The Wall Street Journal-20080125-Bush-s Economic Surrender
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Bush's Economic Surrender
Here's one group that isn't much stimulated by the White House's economic pact: Republican presidential hopefuls. The general sentiment among most of the campaigns? Thanks for nothing.
The Bush administration unveiled its $150 billion feel-good stimulus package yesterday, with President Bush praising the "good will on all sides." The package, with its "middle-class" tax rebates and minor assortment of business benefits, isn't likely to help the economy. But it did allow the political class to provide itself some cover if things continue to go south. After all, Washington "did something."
Left holding the bag have been Republican presidential candidates as they struggle to explain why their party should again be trusted with the Oval Office. The White House provided no real outreach to let the campaigns know what was coming down the stimulus pipe, forcing them to instead cobble together plans they hoped wouldn't conflict with the president's. With the administration jumping on the Keynesian bandwagon, it was left to the candidates to make the case for conservative ideals and supply-side economics. And since nobody wants to pick a fight with Mr. Bush during a primary, the aspirants were also stuck saying nice things about this no-growth plan. Many inside the campaigns are privately miffed, and with good cause.
Talk about the ultimate missed opportunity. One of the few advantages the GOP starts with in this election is a president who can use his perch to frame the national debate. This was Mr. Bush's chance to explain to voters the stark economic choice they will face this November. They can choose another Republican who is committed to preserving the Bush tax cuts that have done so much over the past five years for economic growth -- plus more. Or they can vote for a Democrat who will raise their taxes at a time of economic uncertainty, causing untold harm.
Instead, the administration abandoned the economic high ground before even a popgun was fired. A year into nonstop investigations and confrontation, Democratic leaders decreed "bipartisanship" the order of the day, and Mr. Bush offered up his other cheek. The administration quickly deserted any principled demands for pro-growth policies, say extending the Bush tax cuts or cutting capital gains. The White House and Republican congressional leaders were left yesterday spinning conservative victory out of the fact that "most" of the non-stimulating rebates would go to people who currently pay income taxes (ooh!), and that businesses will get a depreciation break (ahh!). Imagine what we'd have got if they'd been negotiating against a Democratic Congress with something more than an 18% approval rating.
What didn't appear to factor into the administration's approach was any consideration that the GOP is in the middle of a crucial election. This is odd, given the Bush team's own experience and success in running campaigns, and given that Mr. Bush's best shot at cementing his tax legacy is to see another Republican in the White House.
The president instead seemed more anxious to avoid a repeat of accusations hurled against his father -- that he's indifferent to the struggles of working families. The White House political team also seemed to approach all this from a position of fear, with a view that Mr. Bush needed to take quick action to deflect blame for any further economic fallout. As if Democrats won't blame them whatever the outcome.
It's been left to John McCain, Mitt Romney and Rudy Giuliani to remind voters that Republicans win economic debates when they promote smart policy. And one good piece of news to come out of these economic jitters is that it has spurred the candidates to engage in a more ambitious tax discussion. Mr. McCain rolled out a strong plan that would eliminate the hated Alternative Minimum Tax, cut corporate rates and reform the R&D tax credit. Mr. Romney wants to cut the lowest tax bracket and has offered a proposal to expand tax-free savings accounts. Mr. Giuliani proposes slashing the tax on capital gains and index it for inflation, and is also pushing a flatter tax code. This is all good stuff, and all aimed at long-term economic growth.
Yet the White House's stimulus plan has overshadowed and confused this discussion, in the process giving the candidates headaches they don't need. Case in point: For several weeks, Mr. Romney has been patiently explaining to voters why it's bad policy to provide tax rebates to people who don't currently pay income taxes. Now comes the White House's stimulus plan, which does just that. Mr. Romney will undoubtedly be asked about this discrepancy. He'll have to diss the president, or come up with some way of squaring a circle. Either way, not fun for him -- and not productive for the broader Republican debate.
The candidates have at least been getting some intellectual cover from conservative Republicans in Congress. Missouri Sen. Kit Bond and California Rep. David Dreier, both Giuliani supporters, this week introduced tax legislation that mirrors Hizzoner's economic plan. The Republican Study Group in the House has also been trying to force the debate back toward forward-looking economic policy, introducing legislation that primarily focuses on freeing up capital for businesses.
"I'm not so nervous about the [stimulus package] as I am nervous about the debate," the chairman of the Republican Study Committee, Jeb Hensarling, admits. If Republicans want to reclaim their economic "brand," they have to make the case for supply-side economics. "I'm happy when the president says he is not giving up the quest to make tax relief permanent, but . . . that should be the centerpoint of this debate." He agrees that "at the moment, it is principally being left up to other folks" to make the case.
Meanwhile, this whole unstimulating exercise is still far from a sure thing. Democrats are already eyeing any legislation as a vehicle for other pet projects. If the bill gets larded up with too many offensive goodies or policies, presumably even the White House would balk.
Maybe that wouldn't be so bad. It would at least give the Bush administration time to remember there's an election going on. And that its party is, in fact, trying to win it.
