But after Election Day, the results will, in turn, affect economic policies, and thus the economic outlook. If Republicans retain the House and Senate, the pro-growth tax and regulatory reforms enacted thus far will be sustained, and perhaps even expanded. Likewise, if they keep the Senate, conservative federal judges will continue to be confirmed. By contrast, a Democratic majority in the House will predictably block Trump’s legislative proposals; and a Democratic majority in the Senate (a long shot) will stonewall conservative judicial appointees. Though divided governments sometimes produce policy compromises and preside over a strong economy, it is hard to imagine that happening if Democrats retake either or both chambers of Congress. After all, even supposedly moderate Democrats have moved further to the left to ward off socialist challengers. And more Democrats are coalescing around an agenda of greatly expanded government spending and higher taxes (though they haven’t yet spoken much about the latter). A widely circulated Gallup poll recently found that a higher percentage of Democrats are amenable to socialism than to capitalism. Hence, most of the Democrats veering to the left are proposing universal government- Even supposedly moderate Democrats have moved further to the left to ward off socialist challengers.
provided health insurance (“Medicare for all”), tuition-free college, and a federal job guarantee or basic income. Of course, enacting that agenda would require a Democratic president and majorities in both chambers of Congress. And even then, it would cost tens of trillions of dollars. Paying for it would require a large European-style value-added tax (VAT) or dramatically higher income and payroll taxes, most likely leading to European-style economic stagnation. For their part, the Republicans are divided between traditional free-market, free-trade conservatives and Trumpian “economic nationalists” who want to restrict immigration and trade in lieu of concessions by America’s trading partners. So, after the November elections, the strong U.S. economy may be threatened by an escalating trade war or the specter of higher taxes. With growth slowing in China, Europe, and elsewhere, the global economy will need America to avoid those dangerous policy mistakes. Michael J. Boskin is Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution. He was Chairman of George H. W. Bush’s Council of Economic Advisers from 1989 to 1993, and headed the so-called Boskin Commission, a congressional advisory body that highlighted errors in official U.S. inflation estimates.
American Consequences 71
Made with FlippingBook Online newsletter