Articles

Message to the GOP: Austerity Is Not Enough

March 02, 2011

Yesterday Congress passed a resolution ensuring there will be no government shutdown for the next two weeks. But the threat will remain center stage unless Republicans and Democrats can agree on the budget for the remainder of this fiscal year. Who would be blamed if they can't?

Polls provide conflicting data. Democrats take hope from the Feb. 22 Gallup poll reporting that only 32% of Americans want politicians to "hold out" for cuts even if it means a shutdown (60% favor a compromise, and the rest express no opinion). Republicans are buoyed by a Feb. 24-25 Rasmussen survey reporting that 58% favor a partial shutdown until "Republicans and Democrats can agree on what spending to cut."

In this week's ABC/Washington Post poll, 35% say they'd blame President Obama if the "Republicans and the Obama administration can't agree on a budget," while 36% would blame the GOP. That's a significant shift from 1995, when the same poll reported only 27% would blame President Bill Clinton for a shutdown while 46% would blame House Speaker Newt Gingrich and congressional Republicans.

Of course, Democrats could have passed the fiscal year 2011 budget last summer, when they had huge congressional majorities in both chambers. Whether their failure stemmed from their leaders' incompetence or a desire to protect fellow party members facing re-election from casting a vote, Democrats have only themselves to blame for the current crisis.

Still, Mr. Obama and his party have the upper hand. They want to protect their orgy of spending and force the GOP into shutting down the government. Republicans, who cut $42 billion from this year's budget by blocking an omnibus spending measure in December's lame duck session, strongly want to keep cutting. But they don't control the Senate or the White House.

The GOP can maximize its leverage in the upcoming vote on the debt ceiling by insisting on structural reforms. Some congressional Republicans are talking about pairing an increase in the debt ceiling with automatic spending cuts that kick in if the deficit exceeds a fixed target. This was done successfully under the Gramm-Rudman-Hollings Act of 1985 (amended in 1987). This law brought about significant spending restraint and put the country on a path toward a balanced budget until Congress abandoned the approach in 1990.

Still, dangers lurk for Republicans. If they focus only on austerity and neglect to offer a pro-growth message, their attempt to tame the budget will be of limited appeal and could prove to be their undoing.

Consider the United Kingdom. Thirteen months before the last British elections, Conservatives led with 45%, yet ended the campaign with 37% to Labour's 28% and the Liberal-Democrats' 23%. One explanation is that all three parties pledged austerity: Conservatives immediately, the Liberal-Democrats soon, and Labour down the road. None of the parties emphasized a prosperity agenda.

It is surely essential that Republicans justify spending cuts on fiscal and moral grounds. It is also essential to make the case for restoring robust growth and job creation.

The political genius of Ronald Reagan is that in 1980 he added a pro-growth emphasis (supply-side economics) to his economic message. In 1976, when Mr. Reagan unsuccessfully challenged President Ford, he concentrated more on austerity.

Americans today want to know what steps Republicans will take to create more jobs, bigger paychecks and greater prosperity. A good starting point for the GOP would be to outline a comprehensive tax reform that scrapes preferences out of the tax code and makes it simpler, flatter and fairer.

A Feb. 2-5 Gallup poll (its most recent on the issue) gave Mr. Obama a 27% approval rating on the deficit and 37% approval on his handling of the economy, making the president politically vulnerable. But as the incumbent, Mr. Obama has plenty of advantages and his West Wing political wizards will exploit them.

To prevail in 2012, the GOP needs a pro-growth candidate who represents a pro-growth party. Republicans must put front and center political leaders who can speak in compelling terms about opportunity as well as sacrifice. A message of austerity and prosperity is far more powerful than either one alone.

This article originally appeared on WSJ.com on Wednesday, March 2, 2011.

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