When it comes to the economy, divided government will keep either candidate from accomplishing anything major, and global fundamentals will outweigh anything they accomplish, anyway
There is a quadrennial temptation to call each presidential election "the most important in our lifetime," and this time (like every time) there is the remote possibility that it might be.
But probably not.
True, there are cavernous differences between the candidates -- and perhaps even deeper differences between the parties. Obama and the Democrats are largely defending the size of government and seeking to pay for it with new taxes, while Romney and the Republicans have plans to cut tax rates and shrink every part of government except defense.
You can measure the distance between their ideas in the most gosh-wow numbers. Fifty-two million is how many people could lose insurance if Romney repeals Obamacare and enacts his Medicaid plan, as Jonathan Cohn reports; $1.8 trillion is how much Washington would cut the discretionary budget that pays for public goods and support for low-income families in Ryan's budget; $800 billion is the 10-year cost of Romney's plan to keep the Bush tax cuts for the highest-income households. And that's just on economic policy. On social issues, the candidates' position are even further apart.
How could this not be the most important election of our lifetime, given those stakes? It's the political system, stupid. A 3-pronged government torn between 2 fiercely opposed parties representing 1 evenly divided electorate is a recipe for stasis, pure and simple. Barring a complete shock tomorrow night, we will wake up Wednesday to another two years (at least) of fiercely divided government, with Republicans holding the Congress and Democrats holding the Senate.
If Mitt Romney wins the election, he will preside over a divided government and find it nearly impossible to accomplish anything in his agenda. If Barack Obama wins the election, he will preside over a divided government and find it nearly impossible to accomplish anything in his agenda. Repeal Obamacare over a Democratic Senate majority? Forget about it. Raise taxes on a GOP Congress? Can't wait to see it. Nominations for the Federal Reserve and Supreme Court are important events where the White House does seem to hold home-field advantage; and a Supreme Court ruling that overturns Roe v. Wade would be truly momentous. But when it comes to passing laws, both parties have made it repeatedly clear they don't want what the other guy is serving, and they're not terribly interesting in discussing matters further. It that environment, who controls the congressional caucuses matters as much as who sits in the Oval Office.
THE FUNDAMENTALS PRESIDENTS DON'T CONTROL
When it comes to economics, I'm dovish about the significance of this election, not only because divided government will blunt either candidate's agenda, but also because global fundamentals will probably outweigh whatever they accomplish.
The U.S. today suffers from a jobs gap, a wage gap, and an innovation gap -- and the president doesn't have much control over any of them now. The jobs gap is being filled, albeit too slowly. The end of government austerity means that we've gone from losing 200,000 public sector jobs a year to gaining more than 20,000 this year. That's a big deal. The other big deal is housing, where a nascent recovery will expedite hiring, first in construction, and then throughout the industry, while rising home prices should make consumers and businesses more confident about spending. Barring some awful news from Europe or Asia, this is going to happen no matter whom we call president next January.
As jobs return, incomes will rise, but middle class salaries will continue to fall behind their historical rate of growth. This wage gap isn't Obama's fault, and it wouldn't be a President Romney's fault, either. It's globalization, and automation, and rising health care costs, and labor's decline matching the fall of U.S. manufacturing, and a lot of other trends you have heard of, and are easily considered opaque, because they have no easy solution. Some public problems have logical matching policies (e.g.: If Social Security is underfunded, we raise taxes or tweak spending). But some middle class problems are just ... problems. When multinational companies discover that American workers within a global supply chain are replaceable with cheaper workers around the globe, that's not the president's fault; it's just a part of global business.
Creating tens of millions of well-paying middle class jobs means giving tens of millions of people something to do with high added value. Presidents can't do that. Innovations can. But as Clayton Christensen described brilliantly in the Times, the U.S. economy has, for the moment, moved beyond "empowering" innovations that create new scalable products that require more workers toward "efficiency" innovations that make existing processes cheaper and easier -- and replace workers. The fixation on efficiency isn't evil. It's not a function of bad governance. Instead, Christensen writes, it's a stage of capitalism, and a dilemma for capitalists.
Any U.S. president in a divided government today faces two distinct challenges to enacting an economic agenda that makes a difference. The first challenge is that the architecture of divided government prohibits any one branch from getting its way on domestic policy. The second challenge is that even getting one's way on domestic policy is probably insufficient to take on the huge global forces threatening the middle class.
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