If pundits who discern a swing to long-term Republican majorities are correct, U.S. policy making may become like that long common in Mexico. When the Partido Revolucionario Institutional dominated, important policy fights were not between it and other parties, but rather within PRI itself.
If Republicans maintain control of both houses of Congress and the presidency after election, divisions within their party similarly will trump differences between Republicans and Democrats. There are few issues on which Republicans are more divided than fiscal policy.
The view of President George W. Bush and Minnesota Gov. Tim Pawlenty — that if one can only cut taxes enough, everything will magically work out in the end — certainly seems to dominate right now. Tax cuts continue to be seductive to many voters. Vice President Cheney’s assertion that deficits don’t matter is popular.
Many Republicans, however, especially in the U.S. Senate, remain more orthodox in their views on tax cuts and deficits. Senators Richard Lugar, John Warner, and John McCain do not buy the borrow-and-spend approach.
Neither does Peter G. Peterson, Commerce secretary in the Nixon Administration and an investment banker. He sees the U.S. economy going to hell in a hand basket if ongoing economic policies supported by both major parties continue.
Briefly, the policies he sees as self-destructive are the unbridled budget deficits that occurred under former President Ronald Reagan and the Bushes along with inexorable growth in federal entitlement programs. Such programs, he argues, inefficiently tax the middle class for programs that benefit the same middle class while doing little to help the truly poor.
A founding member of the anti-deficit Concord Coalition, Peterson first made these arguments in his 1993 book, “Facing Up: How to Rescue the Economy from Crushing Debt and Restore the American Dream.” He followed this with books on the economic effects of baby boomer retirements under an unreformed Social Security system. Peterson returns to the anti-deficit soap box in his new book, “Running on Empty: How the Democratic and Republican Parties are Bankrupting Our Future and What Americans Can Do About It.”
As an economist, one can say little about Peterson’s arguments except that he is basically correct. The underlying argument that large ongoing budget deficits across the business cycle hurt economic growth is one that most economists — whether politically liberal or conservative — agree with. The ineffectiveness and resource waste of many time-honored transfer programs enjoys a similar consensus.
His data and arguments are sound. He is correct that Democrats are in a conservative mode and will stonewall any changes to existing transfer programs. But few Republicans will attack sacred cows either. The viable battle is over budget deficits, and here the key battle is for the hearts and minds of Republicans. Peterson’s book raises the level of the debate
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.