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Why a Republican victory would be good for America and the world

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In Brief

Non-Americans generally have a patronising, derisive view of American politics. Trivia, mud-slinging, bitter partisanship, extremism among both Republicans and Democrats, and Washington gridlock crowd out sensible debate, reasonable compromise and hard policy choices.

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But this year the US is having a serious debate about its anaemic economy. Low growth, high unemployment, a squeezed middle class and escalating public debt are the key issues. President Obama and the Democrats are offering one set of policies for economic recovery; Governor Romney and the Republicans are offering a starkly different set. Behind these policies are competing philosophical and moral visions for America.

Europe is having no such debate. The European economy is in a worse state than the US economy, especially with its never-ending euro crisis. But Europe’s mediocre politicians and bureaucrats blunder on without a fundamental debate on policy choices, and with little sense of competing philosophical and moral visions to underpin them. Such debate is also lacking in Asia and other parts of the non-Western world.

While there are of course differences between centrists and hardliners in both camps, President Obama and the Democrats agree that public debt, approaching 100 per cent of GDP and projected to increase exponentially, is unsustainable, and should be cut in the medium term. But, in the short term, they favour a Keynesian stimulus via increased spending and cuts to payroll taxes. Beyond that, deficit cutting should include tax increases on high-income earners and steep cuts in defence spending. They have nothing to say about cuts to entitlement programs that account for the bulk of federal spending, notably health care and pensions. They also favour more government investment in infrastructure and renewable energy. The underlying philosophy is a combination of Keynesian macroeconomics and faith in government intervention.

Republicans reject Keynesian stimulus outright and aim to tackle public debt straight away and head on. The Romney-Ryan budget plan relies on steep cuts to public spending through deep market-oriented reforms of entitlements, notably Medicare, Medicaid and Social Security. They favour tax reform to simplify the Byzantine tax code and close loopholes. They pledge tax cuts and foreswear tax hikes. And they have high ambitions for deregulation, not least on energy policy to spur a boom in shale oil and gas.

The underlying Republican philosophy is individualist rather than collectivist. It offers supply-side, rather than demand-side, solutions. Republicans believe that removing government obstacles will provide the right incentives for private-sector saving, investment, entrepreneurship and innovation. ‘Limited government and free markets’ is the mantra. This is a ‘Hayekian’, not a ‘Keynesian’, program for the American economy.

For those that favour the classical-liberal message of Hayek — based on limited government, free markets and individual liberty — to Keynesian social engineering, the best outcome would be for Governor Romney to win the White House, and for the Republicans to keep control of the House of Representatives and strengthen their representation in the Senate.

America needs to have the right supply-side signals being sent — especially to entrepreneurs — to bring about an economic recovery and renaissance. That is what Ronald Reagan did in the 1980s by tapping into the can-do spirit and rugged individualism of Americans. It is this American vitality, which a European-style social democrat like President Obama has never understood, that inspires more confidence in America’s prospects than Europe’s.

Two further implications of the US elections come to mind.

On the domestic front, while the presidential election grabs the headlines, the congressional elections are at least as important. Even if President Obama is re-elected, he will likely face even stronger Republican representation in Congress. It is possible that Republicans will control both the House and the Senate. That will clip his wings enormously. And if Governor Romney is elected, he and the Republicans will have to compromise to get things done — just as the founding fathers, with their constitutional system of checks and balances, intended.

Compromise on cutting public debt will matter most of all. Republicans are right to put overwhelming emphasis on spending cuts, entitlement reform and tax reform, but they should concede something on revenue-raising measures.

Finally, America’s economic choices at home matter hugely for the rest of the world. Economic weakness at home translates into weak leadership abroad. But diagnoses and prognoses of American decline are off the mark today, just as they were in the late 1980s and early 1990s. The US is still the ‘indispensable’ nation. China and other powers are nowhere near showing the constructive global leadership that the US has provided since 1945, nor are they likely to in the foreseeable future. That is true of ‘hard power’. It is even truer of ‘soft power’: the American ‘way of life’, particularly its model of liberty in a law-governed society, remains globally compelling in a way no other country can match — least of all China. Hence the world continues to rely on American leadership on security and economic issues. That applies to Asia too, where the US is the vital ‘balancing power’.

