FOUR YEARS AGO it was obvious to everyone that the state of the economy should be seriously addressed by the candidates. With "It's not the economy, stupid" as his campaign motto, Bill Clinton won, promising to act decisively to revive the economy from the recession it was then in, to "reform welfare as we know it," and to overhaul the U.S. health system. Shall we give him credit for one out of three?
At least the economy has fully recovered from the recession of the early '90s. But who or what should get the credit? Ironically, it is due to Congress that Clinton's promises to "kick-start" economic growth were not implemented. As it turned out, the economy was beginning to revive before Clinton took office. Thus, any massive increases in government spending would have been illtimed, tending to push consumer spending beyond the economy's productive capacity. The result would certainly have been a return to unacceptable rates of inflation--that old dragon which was temporarily slain at the cost of two serious recessions in the early 1980s and 1990s.
The past two years' tug-of-war between the president and the Republican-dominated Congress have served one useful purpose. They have forced Clinton and his administration to move away from a long-standing Democratic bias in favor of government involvement in, and management of, the economy. Clinton's victory in his first run for the office already reflected his willingness to move with the electorate in the rightward direction, but the mid-term Republican win forced him to go still further.
By now, there is not a lot to distinguish between Clinton and Dole in terms of economic policy--and this is a good thing. Because we are not in the midst of a recession and negotiations over NAFTA, we will be spared much of the dangerous stupidity of the antiforeign rhetoric which fired up Ross Perot's forces and which inspired the supporters of Pat Buchanan during the early primaries. The American citizen is not losing ground to Mexico. The U.S. economy is not being deserted by profit-gluttons, eager to send money and jobs to Southeast Asia. In fact, unemployment rates are now lower than they have been for about ten years. Buchanan may have made friends campaigning in towns that have lost jobs to foreign competition, but overall jobs in the U.S. are rising at an enviable rate.
I am not saying that there is nothing in the economy which deserves to be debated. Indeed, the most crucial budgetary issue is not being touched with a ten-foot pole--namely, the urgent need for Social Security and Medicare reforms. Furthermore, the long-run health of the economy--and the need to encourage higher rates of national savings and investment, via tax reform--are issues for which presidential leadership is vitally needed. Unfortunately, these are issues which transcend the horizon of most campaigners. But I am glad that the types of economic issues which typically occupy a main stage during campaigns are not there, namely, whether the federal government should micro-manage whole sectors of the economy (e.g., health care), protect American jobs with "get tough" threats of tariffs, and spend us out of one crisis or another--national insecurity, high rates of poverty, overdependence on foreign oil, etc.
During the past decade, the whole world has learned that open markets and generally less direct government involvement in their economies is the best policy for any country, whether we are considering India and Peru, formerly socialist countries like Russia and Poland, or France and the U.S. Less state ownership of enterprises and fewer restrictions on markets (especially where strong competitive forces are at work, as in agriculture, communications and computer chips) have released powerful forces for efficiency and innovation. Surprisingly, fewer attempts to macro-manage the business cycle with tax and spending changes appear to produce greater economic stability, given the potential for awkward implementation lags and the dangers of overshooting the target. …