wanted: more money for government programs. But the Democrats today dare not call for what they really want: rescinding the prospective Bush tax cuts voted in May 2001.

So for some time they took the politically preposterous position that the economy was in dismal shape and that they had no policies to deal with it. Voters noticed. A Princeton Survey Research poll conducted October 10-11 asked voters whether they thought the Democrats were offering a "clear-cut alternative to the Bush administration policies" on the economy. Only 32 percent said yes-most probably being already solid Democratic voters. Some 48 percent said no.

Now two potential Democratic 2004 candidates-the two who most solidly supported George W. Bush's policy on Iraq-have come out with some specifics. Sen. John Edwards, in a one-page "plan for economic growth now," called for a one-time refundable $500 tax credit to cover energy costs for the winter; a 50 percent increase in "bonus depreciation" up through next June 30; an increase in Medicaid payments to states; an extension of unemployment insurance. He also called for repeal of "the top of the Bush tax cut." Dick Gephardt, in a speech October 15, called for short-term stimulus spending of $125 billion for schools, antiterrorism infrastructure, and healthcare assistance; $75 billion in one-time rebates and tax cuts; "corporate welfare" tax cuts of $100 billion; an increase in the minimum wage, and extension of unemployment insurance. He hasn't given up on the budget summit approach: He wants a "bipartisan summit agreement to impose triggers, caps, or other mechanisms to ensure long-term fiscal responsibility and balanced budgets."

Now, most of these are proposals for short-term stimulus, like the rebate that Democrats got Bush and the Republicans to agree to in the 2001 tax cut, and which provided most of the short-term stimulus in the bill-stimulus that turned out to be much needed and for which Bush and the Republicans have been happy to take credit. If adopted, they might arguably provide an economy that is growing slowly with the stimulus to grow just a little faster-probably a good thing. Whether they would provide more stimulus than some of the proposals recently advanced by House Republicans-an increase in the deductibility of losses for investors, an increase in the age at which 401(k) income would have to be realized-is debatable; these are aimed at what is arguably the most underperforming part of the economy now, the stock market.

There is little remaining here of the Clinton economic policies, which led, in Democrats' opinion at least, to surging economic growth. The Clinton Democrats pushed through a large tax increase in 1993, then promptly lost control of Congress. Democrats have been averse ever since to supporting tax increases, and while they might like to rescind the Bush tax cuts after they kick in, they are certainly not going to say so out loud. The Clinton Democrats pushed, at least in their first years, for knocking down trade barriers. But now the large majority of Democrats in Congress have been opposing proposals for freer trade. The Clinton Democrats pushed for small tax breaks and subsidies for middle- and low-income families, most notably a large expansion of the earned-income tax credit. The Edwards and Gephardt proposals are minor variations on this theme.

The emergence of the Edwards and Gephardt proposals is unlikely to change the balance of the campaign. They come too late, and they are not echoed (as the Republicans' 1994 Contract With America) by a united party. The headlines may continue to be about the war against terrorism and the Washington-area sniper-who may be part of a terrorist network for all we know. The megaphone of the presidency is not with the Democrats' Bill Clinton-who was able to make much of his rather mild post-1994 economic initiatives-but with the Republicans' George W. Bush.

The real economic struggle in American politics today is between Democrats who would like to see the government grow larger so that it can redistribute more money and Republicans who would like to hold back the government so that people will have more to spend on their own. In the short run, neither party has an advantage. In the medium term, the Bush tax cuts enacted in 2001 but taking effect mainly after 2005 give the Republicans a great advantage; Democrats who want to repeal them have the burden of going forward, and that becomes more difficult each year as the tax cuts come closer and then become reality.

In the long run, Democrats have a great advantage, because the existing Social Security program will gobble up a greater and greater share of national income; George W. Bush wants to change the program by allowing individual investment accounts, but Republicans have been put on the defensive this year, and it's not clear Bush will be able to advance his proposal in 2003 or 2005. But that's a subject for another day. In the short run, Democrats, to the extent they have any new economic policies to recommend at all, are calling primarily for tax cuts. That is not the party's natural turf. The economy does not favor the Democrats as much as they like to think.

This was the point made in a widely released memo by Republican National Committee poll analyst Matthew Dowd this morning. Dowd writes, "The public's desire, in spite of the Democrats' best efforts to the contrary, is to not fix political blame for the economy. They continue to look for positive solutions for job creation and economic growth. Thus far, the public hasn't heard a single positive message from Democrats on this issue. This provides a great opportunity for Republicans to debate and engage voters and Democrats directly. Since Democrats do not have the voters' overwhelming trust on the economy and have no real solutions from their leaders, the Republicans are in a great position to win the debate on the economy in this election."

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Michael Barone Archives

JWR contributor Michael Barone is a columnist at U.S. News & World Report and the author of, most recently, "The New Americans." He also edits the biennial "Almanac of American Politics". Send your comments to him by clicking here.


©2002, Michael Barone