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By Jay Cost

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Obama's Strategic Mistake

Presidential mandates are inherently political, as Sean Trende and I argued in January: "Though they are cloaked in the language of democratic theory, they are more a matter of what adroit politicians can claim for themselves in the face of the opposition..."

In a few instances instances, politicians can feasibly claim a mandate to implement a particular policy. The election of 1896 revolved around a clear policy debate, thus implying a policy mandate for McKinley (at least on gold). More often, mandates cannot be linked to actual policies, but to problems like recession. The election of 1932 is an example of this. That's where politics can play a big role. Of course, many elections imply no mandate whatsoever. The election of 1988 is a good example. The vote that year was more an endorsement of the past eight than an indication of what should happen next.

Last year seems to fall into that middle range. There was no crucial policy choice made - nothing like gold over silver - but President Obama can feasibly claim some kind of mandate to get the economy out of recession. I'd base this conclusion on a few data points. The first is the trajectory of the horse race. Gallup showed a dead heat when the Democratic National Convention began - and after the Republican National Convention, McCain jumped out to a modest lead. Then the financial market began to crumble, and that was essentially the end of the campaign:

RCP Average for September.jpg

There was very little change after this. The exit poll indicated that the economy was the decisive factor. A comparison of 2004 to 2008 is instructive.

Top Issues, 2004 and 2008.gif

There was no single issue that dominated in 2004. Voter concerns were distributed evenly around Iraq, terrorism, the economy, and moral values. Additionally, those issues cut in opposite directions: two favored Kerry, two favored Bush. The election of 2008 was different. Voters' concerns centered on the economy - and they broke to Obama by the same rate as the whole country did.

The 2008 election is a typical American response to economic woes. The country has been voting for out-parties during economic slowdowns since 1840, when it tossed Martin van Buren out on his duff. The United States votes for prosperity. It always has. It always will.

That's why I have been so perplexed by the Obama administration's legislative strategy this year. The contrast between the stimulus bill and the health care debate is especially peculiar. It's a strange sight to watch continued gloomy numbers trickle out from the economic pulse-takers on the one hand, and Congress debating a "public option" and fretting over CBO scores on the other.

The following is Keith Hennessy's analysis of the stimulus bill:

The President's mistake was in largely deferring to Congress on the composition of the stimulus bill. Rather than allowing Congress to pump hundreds of billions of dollars through slow-spending and inefficient bureaucracies, the President should have insisted that Congress instead send all the funds directly to the American people and let them spend it quickly and efficiently. Given his policy preferences, he could have directed a large share of those funds to poor people who don't pay income taxes...

The final 2009 stimulus law broke down like this:

10-yr total

% of total

Discretionary spending (highways, mass transit, energy efficiency, broadband, education, state aid)

$308 B

39%

Entitlements (food stamps, unemployment, Medicaid, refundable tax credits)

$267 B

34%

Tax cuts

$212 B

27%

Total

$787 B

100%

The problem is that only 11% of the first line (discretionary spending) will be spent by October 1 of this year. In contrast, 31-32% of the entitlement and tax cuts lines will be out the door by that time. (I have questions about the speed of the entitlement part. The bulk of that is Medicaid spending, and it's not clear to me that a Federal payment to a State means the cash is immediately flowing into the private economy.)

If we extend our window to October 1, 2010, then less than half the discretionary spending will be out the door, while almost 3/4 of the entitlement spending and all of the tax cuts will be out the door and affecting the economy. The largest part of the stimulus law is therefore also the slowest spending part. This is fine if you're trying to increase GDP growth over the next 2-4 years. If you're going for short-term GDP growth, it makes no sense.

What's odd is that when the stimulus bill was under consideration, the President said there was no time for a real debate. Why the need for speed if the bill wouldn't begin to take effect for months? This seemed like a rhetorical trick designed to deflect criticism from what was a questionable bill.

Relatedly, Republican concerns were brushed aside, with the implicit claim that they were rooted in bad faith. The problem with this argument is that the Republican House caucus was unanimously opposed to the bill. Members like Bono Mack, Castle, Kirk, Lance, LoBiondo, McHugh, Reichert, and Smith all voted nay. That's significant. These members voted in favor of Waxman-Markey, so minimally we can conclude that they are open to Democratic ideas. Additionally, Obama tapped McHugh to be Secretary of the Army, so he can't be a Republican hack. There are certainly fewer moderates in the Republican House caucus now than there were in 2005 - but some are still in the lower chamber. The fact that they were unanimously opposed to the bill suggests that perhaps there was something wrong with it.

All in all, the process that produced the stimulus bill was not a good one. Rather than use his enormous political capital to construct a bill designed to confront the economic crisis head-on, the President left its construction mostly up to Congress, which is inclined to particularism and waste. It was then rushed through the legislature without a full review. The opposition to it was painted as politically motivated. Perhaps unsurprisingly, the final product was a bill that will not produce much effect until some time in the future - and now some are calling for a second stimulus.

Meanwhile, the President and Congress are moving forward carefully and deliberately on health care. There's a robust debate that includes congressional committees across both chambers, the President, members of both parties, and the public. The President has clearly indicated that this is his top legislative priority, and he intends to do what is necessary to get a good bill that he can sign into law. Over the next few months, Washington's focus will squarely be on health care, even though it sits well below the economy on lists of public concerns.

This seems backwards to me. It's as if the economy was a secondary concern that had to be dealt with quickly so attention could shift to the rest of the President's domestic agenda. Why so much focus on health care and so little focus on the economy? Perhaps it's because Obama - like many Democratic Presidents before him - wants to be the next Franklin Roosevelt. For whatever reason, they seem to dream of getting themselves into the pantheon of leaders who expand the federal government's role in the provision of social welfare. And health care is the white whale of the Democratic Party's social welfare agenda. The President who finally delivers is guaranteed the spot next to the Squire of Hyde Park.

I understand why President Obama might feel this temptation. Democrats see themselves as members of the progressive party, and their leaders are expected to make progress on issues of social welfare. Their overwhelming numbers in the legislature augur well for a bill - so shouldn't Obama and company give it a try? Yet, there are other factors to consider. FDR guided Social Security through Congress in 1935, after he had already dedicated the government to massive relief and recovery efforts, after GDP had stabilized, and after the public had validated his initial efforts in the 1934 midterm. LBJ pushed for the Great Society in the mid-60s, a time of immense prosperity. Expanding social welfare requires a meeting of the man and the moment, which helps explain why some well regarded presidents (Truman and Clinton) failed in their attempts.

This moment is calling for a focus on the economy. That's why Barack Obama has the top job. It's not because of cap-and-trade, not because of health care, not because of his magnetic presence on the campaign trail - but because the economy was shrinking at a 6.1% annualized rate by Election Day. Americans were voting against recession by voting for him. This gives him a claim to a mandate, which not every President enjoys. He now has an opportunity to put his stamp on the country's economic policy in the name of recovery. Yet he's not doing that. He encouraged the Congress to rush through a poorly designed stimulus package that he had little involvement in; now he has focused the legislature's time and attention on health care, which is a secondary concern right now.

I think this is a strategic mistake. My scan of the history of American politics does not indicate that we've been governed so much by "alignments" - the systems of 1860, 1896, 1932, 1968, and so on. Instead, I see a country that votes for growth. That's the true American ideology. Left, right, or middle - the average American wants prosperity. When the majority party fails to deliver growth after having been elected to do so - the electoral consequences can be significant.

-Jay Cost