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Is History Siding With Obama’s Economic Plan?
By ALAN S. BLINDER
Published: August 30, 2008
CLEARLY, there are major differences between the economic policies of Senators Barack Obama and John McCain. Mr. McCain wants more tax cuts for the rich; Mr. Obama wants tax cuts for the poor and middle class. The two men also disagree on health care, energy and many other topics.
Such differences are hardly surprising. Democrats and Republicans have followed different approaches to the economy for as long as there have been Democrats and Republicans. Longer, actually. Remember Hamilton versus Jefferson?
Many Americans know that there are characteristic policy differences between the two parties. But few are aware of two important facts about the post-World War II era, both of which are brilliantly delineated in a new book, “Unequal Democracy,” by Larry M. Bartels, a professor of political science at Princeton. Understanding them might help voters see what could be at stake, economically speaking, in November.
I call the first fact the Great Partisan Growth Divide. Simply put, the United States economy has grown faster, on average, under Democratic presidents than under Republicans.
The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.
That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.
Such a large historical gap in economic performance between the two parties is rather surprising, because presidents have limited leverage over the nation’s economy. Most economists will tell you that Federal Reserve policy and oil prices, to name just two influences, are far more powerful than fiscal policy. Furthermore, as those mutual fund prospectuses constantly warn us, past results are no guarantee of future performance. But statistical regularities, like facts, are stubborn things. You bet against them at your peril.
The second big historical fact, which might be called the Great Partisan Inequality Divide, is the focus of Professor Bartels’s work.
It is well known that income inequality in the United States has been on the rise for about 30 years now — an unsettling development that has finally touched the public consciousness. But Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all. And the bad news for America’s poor is that Republicans have won five of the seven elections going back to 1980.
The Great Partisan Inequality Divide is not limited to the poor. To get a more granular look, Professor Bartels studied the postwar history of income gains at five different places in the income distribution.
The 20th percentile is the income level at which 20 percent of all families have less income and 80 percent have more. It is thus a plausible dividing line between the poor and the nonpoor. Similarly, the 40th percentile is the income level at which 40 percent of the families are poorer and 60 percent are richer. And similarly for the 60th, 80th, and 95th percentiles. The 95th percentile is the best dividing line between the rich and the nonrich that the data permitted Professor Bartels to study. (That dividing line, by the way, is well below the $5 million threshold John McCain has jokingly used for defining the rich. It’s closer to $180,000.)
The accompanying table, which is adapted from the book, tells a remarkably consistent story. It shows that when Democrats were in the White House, lower-income families experienced slightly faster income growth than higher-income families — which means that incomes were equalizing. In stark contrast, it also shows much faster income growth for the better-off when Republicans were in the White House — thus widening the gap in income.
The table also shows that families at the 95th percentile fared almost as well under Republican presidents as under Democrats (1.90 percent growth per year, versus 2.12 percent), giving them little stake, economically, in election outcomes. But the stakes were enormous for the less well-to-do. Families at the 20th percentile fared much worse under Republicans than under Democrats (0.43 percent versus 2.64 percent). Eight years of growth at an annual rate of 0.43 percent increases a family’s income by just 3.5 percent, while eight years of growth at 2.64 percent raises it by 23.2 percent.
The sources of such large differences make for a slightly complicated story. In the early part of the period — say, the pre-Reagan years — the Great Partisan Growth Divide accounted for most of the Great Partisan Inequality divide, because the poor do relatively better in a high-growth economy.
Beginning with the Reagan presidency, however, growth differences are smaller and tax and transfer policies have played a larger role. We know, for example, that Republicans have typically favored large tax cuts for upper-income groups while Democrats have opposed them. In addition, Democrats have been more willing to raise the minimum wage, and Republicans have been more hostile toward unions.
The two Great Partisan Divides combine to suggest that, if history is a guide, an Obama victory in November would lead to faster economic growth with less inequality, while a McCain victory would lead to slower economic growth with more inequality. Which part of the Obama menu don’t you like?
