It’s the economy, stupid



By Peter J. Wallison.

The Democratic convention in July was impressive, but primarily because it was a clever distraction from what should be the real issues in the current campaign – ironically summed up as, “It’s the economy, stupid.” Anyone who remembers the first successful Clinton campaign in 1992 will recognize immediately what was missing from this year’s Democratic Party celebration of patriotism, diversity and inclusiveness.

The recent news that the economy grew only 1.2 percent in the second quarter – and that the first quarter was revised downward to a meager .8 percent growth – only emphasizes the intractable problem that Hillary Clinton faces in trying to both follow and apologize for President Barack Obama’s economic policies.

Yes, Clinton’s acceptance speech noted that she and the Democrats have not done a good enough job in recognizing the economic pain that people across the heartland have been suffering. But these are only words of palliation. What she said she would do about it showed that she would continue the same policies – higher taxes and more government spending – that, combined with excessive regulation, are responsible for the economy’s sluggishness throughout the two Obama terms.

Normally, this would be a laydown for the Republican candidate, and we would see a revolt against economic drift and disappointment that would shift the presidency from the Democrats to the Republicans, the kind of reversal of party control after a two-term presidency that has been customary in the post-World War II period. But it happens that the Republicans have nominated a candidate this year who will make this race much closer than it should be.

Until his economic speech this week, Donald Trump had not shown any skill at exploiting the weakness of the Democratic argument for continuing to hold power. Instead, he continued to add new material to the Democratic argument that he doesn’t have the temperament, honesty and perhaps the basic knowledge of policy to be president. Unless Trump radically changes his message and his method of presenting it – one speech on the economy is not enough – the highly unpopular Hillary Clinton will become president by default.

What can Trump do to recover? Start by adopting the successful 1992 slogan, “It’s the economy, stupid.” That would do much to emphasize that Clinton has both moved away from her husband’s successful economic policies and is running to create a third Obama term; it would also put the Republican campaign back on the normal track, making the out-party’s strongest argument for change when the incumbent’s economic policies have failed.

Where Clinton has emphasized attacks on Wall Street, and further extension of the Dodd-Frank financial regulation law, Trump should point out that it was precisely these policies – pursued by Obama and the Democratic Congress elected in 2008 – that have led to the economic malaise of today. Every day in which Trump wastes his time raising divisive issues about race or displaying his over-the-top sensitivity to criticism, is a day he has cast his campaign into further irrelevance.

At this point, everyone should understand that the economy is failing. Two consecutive quarters of less than 2 percent growth could actually be signaling a recession on the way. In any event, it’s just a continuation of the slowest economic recovery since 1949. It’s so easy to link these numbers to Democratic policies that any sensible Republican campaign would have long ago made the slow economic recovery its central theme.

Tax increases under Obama have come through increased income taxes – a rise in the top marginal rate to 39.9 percent (Clinton indicated in her convention speech that it would go higher), a phase out of personal exemptions, a phasedown of itemized deductions – and an increase in tax rates on dividends and capital gains. Obamacare has added other taxes on employers and on medical devices.

Remember when the Republicans were arguing that higher taxes on small business would reduce jobs and growth? It’s happened. Then there is Dodd-Frank, by far the most far-reaching and costly regulation of business and finance since the New Deal. The new regulation of community banks, in particular, has stifled the growth of business start-ups, which are the single largest source of employment growth in the economy. (Clinton says she would go beyond Dodd-Frank.)

But who would have imagined that the Republican nominee, who has been dealt a winning hand, would squander it with his own distractions. Even if Trump has been talking about weak economy, it’s not been reported because he continues to raise irrelevant issues with outlandish and often absurd statements at rallies or in tweets.

The numbers on the economy are there for anyone to see. There’s ample reason for Clinton and the Democrats to create distractions from the “the economy, stupid.” The reason for the Republican candidate to do it is inexplicable.

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