Recipe for Depression

My brother said something the other day that I found a little disturbing. He said “Democrats are better for the economy.” Of course he was only 10-years old when Jimmy Carter left office. The economy did do fairly well during Bill Clinton’s presidency, but I am not sure that he deserves most of the credit for it. To be fair, while Clinton’s tax hikes did not help the economy, his free trade policies did. Still. In my opinion, the single largest factor responsible for the 1990’s economic growth was technology creating massive gains in productivity. Maybe Al Gore deserves credit for the growth since he invented the Internet. Well maybe not.

But what about today? Since it appears we may be in (or heading towards) a recession, how will the Democrats improve the economy? The economic plans of Clinton and Obama appear to involve turning away from free trade and raising taxes. The last President that I recall doing both in the face of an economic downturn was Herbert Hoover. It didn’t work so well for him (or the rest of the Country).

Michael Barone makes this point on NRO in Uncle Sam Pays? Sure — Whatever.

On fiscal policy, both Barack Obama and Hillary Clinton want higher taxes, at least on high earners. They want to let at least some of the Bush tax cuts expire in 2010, as scheduled. On trade, they oppose new free-trade agreements and want to renegotiate NAFTA with Canada and Mexico.

As it happens, another president embraced such policies in a time of economic slowdown and financial market turbulence. Herbert Hoover raised taxes on high earners sharply and, ignoring a letter from 1,000 economists, signed the Smoot-Hawley tariff in 1930. The results were not pretty. Until now, his example has not commended itself to Democrats. One wonders whether voters will agree that tax increases will stimulate the economy.

He also talks about Carter memories.

Almost all voters in 1992 and a large majority in 2000 had vivid memories of the 1970s, when we had both economic stagnation and double-digit inflation — stagflation — and thanks to government price controls, motorists had to wait an hour in line to fill up their gas tanks. Those experiences put the advocates of bigger government on the defensive.

This year, half the voters are too young to have been behind the wheel in a gas line or to have been paying rapidly rising monthly bills with a paycheck eroded by inflation. They have lived all their adult lives — all their lives, in the case of the millennial generation, born since 1980 — in an era when we have had low-inflation economic growth 95 percent of the time.

I think McCain really should start challenging Clinton and Obama on the economy, especially on trade. Point out how many jobs were CREATED as a result of NAFTA and other free trade agreements instead of how many lost. Since Clinton and Obama are still battling for Democratic primary voters, they will find it difficult to backtrack from harmful protectionist positions.