Roosevelt, Carter, or Clinton?
Brian Wesbury wrote a thought-provoking memo (pdf) on how Obama might govern. Will it be like Roosevelt, Carter, or Clinton?
Excerpts:
If Barack Obama governs like Roosevelt, and grabs the reigns of power tightly in an attempt to run the economy from Washington, denounces the private sector as evil, and follows every whim of a very liberal Congress, then the markets and the economy are in for an awful and dangerous ride. Roosevelt had little belief in the free market and the economy remained in Depression until World War II.
While Roosevelt was able to get away with this in the 1930s, blaming all bad things on the private sector, Herbert Hoover or just bad luck, it is doubtful that in the age of the Internet, this could happen again. In today’s environment, governing like Roosevelt would be a huge loser. It certainly hasn’t worked well for George Bush. The more the Treasury Department interferes with the private sector the worse things become.
If Barack Obama governs like Jimmy Carter, wearing a malaise-like, defeatist frown on his face, throws up his hands and says, “America is in decline, accept it,” the ride could be bumpy, but not completely catastrophic. The US muddled-through the late 1970s with some good moves (like capital gains tax cuts, some deregulation, and the appointment of Paul Volcker to head the Fed). But there were many bad policies (solar energy subsidies, synfuels, raising the social security tax, price controls, tax credits for job creation, the Humphrey-Hawkins Act, and a Windfall Profits Tax on oil companies).
The Clinton years were different. After initially moving left politically, with tax hikes and an attempt to nationalize healthcare, Clinton was quickly forced to move right.
In his 1995 State of the Union Address, Bill Clinton said “the era of big government is over.” He then signed onto capital gains tax cuts on stocks and housing, welfare reform and remained a solid freetrader. These were the policies that led to a boom in economic activity late in the 1990s. Taken as a snapshot, the middle four years of Bill Clinton’s presidency saw the best supply-side policy mix since Ronald Reagan.
If Barack Obama follows the Clinton path of triangulating – stealing ideas from the other side to become more electable to a second term – the economy and world will not repeat the 1970s or 1930s. And it appears that instead of the bond market, the Obama barometer will be the stock market. If he gets that right, two terms are a lock. His other choices, of following a path of Roosevelt activism or dour acceptance of decline will not do.
[A]n Obama White House that wants to be elected to a second term must get the stock market to respond positively. As a result, we look for an Administration that looks much more like the Clinton years than either Roosevelt or Carter.
