In the Disney movie Beauty and the Beast, Lumierre, the candlestick-butler advises the beast to “make little promises you don’t intend to keep.”
It’s great advice if you are a beast wooing a beauty. I just wish political candidates would avoid the practice.
George Bush was a capable president, but his reputation will long be marred by memories of his famous promise, “Read my lips, no new taxes”
Now perhaps I am too cynical. George Bush probably intended to keep that promise. But it was s stupid thing to promise after we had nearly quadrupled our national debt in the preceding eight years.
In the debates this past week, Al Gore did the same sort of thing. “I will balance the budget every year,” he intoned. Gosh Al, have you ever thought about how damaging that might be for the country?
Few economists are enthusiastic Keynsians anymore, but there similarly aren’t many who think that balancing a budget every calendar year despite the vagaries of the business cycle is a good idea. We should run surpluses when the economy is booming, as it currently is. But raising taxes or slashing spending to achieve balance during a recession is likely to only make the recession longer and more painful.
George W. Bush did the same sort of thing in a speech in Pennsylvania a few weeks ago. “We will not increase Social Security taxes and we will not cut benefits.” he promised. OK, but you have just thrown away two alternatives that should get at least some consideration in a thoughtful, bipartisan review of Social Security.
In the meantime, both Bush and Gore have promised, in effect, to divert large amounts of general tax revenues to pay Social Security. Perhaps this is warranted, but it is a huge departure from the original intent of the legislation in 1935, from established practice over the past 65 years and from what taxpayers have been promised for decades.
Surely a step of this magnitude warrants broader national debate.
It is hard to think of an election year in which the eventual winner will inherit an economy that is fundamentally as strong as that right now. We are benefiting from genuine broad gains in productivity. Incomes are up. Unemployment is low and poverty levels declining.
Prospects for our public finances are better than at any time in the past 35 years and better than those of nearly every other industrialized nation. The challenges we face are less daunting than those faced by any president from Johnson through Clinton.
But it is foolish to throw away some of your most powerful economic ammunition before you even get into the first firefight. Even though the economy is fundamentally strong, the odds are high that we will face at least a garden-variety recession in the next four years.
Indeed, rising petroleum prices are likely to slow world economic growth quite rapidly. It would not be unheard of for stock markets to experience a major correction. And preserving intergenerational fairness and economic efficiency as Baby Boomers, the biggest demographic shock ever to hit this country, retire will be a major challenge.
Let’s not rule anything off limits before we even start.
Politicians will reply that to get elected they have to take more definite stands than do academic economists. Harry Truman is famous for saying that the next time he hired an economist he was going to be sure he got one who had an arm shot off in the war. Harry was sick and tired of hearing “on the one hand this and on the other hand that” from his economic advisors.
That may be a fair criticism of my profession. But the core of economics is that individuals and societies face choices. Many times these choices are not easy ones.
Political candidates do not have to offer Churchillian “blood, toil, tears and sweat,” in their campaign speeches. But they do themselves and the nation as a whole a disservice when they make promises that essentially deny we face any choices at all.
© 2000 Edward Lotterman
Chanarambie Consulting, Inc.