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Mr McCain is rich because he ditched his first wife for an heiress, which somewhat undermines his Joe Sixpack image
Come November, the Democrats will almost certainly increase their majorities in the House of Representatives and the Senate. Ironically, the surging Democratic tide gives tactical voters a reason to back Mr McCain. When one party controls both Congress and the White House, its more extreme elements can flex their muscles without hindrance. Historically, presidents have been slow to veto their own party’s bad laws and wasteful spending plans. United government typically leads to fiscal incontinence, as happened in Mr Bush’s early years.
http://www.economist.com/displaystory.cfm?story_id=12001775
John McCain
No surrender
Aug 28th 2008 | CINCINNATI, OHIO
From The Economist print edition
The gnarled maverick outpolls his party and might even beat Barack Obama. But what sort of president would he be?
Illustration by Matt Herring
ON JULY 16th John McCain addressed the National Association for the Advancement of Coloured People (NAACP). The audience was nearly all black and mostly left-of-centre. Few of them would vote for a Republican in any circumstances, let alone a Republican running against the man who could be America’s first black president.
“Let me begin, if I may, with a few words about my opponent,” Mr McCain said. “Don’t tell him I said this, but he is an impressive fellow in many ways.” He said that Barack Obama’s success made him proud of his country, since it showed that it was moving away from “the cruel and prideful bigotry” of the past. He then respectfully explained why he disagrees with Mr Obama on certain issues, such as school choice.
It was a shrewd choice of topic. Mr McCain favours giving vouchers that would allow parents whose children are stuck in terrible schools to send them to better ones, whether public, private or parochial, and believes that public money should follow the child, not the diktat of some education bureaucrat. Wherever vouchers have been offered, poor black parents have seized them with both hands. Mr Obama, out of deference to the teachers’ unions, opposes school choice—as does most of the NAACP’s leadership. So Mr McCain won few converts in the room; but by backing a policy that demonstrably improves the lives of poor blacks and treating a large, quietly hostile black crowd with respect, he reassured the independent voters watching on television that he was a tolerant kind of Republican.
As is his wont, he also slipped in a deft reminder of his own remarkable life story. Recalling the day he heard that Martin Luther King had been murdered, he said he felt “just as everyone else did back home, only perhaps even more uncertain and alarmed for my country in the darkness that was then enclosed around me and my fellow captives.”
Biography matters in a presidential election, and this year the candidates offer two quite different kinds of story. Mr Obama’s appeal depends on what he symbolises: the uplifting notion that the son of a Kenyan father and a Kansan mother can, through talent and hard work, rise to the highest post in the land. Mr McCain’s appeal rests on what he has done.
While Mr Obama was playing hide-and-seek with his fellow six-year-olds, Mr McCain was dodging surface-to-air missiles over North Vietnam. After failing to dodge one of them, he ejected from his plane, broke three limbs and fell into a lake. He was dragged out by a mob, stabbed in the groin and beaten nearly to death. As a prisoner-of-war, he was denied medical treatment until his captors realised he was the son of an admiral. They offered to free him. He refused to go home until the American prisoners captured before him were also freed. That took more than five years, but it was what the navy’s honour code required, and Mr McCain did not want the enemy’s propagandists to be able to say that, in America, there was one rule for the ruling class and another for the masses.
Voters admire this sort of thing. Mr Obama may write eloquently about the agony of trying to work out how a mixed-race kid fits into America’s racial mosaic, but Mr McCain has endured actual physical torture: having his ribs cracked and his teeth knocked out and being stuck in solitary confinement for shouting obscenities at his jailers. None of this necessarily means he would make a good president. But it makes people take him seriously when he says he serves a cause greater than his own self-interest.
Junk food and bad jokes
Mr McCain says he enjoys being the underdog, which is just as well. If this year’s presidential election is a dogfight, any Republican candidate starts with his ammunition all but spent and both wings on fire. The economy is in the doldrums. House prices are sliding. Petrol costs two and a half times as much as it did when George Bush came to power. Americans are sick of the war in Iraq, sick of their president and hungry for change. As the nominee of the incumbent party, Mr McCain should have no chance at all.
