US election: It’s a pity that the range of policy options presented by the major primary candidates is so narrow. There are big and controversial issues out there, but voters aren’t being presented with many realistic choices.
It was better back in 1980. That year, voters’ choices ranged from the pure supply-side economics of Phil Crane on the right through Ronald Reagan and Jimmy Carter to the big spending “liberal Republicanism” of John Anderson and the social democracy of Edward Kennedy.
In 2008, voters have variations on a few themes. From the Republicans, there is smaller government at home and big ambitions abroad. The Democrats offer a defensive international posture and expansion of domestic entitlements. For something truly different, there is only the second-tier Republican Ron Paul, who advocates a truly modest government role. Nobody is offering the Lyndon Johnson mix of larger domestic government and aggressive foreign policy—though in practice that’s what the US may end up with.
Here are a few of the contested issues:
Health care: US government spending on health care is currently 7% of gross domestic product (GDP), out of total health care spending of 16% of GDP. For this, the US gets health outcomes somewhat inferior to European countries and Japan, where health care spending is around 11-13% of GDP. While the Republicans content themselves with only minor tweaking, the major Democrat candidates present proposals that approach universal health-care coverage, including the 47 million US residents currently not covered by insurance.
Even if better mechanisms for health-care delivery might save 1-2% of GDP, it seems unlikely that truly universal healthcare coverage can be obtained for less than 10-11% of GDP in public spending, i.e., 3-4% of GDP more than now, an increase of around $400-600 billion (Rs15.76-23.64 trillion) above current levels. All of the Democrats’ health-care proposals cost between $90 billion and $120 billion. It seems too low. It suggests that either their estimates are deliberately optimistic or their health-care plans will have gaps in coverage to be closed later.
Trade: Democrats are now generally significantly more protectionist than Republicans, opposing the South Korea and Colombia trade agreements and insisting that future trade agreements have labour and environmental safeguards. However, only John Edwards plans to close the US balance of payments deficit through trade policy. There are no representatives of the Democrat free trade tradition, which was dominant as recently as the Bill Clinton era.
Taxes: Republicans generally pledge to keep the 2001 and 2003 Bush tax cuts; in addition, John McCain pledges to abolish the alternative minimum tax.
Mike Huckabee has an eccentric proposal to replace the federal income tax with a consumption tax; it appears ill thought out and politically impossible. Since the office of management and budget and congressional budget office deficit projections currently assume the Bush tax cuts will phase out in 2011 and the social security surplus shrinks after 2010, all candidates’ spending and tax plans seem optimistic.
Democrats do seem to be true to one stereotype—they are generally in favour of high taxes. The combination of eliminating the Bush tax cuts for top earners, imposing social security payments on incomes over $200,000 (as Edwards and Barack Obama propose and Hillary Clinton hints) and the Rangel tax proposal currently before Congress, which all Democrat candidates support, would raise the top Federal marginal tax rate from 35% to 50.2%, often more than 60% when state and local taxes are included. This seems high enough to have an adverse supply-side effect and increase tax evasion.
Global warming: All the Democrats and Republican John McCain plan to auction carbon emission permits under a “cap-and-trade” system. That would provide significant additional revenue to the Federal budget, even if it did little to reduce global warming.
Foreign policy: All top-tier Republicans plan to remain in Iraq, and Clinton has also refused to pledge that US troops will be withdrawn by 2013.
The current annual cost of the Iraq occupation is around $170 billion, just over 1% of GDP. Obama, Edwards and Paul—who promise a quick withdrawal from Iraq —thus have an advantage over other candidates in having around 1% of GDP available for other purposes.
Fiscal policy: While Democrats threaten the fiscal balance through their health-care plans, Republicans threaten it through their low-tax policies. McCain, with auctioned “cap-and-trade” permits and a determination to settle the medicare and social security imbalances, is the fiscally soundest candidate. Clinton and Edwards, through their plans for health care and other social spending, appear the least sound.
Monetary policy: While several Democrats note the rise in income inequality since 2000, all candidates except Paul operate a “hands off” policy towards the Fed. This is a pity; monetary policy has a huge impact on the US economy, and the president gets to reappoint the Fed chairman every four years. It would be useful to know the candidates’ views on past monetary policy and what they would wish had been done differently.
Overall, it seems fair to say that this election has more serious candidates than serious economic polices. The electorate isn’t getting an adequate range of choices.