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BusinessWeek: January 11, 1993 |
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Economic Viewpoint
CHANGE AT THE WHITE HOUSE? PLUS CA CHANGE... In democracies, when power shifts between political parties, there is scarcely a ripple in public policy. The actions of Harold Macmillan, Edward Heath, and most other Tory leaders after World War II are difficult to distinguish from those of Clement Attlee, Harold Wilson, and other British Labor leaders. The lone--admittedly huge--exception, Margaret Thatcher, had to stage a coup within her own party. The same could be said of Democratic and Republican Administrations in the U.S. during the past 50 years. Richard Nixon professed to support free markets, but he was the first President to impose wage-and-price controls during peacetime, and he presided over one of the most rapid expansions of business regulation by the federal government. Ronald Reagan is rightly credited with encouraging deregulation and the buildup of the military, but both movements began under Jimmy Carter. There is no more apt illustration of this thesis than the Bush Presidency. During his term, labor, market, and environmental regulation expanded remarkably rapidly, as did federal spending. I doubt if these trends would have been much different had Michael Dukakis won in '88. While Bush vetoed 33 bills passed by Congress, the Democrats, who controlled Congress, counted on many of his vetoes to bail them out of grandstanding tactics. CENTRIST PULL. This Tweedledum-and-Tweedledee stability of policies should not be lamented, however, because the political system would be chaotic if government spending and taxing radically changed every time a new group took over, and the consequences for economic and social decision-making would be catastrophic. Companies would be unable to plan their investment and employment decisions if tariffs, pollution-control requirements, and other regulations were drastically altered with each new Administration. A stable political system, with its slow shifts in voting patterns, is the direct result of stability in the distribution of power among many competing special-interest groups. Pressures on Bush to maintain generous Social Security and medicare expenditures, continue welfare and food-stamp programs, support agricultural prices, and cut competition from Japanese cars have been every bit as strong as they would have been under a Democrat. Unexceptional. Clinton wisely recognized that American voters did not want the sizable expansion of the federal government advocated by the interventionist wing of the Democratic Party. His economic appointments so far are moderates, with the glaring exception of the new head of the Council of Economic Advisers. Although big spenders have been chosen to head the agencies in charge of transfer payments and social services, I suspect the liberal wing of his party will be unhappy with much of what Clinton does. Similarly, Bush appreciated that there was no groundswell of support for the large rollback of programs advocated by free-market Republicans. Both planted their feet firmly in the political middle, differing mainly in details. So it would be surprising if the election's outcome makes a big difference, especially in the domestic programs that dominated the compaign. Historians discuss these issues on a grander scale when considering the role of great individuals. Of course, exceptional figures--such as Franklin Roosevelt, Reagan, Thatcher, and Mikhail Gorbachev--matter a great deal. They capture and promote major shifts in popular opinion and the configuration of political forces, though in part, they simply speed up changes that are inevitable. However, most of the time, it is not the individuals in office who determine what happens but the underlying economic and social forces--the political "fundamentals," as stock market jargon has it. With the greatest of respect for their considerable talents, neither George Bush nor Bill Clinton is in the truly exceptional class. This doesn't mean that people who identify with particular political parties are misguided. The party in power does make some difference. Clinton will be more disposed than Bush has been to federal spending on roads and other infrastructure, to environmental claims about the greenhouse effect, to subsidizing industrial product development, to protectionist trade restrictions, to easier access to abortion, and to judges who are less enamored of free markets. But the differences won't be easily detected from statistical trends in federal policies. Such skepticism about the impact of a Bush, Clinton, or Perot won't sit well with those who devoted time, effort, and emotion to their favorite candidate. But the stability of Western democracies is far preferable to a system in which the enthusiasms of campaign workers and contributors radically alters public policy. | |
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