Yet most polls showed him in a statistical dead-heat with Mr Obama going into their two conventions. That partly reflects voters’ reservations about Mr Obama. Some worry about his inexperience or his unsavoury friends. Some are unsure what all that rhetoric about hope and change really means. Some, alas, are unwilling to vote for a black man. But part of the credit for the way Mr McCain outperforms his party must go to Mr McCain himself.
For one thing, the senator from Arizona is a redoubtable campaigner. It is hard to name another politician who is such a mediocre public speaker, and yet so effective. His speechwriter, Mark Salter, prepares him elegant texts that he stumbles through like a man of homely tastes choking on nouvelle cuisine. His voice has no range; he stresses the wrong words. Yet people listen, because they think he means what he says.
He projects the blokeish persona of a man who used to drink too much, crash planes and chase women. On the campaign trail, he wolfs culturally significant junk food—“Pronto Pup” deep-fried hot dogs in Grand Haven, Michigan, or “concrete” frozen custard in St Louis, Missouri—with apparent relish. He has a stock of awful jokes, which he repeats so often that his staff have the punchlines printed on T-shirts. Unlike his more nuanced opponent, he couches straightforward convictions in simple terms. And he salts his message with earthy anecdotes and self-deprecating asides.
Mr McCain is at his best taking questions from unscreened voters, something most politicians seldom dare to do. He seems empathetic, albeit in a gruff, grandfatherly way; and crucially, unlike most politicians, he lets dissatisfied questioners ask follow-up questions until they run out of puff.
Mr McCain’s unusual openness helps to explain why journalists, even ones who don’t warm to Republicans, often make an exception for him. Whereas Mr Obama tosses only sporadic crumbs to the hordes of scribblers who follow him, Mr McCain spends hours at the back of the bus blabbing with them. Other politicians seek to minimise gaffes by never voluntarily saying an unscripted word. Mr McCain takes the opposite approach. By opening up, he lets reporters see how he thinks and what he knows. As a result, hacks tend to cut him some slack, for example when he confused Sunni terrorists with Shia ones. Any journalist who has spent time with him knows he knows the difference.
The downside of Mr McCain’s openness, of course, is that it exposes his weaknesses as well as his strengths. He knows a lot about geopolitics, but embarrassingly little about economics. He is intelligent, but not as intelligent as his opponent. He is a man of principle, but his principles are neither unwavering nor always coherent. And he has a short temper.
Mr McCain’s credibility on issues of national security has played a huge role in his success. His father and grandfather were admirals. He has sat on the Senate Armed Services Committee for two decades. When he talks about military affairs, voters know he is not just regurgitating briefing notes. He insisted that Mr Bush had not sent enough troops to pacify Iraq long before the success of the “surge” proved that he was right.
When anything happens to remind Americans that the world is a dangerous place, Mr McCain’s stock rises. The murder of Benazir Bhutto in December probably helped him win the New Hampshire primary less than two weeks later. Russia’s recent invasion of Georgia made him look prescient. (Mr Bush once gushed that he looked into Vladimir Putin’s eyes and saw his soul; Mr McCain quipped that he looked into his eyes and saw “a ‘K’, a ‘G’ and a ‘B’.”)
But will foreign policy always be a strength? Deliberately misconstruing a McCain comment, Democrats have suggested that he wants to occupy Iraq for 100 years. In fact, the gulf between the two candidates on Iraq has narrowed since the end of the Democratic primaries. Mr McCain wants to make Iraq stable and then pull out. Mr Obama wants to pull out as soon as possible, provided that Iraq is stable. How far apart these positions really are depends on how differently you think each candidate would react to developments on the ground. Mr Obama would doubtless withdraw more American troops more quickly, but perhaps not much more quickly.
