Monday, March 8, 2004

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Kenneth Rogoff tests the Nixon analogy

Last month I wrote:

More and more, Bush reminds me of Nixon. He's not afraid to make the bold move in foreign policy. On domestic policy, Bush seems like he'll say or do anything, so long as it advances his short-term political advantage. If Karl Rove thought imposing wage and price controls would win Pennsylvania and Michigan for Bush, you'd see an Executive Order within 24 hours.

Kenneth Rogoff, a professor of economics at Harvard -- and chief economist at the IMF from 2001 to 2003 -- has an amusing article in Foreign Policy on whether, when it comes to spending, Bush really is as bad as Nixon when it comes to domestic spending. His conclusion -- "Overall winner: Nixon—although Bush has eight months left."

He also makes the point that compared to the rest of the world, U.S. presidents seeking re-election are misers:

U.S. presidents are hardly the only or the best practitioners of electoral economics. Mexico, for example, boasts a history of political business cycles that make the United States look fiscally Puritan. Mexican Presidents José López Portillo in 1982 and Carlos Salinas de Gortari in 1994 set benchmarks that few have surpassed. Former Russian President Boris Yeltsin gave away the country’s natural resource base (under the guise of “privatization”) to ensure his reelection in 1996, a problem the country is still painfully sorting through today. In Italy, every prime minister seems to produce a fiscal splurge come election time—and Italy has a lot of elections. But then, a country does not achieve one of the world’s highest debt-to-GDP ratios (more than 100 percent) without effort.

Go read the whole thing -- it's a nice primer on the political business cycle.

posted by Dan on 03.08.04 at 11:32 PM


Except that the President's tax policy could have been made more politically useful to him, by skewing it more to the middle class. That also would have enhanced the current recovery, according to most economists.

I think he does have a principled stand there, that the very highest brackets needed tax relief, even at some political cost.

posted by: voice of the demoracies on 03.08.04 at 11:32 PM [permalink]

doesn't it speak poorly of Pres. Bush, when the arguments defending him start relying on countries whose politics are widely known to be corrupt. I realize that the main comparison is Nixon, but to even use those other countries is a backdrop is a bit sad. Shouldn't it simply be an unstated assumption that any US president is incomparable to Russia during the last 10 years?

posted by: chris brandow on 03.08.04 at 11:32 PM [permalink]

Rogoff's is a fairly shallow analysis, given that Nixon faced very large Democratic majorities in Congress who supported raising Social Security benefits even more than he did, and that Bush started signing off on election year spending before the mid-term 2002 election (as in the 2002 farm bill), not bothering to wait until his own. Moreover the fixed exchange rates of the Bretton Woods regime were bound to outlive their usefulness at some point. It happened on Nixon's watch, but this was as much a coincidence as a result of political calculation.

I've always felt that economic policy during the Nixon period was influenced much more heavily by mistaken beliefs about and sometimes outright ignorance of economics than they were by campaign strategy. The near-obsessive focus on the campaign by this White House, the last White House, and all the Democratic candidates for the Presidency this year has I think tempted some analysts to evaluate past administrations by the standards of the present.

posted by: Zathras on 03.08.04 at 11:32 PM [permalink]

“...given that Nixon faced very large Democratic majorities in Congress who supported raising Social Security benefits even more than he did...”

President Bush’s protectionist policies and willingness to raise benefits to seniors seem senseless. These people will never reward him politically! He only alienates his base support. I can, at the very best, only give this administration at C+ regarding economic issues. Would a Democrat like John Kerry do a better job? Are you smoking an illegal substance? A Kerry administration would be far worse. President Bush is the lesser of evils.

Why is it so difficult to do what is necessary to truly help the economy to grow? That is a very simple question to answer: we live in a democracy---and many voters are economic illiterates. They take serious the ridiculous populist rhetoric of a John Kerry or John Edwards. Bashing the wealthy and advocating protectionist legislation can be very popular. Need some evidence? Just look at what happened to the Republican candidates who lost the fairly recent major races in Louisiana. It should tell you all you need to know.

posted by: David Thomson on 03.08.04 at 11:32 PM [permalink]

It always seemed to me that Nixon didn't care about domestic policy. He took the path of least resistance--which in those days meant a relatively liberal domestic policy--because he wanted to spend most of his time on foreign policy and went the way that he thought would insure his re-election. In a way, Nixon seemed to be somewhat of an echo of Eisenhower, who, while no domestic liberal, was not inclined to dismantle the New Deal because he was more interested in foreign policy. Of course, Nixon's lack of principle led to some egregious decisions (not even considering Watergate, of course) in the domestic arena. Bush's actions seem to be more purposefully political (although a recent article in Commentary suggests that Bush is "redefining" conservatism).

posted by: Marc on 03.08.04 at 11:32 PM [permalink]

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