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Campaign Malarkey Knows No Bounds

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Campaign Malarkey Knows No Bounds

February 2, 2016

Presidential campaigns are a free-for-all when it comes to platitudes, promises, and pronouncements. Candidates and their supporters - in some cases, the White House - say what they need to say to garner votes, seemingly without considering the rigor or the implication of their arguments.

Presidential hopefuls tend to focus on the state of the economy, or voters' perception of it, and for good reason: People tend to vote their pocketbook when they go to the polls every four years to elect a president. Incumbents take credit for the positive outcomes and deny any responsibility for policy failures. Challengers do just the opposite. With that in mind, let's examine some of the promises and pablum being offered during the 2016 campaign season.

1. The economy is doing better than when Obama took office.

This is a standard Democratic talking point used to convince voters to keep a Democrat in the White House after the lackluster economic performance during President Barack Obama's two terms in office.

It is also quite silly. When Obama was sworn in on Jan. 20, 2009, the U.S. economy was suffering through the worst recession and economic crisis since the Great Depression. It would be difficult for the economy not to be doing better, even without all the ministrations from monetary and fiscal policy.

An economy's natural tendency is to grow. Really it is. Government can put obstacles in the way: usurious tax rates and excessive regulations, for example. But the fact remains that people produce in order to acquire the resources to consume.

Back in 1980, Republican hopeful Ronald Reagan posed a simple question to voters in his closing statement at the single debate with sitting president Jimmy Carter.<

"Ask yourself, 'Are you better off now than you were four years ago?'" Reagan said.

The question was rhetorical. It would have been hard to answer "yes." Candidates of all stripes have used Reagan's question in one form or another, with varying degrees of success, ever since. In turning it into a declarative statement, today's Democrats aren't taking any chances.

2. No tax increases on the middle class.

Democrat Hillary Clinton has pledged not to raise taxes on middle-class families making less than $250,000 a year. Leaving aside her income threshold for middle class - real median income in the U.S. was $53,657 in 2014 - there simply are not enough wealthy taxpayers to fulfill the promises the federal government has made to future generations. Throw in Clinton's proposed $1.1 trillion of spending for education, energy and infrastructure over the next 10 years, and the only way middle-class taxes aren't going up is with the assistance of fuzzy math.

"You have to give Bernie Sanders credit for saying what many people have long held: Middle-class benefit programs of that size and scope have to be financed by the middle class," said Pete Sepp, president of the National Taxpayers' Union, a non-partisan citizen group that works for limited government.

Questioned about her middle-class tax pledge in a recent interview, Clinton downgraded it to a "goal." As president, she might find it necessary to reclassify the goal as a case of wishful thinking.

3. The 4 percent solution.

Republican Jeb Bush has been campaigning on a platform of 4 percent economic growth, to be achieved through a combination of tax reform and tax cuts. The last decade to witness average GDP growth of 4 percent or greater was the 1960s.

Things have changed since then. The population is aging. Productivity growth has been anemic for the past decade. These two factors are inhibiting potential growth. 

Lowering the corporate tax rate so the United States would become a desired domicile for business investment would help. But short of massive immigration and a productivity miracle, Bush's 4 percent growth target is, like Clinton's, wishful thinking.  

4. Jobs created by building the Keystone XL Pipeline would be temporary.

This assertion has been a staple of President Obama's and one of his many excuses for denying TransCanada's application to construct a pipeline to carry Canadian oil from Alberta to U.S. refineries on the Gulf. (An equally silly reason is his claim that additional oil supply would do nothing to lower U.S. energy prices.) Both Clinton and Bernie Sanders have come out against the pipeline; in Clinton's case, only after she initially supported it.  

Obama touts the urgency of infrastructure investment to repair and rebuild America's crumbling roads, bridges and tunnels. Unless he is contemplating a constant Keynesian stimulus - trash what was repaired in order to repair it again - his infrastructure jobs represent the epitome of temporary employment.

5. The deficit has come down.

The federal deficit fell to $439 billion, or 2.5 percent of GDP, in 2015: the lowest since 2008 and 2007, respectively.

Even declining annual deficits add up to increased debt. Publicly held debt as a share of GDP stood at 73.6 percent last year, more than double the 2007 ratio. 

Over the next decade, things will get worse, according to the Congressional Budget Office's Budget and Economic Outlook, released last week. Tax revenues are projected to remain stable at 18 percent of GDP over the next decade while the rising cost of health care and increasing number of beneficiaries will boost outlays to 23.1 percent of GDP from 20.1 percent last year.

By 2026, the debt-to-GDP ratio will rise to 86 percent, the highest since just after World War II, according to CBO. That's the elephant in the room: the one thing candidates from both parties are carefully avoiding. 

Democrats want to increase government spending. Republicans seek salvation through tax cuts. They both giveth without mentioning what they must taketh away. 

To be fair, a few candidates do have proposals to address the debt, increasingly driven by mandatory spending. Republican Chris Christie, Governor of New Jersey, has laid out a comprehensive plan to reform entitlement programs, reining in their growth while ensuring their solvency. So has former Florida Governor Jeb Bush. Ohio GOP Governor John Kasich, who emphasizes his experience in balancing budgets in Ohio and as a member of Congress in the late 1990s, has put out a budget framework without the details. 

That said, none of the candidates wants to be a spoiler. There's plenty of time for bad news once elected. For now, it suffices to invoke Reagan's rhetorical question, implying that a vote for him or her will ensure that we are better off four years from now than we are today.

 

Caroline Baum is a contributor to e21. You can follow her on Twitter here.

Interested in real economic insights? Want to stay ahead of the competition? Each weekday morning, e21 delivers a short email that includes e21 exclusive commentaries and the latest market news and updates from Washington. Sign up for the e21 Morning eBrief.

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