A more fertile area of attack for the Democrats might well be Mr McCain’s general bellicosity. Back in 2000, his keenness to stamp American democracy on the world made him the neoconservative pick ahead of the milder Mr Bush. Mr McCain, whose political hero is the warlike Teddy Roosevelt, would certainly be readier to bomb Iran than Mr Obama would. And although he has a much better record of getting on with allies than Mr Bush, his scheme for a League of Democracies has plenty of pitfalls.
Economic wobbling
On economics, Mr McCain’s record has been pretty sensible. He has favoured free trade, low taxes, light regulation and fiscal responsibility. He has consistently opposed wasteful pork-barrel spending while Mr Obama has indulged in it. Two problems, however, have emerged on the campaign trail.
First, he has lost some of his reputation for fiscal straight-talking. The man who condemned Mr Bush’s tax cuts as irresponsible now proposes irresponsibly to expand them. On the stump, he sometimes spouts populist piffle, suggesting for example that oil prices might be reduced by cracking down on speculators. (Mr Obama is guilty of this, too.) And sometimes he says things that make no sense at all, such as when he maintains that a cap-and-trade system for curbing carbon emissions would impose no costs on the American economy.
Second, when it comes to the details of economic policy, Mr McCain often seems out of his depth in ankle-deep water. Asked in July if he supported treasury secretary Hank Paulson’s plan to offer a line of credit to shore up Fannie Mae and Freddie Mac, the ailing government-backed mortgage giants, he said: “I do.” Asked to flesh out his answer, he said: “I support it.”
Given Mr McCain’s weakness in this area, his choice of economic advisers matters a lot. His chief economics guru, Doug Holtz-Eakin, a former head of the Congressional Budget Office, is widely respected. But two other advisers, Carly Fiorina and Meg Whitman, are businesspeople rather than economists. (Ms Fiorina was the boss of Hewlett-Packard, a computer firm. Ms Whitman used to run eBay, an online auctioneer.) Both are able in their field, but neither would give a McCain administration the necessary credibility on Wall Street.
Another part of Mr McCain’s appeal is his record as a maverick. His opponent has never bucked his own party’s orthodoxy on anything important. Mr McCain often has. He pressed for action against global warming when many of his Republican colleagues were still dismissing it as a hoax. He joined hands with a Democrat to enact a campaign-finance reform many conservatives reviled. With Ted Kennedy, he sponsored a bill that would have granted illegal immigrants a path to citizenship, had congressional Republicans not howled it down.
His motives are sometimes mixed. His zeal to curb the influence of money in politics stemmed in part from his shame at having accepted campaign cash and trips on a private jet from a dodgy financier during the savings-and-loan scandal of the 1980s. And, as with his opposition to the Bush tax cuts, he is not always consistent. But even his opponents admit that he is not a typical Republican. “He’s not my candidate,” says Maxine Jones, a black Democrat in Ohio. “[But] I respect him.”
On social issues Mr McCain takes conservative positions, but without obvious gusto. He opposes gay marriage, but half-heartedly. He says he wants to ban abortion, but once let slip that, if his daughter wanted one, he would leave the choice to her. Such moderation, though appealing to swing voters, is anathema to those who equate abortion with murder. But social conservatives have nowhere else to turn. They might stay at home on polling day, but they are unlikely to vote for Mr Obama, who has a 100% rating from NARAL Pro-Choice America, an abortion-rights group.
Talking tough
Mr McCain’s campaign, which nearly fell apart last summer, is running more smoothly now. It lacks the buzz of Mr Obama’s, who has rock stars at his rallies and one of the founders of Facebook organising his online networking. Mr McCain employs a less fizzy mixture of old loyalists and newly hired heavies from Republican central casting. His staff know they are up against a media darling with legions of passionate followers and tons of cash, but they put a brave face on it. The atmosphere on the campaign plane is jovial. Staffers hand out stickers that say: “Tough? You want tough? I travel with John McCain.”
Both candidates started out by promising to conduct respectful campaigns, but that was always a forlorn hope. The race is close, the stakes are high and many voters remain undecided. Neither Mr McCain nor Mr Obama has much executive experience, so voters have no clue whether either could run the federal government. They have little to go on besides the two men’s characters and life histories, which means that each side has every incentive to draw horns on the other guy’s portrait.
