The Wall Street Journal-20080215-Government Showdown
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Government Showdown
Full Text (1022 words)Hillary Clinton and Barack Obama were midway through a joint ode to big government in their last debate when a disbelieving Wolf Blitzer interrupted. Were they both really going into a general election proposing "tax increases on millions of Americans," inviting the charge of tax-and-spend liberals?
"I'm not bashful about it," said Mr. Obama. "Absolutely, absolutely," chimed in Mrs. Clinton.
In the middle of an election that is supposed to be about "change," the country is instead being treated to the most old-fashioned of economic debates. The fun of it is that neither side is being shy about where it stands, which has only sharpened the old choice: higher taxes and bigger government, or more economic freedom and reform. With health care, entitlements and education all on the agenda, the stakes are huge.
We don't have a Democratic nominee yet, but in terms of this battle it matters little. Mrs. Clinton and Mr. Obama both dropped major economic addresses this week, and their most distinguishing feature was that they were nearly indistinguishable. Just ask Mrs. Clinton, whose campaign complained that Mr. Obama had copied her best ideas (even as it simultaneously complained he offered no "solutions" -- go figure).
Republican frontrunner John McCain certainly sees no differences, and his frontrunner status has allowed him to begin training his economic guns on the Clintbama approach. The battle lines are, as a result, already taking shape.
This is going to be an old-fashioned fight over taxes. Whatever they may have said on CNN, Mr. Obama and Mrs. Clinton aren't foolhardy enough to embrace wholesale tax hikes. Like John Kerry and congressional Democrats before them, both are instead proposing raising taxes on only "the rich." Both campaigns made an early bet that the Republicans' broad tax-cutting message had gone stale, and that Americans were frustrated enough with rising health-care and education costs that they'd embrace redistributionist tax policies.
Maybe. But the economic landscape has changed from last year, and even frustrated Americans have grown jittery of tax-hike talk. Mr. Obama has already shifted, and started placing more emphasis on his promise to return some of his tax-hike booty to "middle-class" Americans via tax credits. Both Democrats are already justifying their hikes by pointing out that Mr. McCain voted against the Bush tax cuts in the past.
Mr. McCain's challenge -- which he's already embraced -- is to keep the tax focus on the future. His campaign is going to play off polls that show the majority of Americans are still convinced that political promises to soak the rich translate into higher taxes for all. He will use the gobs of other proposed Democratic tax hikes to make that point, noting, for instance, that higher taxes on dividends and capital gains are in fact punitive to a broad swath of middle-class investors who have become reliant on those equity returns -- in particular during this credit crunch.
This is going to be an old-fashioned debate on spending, and here the divide will be of Grand Canyon proportions. Democrats have presented themselves as the party of fiscal responsibility of late, a message that contrasted well with spendthrift Republicans in the 2006 elections. The Democratic presidential candidates will struggle to make that case, given both are inching toward the $900-billion-in- proposed-new-spending mark.
Mr. Obama's wish list for just one term? Some $260 billion over four years for health care. Another $60 billion for an energy plan. A further $340 billion for his tax plan. A $14 billion national service plan. A $72 billion education package. Also, $25 billion in foreign assistance funding, $2 billion for Iraqi refugees and $1.5 billion for paid-leave systems. (I surely forgot some.) Mr. Obama says he'll pay for these treasures by stopping the Iraq war and taxing the rich. But both Democrats have already spent the tax hikes several times over, and even a Ph.D. would struggle with this math.
Making a message of fiscal responsibility harder is Mr. McCain's reputation as a fiscal tightwad, and his role as one of the fiercest critics of his own party's spending blowout. Watch him also expand this debate to earmarks, as he's already done with an ad ripping into Mrs. Clinton for her $1 million request for a Woodstock museum. Mr. McCain's earmark requests last year? $0.
Mr. Obama's and Mrs. Clinton's economic speeches this week were noteworthy for sweeping government initiatives, straight out of FDR- land. Both propose a federally backed "infrastructure bank" that would finance projects with subsidies, loan guarantees and bonds. Both are vowing to "create" five million "green-collar" jobs in the environmental sector. These are in addition to giving government a huge new health-care role.
This is the area where Mr. McCain has the most work to do in drawing distinctions. He is already hitting both Democrats for their desire for "bigger government." But the Arizonan's challenge will be explaining to voters why more government-run health care is bad for their pocketbook, why school choice will do more than more education dollars. Further, he's going to have to work through his own hit-and- miss instincts, which in the past have led him toward big government initiatives like a climate-change program.
This will be an old-fashioned debate about the role of business in America, whether it will be a federal cash cow and punching bag, or its tax rates lowered so it can compete with the rest of the globe. This will be an old-fashioned debate about trade, which will, with any luck, finally explore the vagaries of the growing "fair trade" movement. This will be an old-fashioned debate about the minimum wage, and its ability to kill jobs.
None of this is to say this economic battle won't encompass "change." If a Democrat wins the general election, things will certainly look different, starting with your tax bill. And if Mr. McCain is smart, his campaign will go beyond criticizing the opposition to put forward a bold economic reform agenda that encompasses the latest in enlightened conservative thinking. Strip all this away, though, and it's the age-old debate about the role of government. And it is shaping up to be a doozy.