Conventional wisdom is that American leadership will get weaker and weaker. But American leadership abroad depends, above all, on economic strength at home. An economic renaissance will translate into reinvigorated American leadership abroad. The chances of such a renaissance occurring will be better with a Republican victory this year.

Razeen Sally is Visiting Associate Professor of the Lee Kuan Yew School of Public Policy, National University of Singapore, and Director of the European Centre for International Political Economy in Brussels.

A version of this article first appeared in the Straits Times.

4 responses to “Why a Republican victory would be good for America and the world”

  1. While both sides view cutting the debt as a serious issue, on the other hand, Republicans are non-compromising about any cuts to defence spending or any tax increases on high income earners.

    In particular, when the Joint Select Committee on Deficit Reduction failed (reported by democrats as due to “the Republican insistence on making tax cuts for the wealthiest Americans permanent”), $1.2 trillion of across the board ‘sequestration’ cuts (including social programs) were triggered. While Obama intends to see these cuts through (demonstrating he is able to some form of compromise on cuts), there is an increasing Republican disquiet about the deep defence cuts.

    Republicans possibly have too much to say about cuts to entitlement programs. In particular, Vice Presidential nominee Paul Ryan’s proposed budget was slammed by Catholic Bishops for “fail[ing] a basic moral test”, and they stated “deficit reduction and fiscal responsibility efforts must protect and not undermine the needs of poor and vulnerable people.”

    Mitt Romney (the Republican Presidential nominee) is also insisting on 20per cent income tax cuts in order to spur on growth in the economy. While he claims the growth caused by tax cuts will pay for the $500bn estimated cost of the plan, his campaign <a href="http://money.cnn.com/2012/10/03/news/economy/romney-tax-plan/&quot>does not provide estimates as to how much revenue the growth would create, and others have questioned exactly how “revenue neutral” this plan could be.

    Mitt Romney’s foreign policy credentials have so far fallen dissapointingly short of ‘strong leadership abroad’. His assertion that the Middle East will “remain an unsolved problem… and we kick the ball down the field” has been slammed as undermining peace efforts with a passive, pessimistic outlook. While visiting Israel he also upset Palestine by claiming their culture is at fault for their economy being slower than Israel’s. He also drew fire from the UK Prime Minister for comments about the Olympic Games preparation, during a visit to London.

    Perhaps a Republican victory at some point would be good for America and the world, in order to renew new ideas, but maybe not this time around.

    • This Hayekian author writes that, if Obama is re-elected, he will likely face even stronger Republican representation in Congress. The Republicans may control the Senate as well as the House. But, he asserts, if Romney wins, he is going to have to compromise. Why? Does the author expect the Republicans to seize control of the Senate and retain a majority in the House only if Obama wins and not Romney? If Romney wins and the Republicans control Congress, where’s the need for him to compromise? Maybe it will just be a compromise between Hayek and Ayn Rand.

  2. Hey guys! This author just conveniently skipped the 8 years of supply-side experiment, 2 horrific unpaid wars, collapsed middle-class incomes, exploded wealth for the top 1%, lowest American prestige abroad and the near depression economy…. all implemented by Republican ideals system, preceding today’s total mess.
    Let’s not be fooled again!

    • Actually, it’s worse. The author skipped 30 years of supply-side economic policy, totally left out the part where Hayek expressed support for universal healthcare and the GOP’s penchant for military Keynesianism at all times, and generally addressed only the most superficial talking points of each party rather the actual policies they have championed.
      This is a pretty pathetic and lazy article all the way around. Although it was written by a professor, I doubt it would pass the smell test in a freshman poli sci class. Stick to whatever else it is you were doing, Professor Sally. We have to wade through enough propagandistic garbage here as it is.

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