America’s political ground has shifted to the rightby James Kwak / April 24, 2012 / Leave a comment
In 1992, Bill Clinton won the presidency by focusing on “the economy, stupid.” Some analysts think that all presidential elections turn on economic conditions. It seems certain that this year’s campaign will be fought on that terrain, with Mitt Romney arguing that Barack Obama’s policies have failed and Obama countering that the economy is recovering, or it isn’t his fault, or both.
For the past three years, politicians and pundits have been watching a “recovery” that feels like a recession. Economic output has grown since the middle of 2009, but only fitfully, weighed down by a depressed housing market, buffeted by last summer’s debt ceiling standoff, and haunted by the European debt crisis. Unemployment remains above 8 per cent, a level not seen since the early 1980s. In this environment, both Obama and Romney are campaigning on the promise that they can get the economy going and create jobs. Only they can’t. The link between presidential policy and jobs is hazy. President Clinton, for example, oversaw the most robust economic expansion in decades, but it’s not clear if the credit should go to his 1993 deficit reduction plan, the information technology revolution, globalisation, or simply an upturn in the business cycle.
President Obama or President Romney will have little room for manoeuvre. Either party might sweep the White House and Congress, but neither will get the 60 Senate seats necessary to pass legislation unilaterally. (Reconciliation, a once-obscure parliamentary tactic, can be used to pass certain types of bill with a bare majority of the Senate, but it faces procedural limits.) A Democratic victory will not lead to a second stimulus program to fuel the recovery. A Republican victory might produce a major tax cut sometime in the next two years; but since its benefits will flow largely to the rich, its short-term impact is likely to be small.
The presidential election will determine what happens to the George W Bush tax cuts, that expire at the end of December. President Romney wants to extend all of them, President Obama only those for the “middle class” (very generously defined). The difference between the two would have little effect on the recovery.
However, this year’s election could have a profound impact on the American economy for decades to come. The hesitant recovery will take hold sooner or later, and unemployment will fall, though perhaps not to the levels of the late 1990s.…