David Warsh: Mitch Daniels's dire fiscal fears -- and his hypocrisy
‘Anxiety,’’ 1894, by Edvard Munch
SOMERVILLE, Mass.
The Republican Party is in disarray. Its House minority leader, California Rep. Kevin McCarthy, last week allied himself with disgraced former President Trump. Sen. Rob Portman (R.-Ohio), 65, director of the U.S. Office of Management and Budget (OMB) in 2006-2007, under President George W. Bush, announced that he would retire in 2022, after two terms. By current GOP standards, he’s considered a moderate.
But it was another G.W. Bush administration budget director who caught my eye, with an op-ed in The Washington Post last week. Mitch Daniels, who served George W. Bush as OMB director in 2001-2003, declared lost the battle to preserve the integrity of the welfare state that America fashioned in the 20th Century. That struck me as genuinely alarming.
In 2012, Daniels was a presidential hopeful, much in the mold of Mitt Romney, John McCain, George W. Bush, Bob Dole and George H.W. Bush. After leaving Washington, he had served two terms as governor of Indiana, in 2005-2013, where he was succeeded by Mike Pence. After deciding not to run, Daniels elected to become president of Purdue University, in West Lafayette, Ind.
“It’s no longer possible to say that, by starting now, we can avert massive, and massively unfair, changes in the promises we have made, or that current beneficiaries have nothing to worry about,” Daniels wrote. “That line was crossed even before the emergency budget blowout of 2020 added trillions to the debt tab we will dump on younger generations….
“No computer models are needed to see that there is zero chance of delivering on the promises already in place, let alone the fresh, astonishing proposals in Washington to make these commitments even larger,” he continued. The promises he has in mind are the Social Security System and Medicare, “so-called entitlement programs.”
Daniels is at least half right: There will be changes in promises that have been made, and they will be unfair. But the battle to preserve their outlines is still not fully joined. The preservation of the United States’ unwritten fiscal constitution is the single greatest crisis facing America in the 40 years ahead.
Worried about climate change? Deep forces are at work around the world, technological and political, which should gradually reduce carbon emissions to less dangerous levels. (That doesn’t mean we should stop pressing the matter.) General Motors’ announced intention to phase out gasoline- and diesel-powered vehicles by 2035 is one scrap of evidence. Exxon Mobil’s plan to reshape its beleaguered board in response to shareholder pressure is another.
Inclusion? President Biden’s plan to put some 1.3 million so-called Dreamers on a fast track to citizenship will be the first test of the strength of support for his ideas. The measure will face resistance in Congress. Gallup polls consistently show more that 75 percent of Americans favor immigration, as long as it is orderly. Return to the closed-border policies espoused by Trump seems highly unlikely.
Foreign relations? China and Russia have demonstrated that autocratic rule has its advantages, but aspirations to democracy have ways of making themselves known. War among global super powers seems even less likely than in the past. The U.S. has a proven role – as an exemplar of democracy, if it can keep it. The fear that a Trump-like demagogue could again be elected in America will, unfortunately, persist for decades,
Civil war? Unlikely, despite the crazies in Arizona, Texas, California, Oregon and Washington. But the possibility cannot be discounted altogether if the United States is unable to resolve its fiscal problems. A reminder of the difficulty of the problem was the breathtaking manner in which Daniels in his op-ed piece excused his one-time boss, George W. Bush, from a share of blame for the developing crisis.
“From very different directions, either of the past two presidents could have led the nation to a safer place, but neither had any interest in doing so,” he wrote. “Instead, both perpetuated the ‘noble lies – ‘You’re just getting your own money back,’ ‘We owe it to ourselves,’ etc. – by which the public has been misled through the years.”
What about ‘tax cuts that pay for themselves?’ Remember President 4-Percent-Growth, who successfully lobbied Congress to cut taxes even as he invaded Iraq? Remember Treasury Secretary Paul O’Neill who was fired by his boss for objecting?
Bush regained political sobriety in his second term, after trying and failing to privatize Social Security, when he appointed Ben Bernanke chairman of the Federal Reserve Board and, in 2008, backed him to the hilt in the financial crisis. Still: that a man so insulated from politics as the president of a major university should gloss effortlessly over the failings of the administration he served while decrying the failings of its successors indicates the magnitude of the problem.
I don’t think that any further evidence is necessary for today to say that macroeconomic arguments are likely to be the most important stories of the next forty years in America. But then I would think that. I am an economics journalist.
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A group of 10 Republican senators has asked President Biden to work with them on a bipartisan coronavirus-relief effort , as Democrats prepared to move forward on without GOP support, Kristina Peterson reported Sunday in The Wall Street Journal.
In a letter, the Republican senators asked to meet with Mr. Biden to present details of their proposal, whose overall cost they didn’t state, and said they were coming forward in response to his appeal for bipartisanship.
A journey of a thousand miles begins, or fails to begin, with a single step.
David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based conomicprincipals.com, where this column first appeared.