By Harlan Ullman
Were Voltaire alive and asked to comment on the multiple collisions between rhetoric and fact that resonated throughout the presidential nominating conventions in Tampa, Florida and in Charlotte, North Carolina, he might have quipped: “lies, damned lies and political parties.” That political hyperbole fires up the already faithful base is not news to most Americans. The tragedy is that by evading fact and truth, both parties have conjured up fatally flawed policies that will not work and deprived Americans of choices with sound bites masquerading as serious propositions.
Consider the economy and job creation. Both parties have competing and contradicting illusions. One believes that economic recovery demands tax and spending cuts to generate investment; reduce the size of government; and thereby provide the financial stimulation to grow the economy ultimately slashing federal debt and deficits. With greater regulatory relief and the assumption of shrinking deficits, trillions of dollars of private sector funds sitting on the sidelines will be encouraged to re-enter the market. In this reverse Keynesian theory, private not public sector spending will create growth, what critics called “trickle down” or, as George H.W. Bush presciently observed, “Voodoo economics.”
The other party believes that expanding the middle class is the ticket for economic growth. Taxing the wealthy to pay its “fair share,” while preserving benefits for the middle class and reducing federal spending, is the proposed path to economic recovery. And, according to this mantra, an expanding middle class will empower the poor and less fortunate to migrate upwardly bringing benefits to more and ultimately all Americans.
The fundamental flaw with both sets of beliefs is that economic recovery must be treated comprehensively as a whole and cannot be compartmentalized into separate, discrete parts based solely on class status of rich or poor. A useful analogy is treating a massive infection of the body one organ or limb at a time. That does not work.
Sadly, an effective economic fix is achievable if political compromise and collaboration were possible. But neither is—a point driven home by former President Bill Clinton’s constant referral in his nominating speech to cooperation not compromise, code for understanding that the latter is an unspeakable word.
Denial and distortion of fact and truth for political purposes are endemic facts of life. What is different today is the extent to which facts no longer matter as the speeches throughout the Republican convention particularly revealed although the Democrats had their share of stretching truth. Among the Democrats’ biggest fibs was that the Obama administration had saved the auto industry. The fact is that only General Motors and Chrysler were saved and GM still owes the taxpayer about $40 billion it is unlikely ever to pay. The other member of the big three, Ford, took no bailout and survived.
A fact: according to the Wall Street Journal, from last July to this July, GM and Chrysler produced just under 2.5 million vehicles or less than 30% of the 8.4 million manufactured in America by U.S. firms including many with names such as Toyota, Honda, Nissan and more than a half dozen others. And had GM and Chrysler failed, both would have declared bankruptcy and with that legal protection would not have been forced to shut down just as American Airlines is still flying under Chapter 11 bankruptcy protection.
Both parties rejected offering any big ideas for economic growth along with deferring mention of any specifics. Big ideas and specifics are dangerous. They provide real targets to attack. So what can be done to rebuild the economy?
A national infrastructure bank tops the list, financed by the private sector based on assured revenues from user fees and tolls for roads, highways, electrical grids, bridges and other vitally needed fixes and guaranteed by the government. With interest rates at historical low levels, the costs of raising 1 or 2 trillion dollars in bonds that would be needed for a massive economic rejuvenation would run between $10 – 20 billion a year for the life of the bond and be paid along with the principal through these fees.
Next, companies and individuals have somewhere between $1-2 trillion safely parked in cash or equivalents, a good chunk of GDP. Putting that money back into circulation requires greater certainty about monetary policy and eliminating the more onerous financial regulation irrespective of intention. Barring a miracle, neither party is likely to agree on an acceptable mix of deficit reduction and revenue generation. So, why not empower real regulatory reform? Clearly, that effort could founder as did the Bowles-Simpson budget commission. But damned political parties aren’t the answer either.
Harlan Ullman is Chairman of the Killowen Group that advises leaders of government and business and Senior Advisor at Washington DC’s Atlantic Council.