In a new column for the FT, I discuss the fiscal legacy of the Bush administration. After I filed it, I settled down to do my taxes. The sequencing was lucky. Had I endured the annual April ordeal first, I think I would have been too paralysed by gloom to discuss the subject. (Living in DC--local income-tax rate, 8.5 per cent--doesn't help. What do they do with it all? )
Competition for “most damaging legacy of the Bush administration” is lively. Iraq is the front-runner, of course, but bear in mind the wreckage of fiscal policy – although to use that term is to imply that the US even has a fiscal policy, when it does not. It would be more accurate to talk of fiscal consequences or fiscal footprint (an apt metaphor) than to imply anything as deliberate as “policy”.
All three presidential contenders criticise the administration on this, but none is offering much improvement. The Democrats remind the country that in the late 1990s the Clinton administration ran a budget surplus. With ill-designed tax cuts and reeling indiscipline on spending (partly, but not only, because of the war) the Bush administration turned this into a deficit. Barack Obama’s answer is the same as Hillary Clinton’s: undo the tax cuts and then raise spending by even more. John McCain, the Republican nominee and supposed fiscal conservative, is against raising taxes and promises to get spending down instead – but will not say how to do it.
The whole debate rings hollow anyway, because most Americans think it has nothing to do with them. The Democrats are promising to raise taxes only on the rich: the country’s vast middle class expects to be unaffected. And as long as Mr McCain declines to explain exactly how he will curb spending (aside from attacking earmarks, the special interest spending projects which in the larger scheme of things are trivial), voters will be equally blithe about that side of the calculation too. Everyone can deplore the fiscal incontinence of the Bush administration and hardly anyone need worry about what restoring fiscal control might require. In this, as in other areas, the thinking boils down to: “After George W. Bush, everything will be fine.”
On taxes and spending – as on Iraq – it will not. The point has become dulled through repetition, but the fact remains that the US faces, from a position of fiscal weakness, new and mounting pressures on public finance. In dealing with the larger problem, muddling through is unlikely to succeed. The country will have to change how it confronts fiscal questions.
You can read the rest of the column here.