The Mystery Election -- and Its Uncertain Aftermath

The Mystery Election -- and Its Uncertain Aftermath

By Lou Cannon - November 2, 2012

The presidential election between Barack Obama and Mitt Romney is so close that pollsters and political analysts can't predict the outcome. But an equivalent mystery is how the winner will confront the nation's on-rushing potential fiscal calamity.

After three presidential debates we still have few clues about how either Obama or Romney would prevent a plunge off what Federal Reserve Chairman Ben Bernanke calls “the fiscal cliff” at year’s end. That’s when across-the-board income tax cuts enacted during the George W. Bush presidency will expire, as will a “holiday” on payroll withholding taxes.

These tax increases would coincide with previously approved federal budget cuts of more than a trillion dollars and the end of extended unemployment insurance. Combined, these actions would subtract roughly 5 percent from the U.S. economy, almost certainly plunging the nation into recession.

It’s widely assumed in Washington and on Wall Street that Obama and the lame-duck Congress will find a way to avoid such a devastating outcome. But neither presidential candidate has hinted at compromise, and the solutions floated in the media by a bipartisan group of U.S. senators would require concessions that neither side appears willing to make.

Obama insists firmly on raising taxes on the rich, and Romney is equally adamant about retaining all Bush-era tax cuts. It seems unlikely that Obama would abandon his most frequent campaign promise before a second term even begins and perhaps even less likely that a Republican-controlled House would approve a tax increase. If Romney wins, the lame-duck Congress might kick the can down the road until he takes office, but a new Republican president who agreed to a tax boost could soon be anathema to his party.

Stuart K. Spencer, a key political strategist for Ronald Reagan and Gerald Ford, is pessimistic about post-election compromise. He notes that the race has been both personal and ideological and believes the losing side is more likely to be confrontational than conciliatory. “It’s not just the politicians either,” Spencer said. “The American people are evenly divided and have strong feelings”

Even if the fall from the fiscal cliff is averted, prospects are dim for reducing a federal budget deficit that has run a trillion dollars annually for four years. The Congressional Budget Office estimates that if Bush-era tax cuts are extended and budget cuts rescinded, the deficit will surge, dimming hope for a “grand bargain” of the sort Obama and House Speaker John Boehner explored two years ago.

The campaign dialogue suggests that achieving even a trivial bargain would be a feat. Romney has promised to create 12 million jobs, cut all tax rates while closing unspecified loopholes, and reduce the deficit to 20 percent of gross national product by 2022. “The arithmetic suggests it may be impossible,” observed The Economist, which also gives Obama a low math grade.

During the campaign Obama has rediscovered the virtues of the commission he created in 2010 to recommend a path to deficit reduction. Known as Simpson-Bowles after its co-chairmen, Alan Simpson and Erskine Bowles, the commission produced a report calling for severe spending cuts in federal programs, including defense and Medicare, and tax increases.

Obama famously declined to endorse the report, but Republicans speak with forked tongue in criticizing him on this issue. Romney running mate Paul Ryan, a commission member, opposed the report, as did most other GOP congressional leaders.

Voters often complain that politicians do not keep their promises, but the greater danger after this campaign is that the winner will try to keep his word at the expense of good governance. Let’s hope he doesn’t. There are numerous examples of U.S. presidents who had the common sense to ignore inconvenient campaign promises to deal with the problems of the day. Here are two favorites:

Ronald Reagan was elected in 1980 after promising to increase military spending, reduce income taxes to revive the economy and cut federal domestic spending.

As president, Reagan faced a Democratic-controlled House whose leaders opposed his agenda. Although Reagan managed to get most of what he sought on defense spending and income tax cuts, he had to load the budget bill with domestic spending projects for individual members to pry it out of the House. This Christmas-tree bill, as it became known, and a subsequent recession unbalanced the budget. For six of his next seven years as president, Reagan’s budgets raised taxes.

Many conservatives were unhappy with Reagan, but he had not abandoned his principles by being practical. Increased military spending helped bring the Soviets to the bargaining table and produced agreements to reduce nuclear arsenals. The marginal tax rate -- the rate at which the last dollar of income is taxed -- was 70 percent when Reagan took office and 15 percent when he left.

Reagan’s early political idol was Franklin D. Roosevelt, a great president and champion promise-breaker. Dismissed by noted columnist Walter Lippmann as “a pleasant man . . . without any important qualifications,” FDR faced President Herbert Hoover in 1932 at the depth of the Great Depression when millions of Americans were jobless and desperate for government help. Following the economic orthodoxy of his time, however, FDR gave a major speech in Pittsburgh promising to balance the budget if elected.

As president, FDR launched his “New Deal for the American people” with a torrent of federal spending that arguably saved the country at the cost of an unbalanced budget. When FDR sought re-election in 1936 and planned a return to Pennsylvania, Roosevelt asked speechwriter Sam Rosenman how he could reconcile his actions with what he’d said in Pittsburgh four years earlier. “Deny you were ever in Pittsburgh,” Rosenman memorably replied.

To govern effectively, the winner of next Tuesday’s election may also have to abandon cherished campaign promises -- and perhaps do a bit of denying. 

Lou Cannon, who is traveling in Scotland, has written about the campaign for RealClearPolitics.

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