J. Bradford DeLong
Romneyworld vs. Obamaworld J. Bradford DeLong U.C. Berkeley January 26, 2011
Somewhere out there in the multiverse, beyond space and time -- perhaps in the place on the TV show "The Fringe� where the characters Olivia and Walter's counterparts Fauxlivia and Walternate live -- is a place in which President Mitt Romney won the 2008 presidential election. The specific reasons for Romney’s victory are not terribly important. Perhaps the fundamentalist preachers of the Republican Party endorsed rather than scorned Romney for his Mormonism. Perhaps traditional Republican power brokers were less willing to forgive John McCain for his previous forays into "bipartisanship." Probably Mitt Romney would have been better informed and appeared more of a leader in responding to the financial crisis than McCain. Add in a few missteps by the Democrats, and it might well have been Mitt Romney before whom John Roberts bobbled the oath of office in January 2009. It could have happened here, therefore it did happen somewhere out in the multiverse. What do the American economy and economic policy look like right now along that President Romney branch of the multiverse? Well, they look a lot like they look right here on earth.
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J. Bradford DeLong
President Romney would have provided support to troubled banks--capital injections and stress tests--but he would have avoided even a few targeted nationalizations of the banking system: he is, after all, a Republican. He would not have pushed the Treasury to engage in large-scale quantitative easing through the Public-Private Investment Program or large-scale mortgage restructuring through the HAMP home mortgage modification program. On monetary policy, Romney would most likely have reappointed Ben Bernanke and let the Federal Reserve proceed as it wished. On fiscal policy, Romney's Chairman of the Council of Economic Advisers, Mark Zandi, and his National Economic Council Director Douglas Holtz-Eakin would have proposed a fiscal stimulus package that was 60 percent tax cuts and 40 percent spending increases. The Democratic Congress would then have bargained with the administration to produce a stimulus that was 40 percent tax cuts and 60 percent spending. But, of course, all these policies are exactly what Obama and the Democratic Congress actually enacted. On global warming, Romney would have abandoned economists' preferred Pigovian carbon tax for the complicated, corporatist and businessfriendlier approach of a cap-and-trade system; but he would have been no more successful than Obama in assembling a Senate coalition to achieve anything. On healthcare, Romney would have taken his signature Massachusetts health care reform and expanded it nationwide: we would have RomneyCare. But that is precisely what we do have. I see only two key policy differences between RomneyWorld and ObamaWorld. Had Romney been elected President in 2008 we would not have repealed the military policy of "Don't Ask, Don't Tell." And had Romney been elected President in 2008, Elizabeth Warren would not now be Assistant to the President for Consumer Financial Protection.
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J. Bradford DeLong
Otherwise? As far as policy is concerned, we would be smack on the mark that we are on now. But the politics would be very, very different. Think, first, of the Republicans -- their legislators and office holders, their spinmasters, stenographers, and intellectuals. All Republicans except a small grumbling fringe would be crowing about how ObamaCare -- oops! I mean RomneyCare -- is the golden mean between continued tolerance of a dysfunctional system and rash experimentation with overregulation. All would be saying that Republicans were able to get things done because they were not overambitious or free-market-phobic. Republicans would talk about how Romney had bargained the Dodd-Frank financial regulation into a form where it was not intrusive overregulation but merely a sober attempt to fence in a free-range system that had been out of control. But the Dodd-Frank bill that Romney would have signed would be, save for the consumer protection agency, the same as the Dodd-Frank bill that Obama signed. Republicans would talk about how Romney's expansionary fiscal policy had been effective in fighting the recession. They would say that, if anything, an even larger fiscal stimulus package back in the start of 2009 would have further boosted the shaky economy. In that alternate RomneyWorld, professional bipartisans would be praising Romney for minimizing partisanship and working for sensible policies. They would praise him for aggressively expanding the deficit so that the government boosted aggregate demand in the depths of the downturn when the private sector sat down. And they would praise him for having taken major steps to control entitlement spending through the long-term cost-cutting and revenue-raising provisions of RomneyCare. But these professional bipartisans who would be praising President Romney for tackling the entitlement problem through Romneycare, by taxing Cadillac health plans and by giving teeth to the Payment Authorization Board, would be the very same people who in our world give Barack Obama no credit for either.
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J. Bradford DeLong
So while the policy outcomes in RomneyWorld would be remarkably similar to those achieved in ObamaWorld, the rhetoric that accompanied and publicly defined those outcomes would have been markedly different. Democrats would have lamented Romney’s various half –measures (which they largely perceive as three-quarters measures in our world) to deal with the crises. But no cries of socialism, or vitriol about government takeovers, would have greeted RomneyCare. There would have been no winks and nods to assertions among a fevered base that the president is a usurper. There would be no claims from Senators like Charles Grassley-who until Election Day 2008 supported health reform based on requiring all individuals to pay a tax if they did not have health insurance --that the Affordable Care Act's requirement that all individuals obtain health insurance on pain of paying an extra tax is unconstitutional. There would be no Republican senatorial candidates telling people that when their party loses an election, "Second Amendment remedies" may be necessary. And, though it’s considered very impolite to say this out loud: quite possibly in alternate RomneyWorld our members of Congress would be less likely to get shot. January 26, 2011: 1013 words
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