Bush's Touchy-Feely Economics
The economics of George W. Bush may be broadly described as lukewarm Reaganomics, but his plans for regressive tax cutting and more dismantling of the public sphere are airbrushed with the same touchy-feely moderation the Republican candidate projects for himself. It's no secret that George the Second lacks intellectual depth--even his father's--and the stubborn ideological self-confidence that made the Gipper so effective in Washington. The big ideas are mostly inherited, modified to appear as unthreatening as possible. No Republican talks "revolution" anymore.
Given current circumstances, this package may be a stealthy fit with public indifference, at least more difficult for Democrats to demonize. To craft his program, George W. assembled a team of economists that roughly reflects elements of the old Reagan coalition but without the hard-edged, zany fervor. Martin Feldstein of Harvard has campaigned to disassemble Social Security for more than twenty years and chaired Reagan's Council of Economic Advisers, but he also got bounced when he persisted in worrying aloud about the soaring federal deficit. Michael Boskin of Stanford filled the same role in Bush Senior's White House and participated in the heretical act (for Republican true believers) of raising the top income tax rate to reduce the deficit. These two and some others are no longer pilloried as sellouts by the hardcore supply-siders (Newt Gingrich, who led the backbench rebellion against George Senior's tax increase, has since retired to the stud farm).
On many large matters like globalization, a Bush administration would take its cues not from academic economists but from the business and financial establishment--not so different from Bill Clinton's tenure (though Bush would doubtless drop the rhetorical flourishes about labor and environmental rights). Republicans always have deeper bench strength for filling such crucial economic positions as Treasury Secretary, and they already have Alan Greenspan running the country at the Federal Reserve. So the distinctive differences are the plans for tax cuts and Social Security privatization drafted by his economic team.
His leading adviser--and the best reflection of Bush's artful strategy--is a putative spokesman for the supply-side wing of the Republican Party. Lawrence Lindsey is a former Federal Reserve governor and ex-Harvard professor, now at the American Enterprise Institute and awaiting GOP restoration, who is likely to fill a key position if Bush wins. Lindsey was warmly embraced by the supply-siders twenty years ago because he was one of the few mainstream economists willing to aver that their theory was not nuts (and had the imprimatur of Harvard). Supply-siders helped him win appointment to the Federal Reserve Board, but some now see him as an apostate, who has adulterated the true faith in the interest of career advancement. Bush would cut the top tax rate but wouldn't get it back to the lower level established by Reagan or propose further reduction for capital gains (already reduced by Clinton).
"Maybe it's the populist in me, but capital should be taxed," Lindsey told The Weekly Standard last year. "The government spends a lot of money protecting it." That sort of talk sounds suspiciously progressive to some on the right. On occasion, Lindsey can sound dangerously open-minded.
Not to worry. Like the nominee, Larry Lindsey is more loose and likable than many stiff-necked conservatives, less dogmatic than doctrinaire ideologues, but the nimble amiability stays safely within party lines. "I studied at Harvard and learned Keynesian economics, and I certainly agree that it works under certain circumstances," Lindsey observed. Then he suggested that if the economy goes into the ditch, as he actively fears, Bush's proposed $1.6 trillion tax cut plan can be speedily enacted to provide emergency stimulus. "I would call it a fiscal insurance policy--in case needed," he said. "What we would do, I think, is accelerate [implementation of] the tax cut."
Lindsey is mischievously poaching on territory that used to belong to liberal Democrats--except their Keynesian pump-priming measures were always denounced by conservatives as reckless interference with nature, and Democrats tried to put the cash in the hands of working people, who would promptly spend it. Bush's tax cutting, like Reagan's, would deliver the money, overwhelmingly, to people who are already rich or very rich. So any Keynesian impact on consumer demand and the economy would likely be slight--but the tax cuts might give a smart boost to the struggling stock market. Supply-side theory, after all, assumes that the very wealthy will not buy more cars and houses but will invest the surplus income in industry, thereby making more jobs for the rest of us. This hoary "trickle down" approach sounds especially dubious in present circumstances. On the other hand, Bush's package is comparatively modest alongside the Reagan original and would not produce a radical unraveling of fiscal balance, as Reagan's did.