Under Steve Schmidt, Mr McCain’s chief strategist since July, the message has grown punchier and more negative. In the tradition of Karl Rove (Mr Bush’s campaign guru), Mr Schmidt seeks to frame Mr Obama’s virtues as vices: to portray his thoughtfulness as waffling and his ability to fire up a crowd as vacuous Hollywood razzle-dazzle. Mr McCain’s TV spots accuse Mr Obama of thinking he is the Messiah but really resembling Paris Hilton. “Celebrities like to spend their millions. Barack Obama is no different. Only it’s your money he wants to spend,” says one.
Such jabs do not go unanswered, of course, and Mr McCain has plenty of soft spots for his opponent to punch. Asked to define “rich”, he unwisely suggested a figure of $5m a year, allowing Mr Obama to joke that he probably thinks people who earn only $3m a year are middle-class. Asked how many houses he and his wife own, Mr McCain could not remember. The Obama campaign pounced, portraying Mr McCain not only as out of touch but also, ahem, forgetful. The McCain campaign shot back with an ad reminding viewers that Mr Obama bought his own million-dollar mansion with the help of Tony Rezko, a convicted felon, ending: “Now, that’s a housing problem.”
The footwork is swift, but some charges are still hard to parry. Mr McCain is rich because he ditched his first wife for an heiress, which somewhat undermines his Joe Sixpack image. And his age (72 on August 29th) is an issue. Mr Obama’s ads accuse him of the “same old politics”, with the emphasis on “old”. Someone has written a book called “72 things younger than John McCain”: they include duct tape, Alaska, chocolate-chip cookies and Dick Cheney. Though Mr McCain seems hale and energetic, plenty of voters worry that his best years may be behind him.
The safer choice?
Come November, the Democrats will almost certainly increase their majorities in the House of Representatives and the Senate. Ironically, the surging Democratic tide gives tactical voters a reason to back Mr McCain. When one party controls both Congress and the White House, its more extreme elements can flex their muscles without hindrance. Historically, presidents have been slow to veto their own party’s bad laws and wasteful spending plans. United government typically leads to fiscal incontinence, as happened in Mr Bush’s early years. Voters may decide that a Democratic Congress needs a grumpy Republican watchman.
But more probably the election will hinge on how swing voters perceive the candidates’ characters. This is Mr McCain’s greatest advantage. Mr Obama’s background as a community organiser and law professor appeals mostly to groups who tend to vote Democratic no matter what—African-Americans, highly educated professionals, people who live in Massachusetts, and so on.
Illustration by Matt Herring
Mr McCain’s curriculum vitae, by contrast, strikes a chord with floating voters, such as white working-class men. Only 12% of voters say they trust Congress “quite a lot” or “a great deal” (“paid staffers and blood relatives,” quips Mr McCain), whereas a whopping 71% feel that way about the armed forces. Most Americans have only the haziest idea what a community organiser does, but everyone knows that a warrior fights wars. Pro-Obama bloggers insinuate that Mr McCain has embellished his war record, but this smacks of desperation. “Character is important. John McCain has it,” says Sallie Smith, a librarian in Missouri. “The rest of the world takes John McCain more seriously because he is more serious,” says a fan in New Mexico.
Mr McCain’s supporters do not think he will magically end partisan differences or usher in a new age of global harmony. But they think he is the safer choice. This may or may not be true—doubters point to Mr McCain’s sizzling temper, that bellicosity and the fact that a man of 72 cannot be utterly sure he will be sprightly and alert in four years’ time. But one thing is certain. In a year when Republicans are about as popular as a scorpion in a tub of popcorn, the senator from Arizona gives his party a real chance of beating the odds.
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Mr Bush once gushed that he looked into Vladimir Putin’s eyes and saw his soul; Mr McCain quipped that he looked into his eyes and saw “a ‘K’, a ‘G’ and a ‘B’.”
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