Fri, Feb 03, 2012 - Page 9 News List

US presidential election offers radically different choices

By Michael Boskin

Successful political candidates try to implement the proposals on which they ran. US President Barack Obama and the Democrats, controlling the US House of Representatives and (a filibuster-proof) US Senate, had the power to do virtually anything they wanted in 2009 — and so they did.

Obama and his congressional allies enacted an US$800 billion “stimulus” bill that was loaded with programs geared to key Democratic constituencies, such as environmentalists and public employees; adopted a sweeping and highly unpopular healthcare reform (whose constitutionality will be determined by the US Supreme Court this year); imposed vast new regulations on wide swaths of the economy; embraced an industrial policy that selects certain companies for special treatment; engaged in borrowing and spending at levels exceeded only in World War II; and centralized power in Washington (and, within the federal government, in the executive branch and -regulatory agencies).

The last election that was followed by such a sweeping change in policy direction occurred in 1980, when then-US president Ronald Reagan overhauled taxes, spending and regulation, and supported the US Federal Reserve’s course of disinflation.

While the 1988, 1992 and 2000 elections were also quite consequential, the policy shifts were not nearly as large as in 1980 and 2008.

The country rebelled against Obama and the Democrats’ lurch to the left with historic Congressional election victories for Republicans in 2010.

Since then, many Republicans have been deeply disappointed that the House of Representatives has been unable to roll back much of Obama’s agenda. However, the US political system is set up to make it much harder to accomplish something than to block it. It is not easy to do a lot while controlling only one-half of one-third of the federal government.

This year’s presidential election is shaping up as a -referendum on Obama’s policies and performance. The economy is improving slowly, but it remains in bad shape, with high unemployment and millions having left the labor force. Republicans are expected to retain control of the House and regain a majority in the Senate.

Former Massachusetts governor Mitt Romney, the Republican frontrunner to challenge Obama in November, and the party’s other leading candidates, including former US House speaker Newt Gingrich, want less spending, major reforms of government programs, lower taxes, trade expansion and less and more-targeted regulation than does Obama.

Romney, for example, has a detailed 59-point economic program, including a cap on federal spending at 20 percent of GDP, which would require reductions similar to those in the 1980s and 1990s. Gingrich and the other Republicans have an even more aggressive agenda of cutting taxes and reducing the size and scope of government. The eventual -nominee would be wise to incorporate his opponents’ best ideas and top people into his campaign.

A Republican presidential victory, together with Republican control of the House and Senate, would likely lead to substantial reduction, repeal and replacement of many Obama initiatives, attempts to reform taxes and entitlements, and measures to impose greater fiscal discipline.

High on Romney’s agenda is a reduction of the corporate-tax rate, from 35 percent to 25 percent the Organisation for Economic Co-operation and Development’s average level (the other Republican candidates would lower it still more), which would redress a major competitive disadvantage for US multinational companies’ global business.

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