A Referendum on Obama

A Republican presidential victory, together with Republican control of the House and Senate, would likely lead to substantial reduction, repeal, and replacement of many Obama initiatives, attempts to reform taxes and entitlements, and measures to impose greater fiscal discipline. High on Romney’s agenda is a reduction of the corporate-tax rate, from 35% to 25%, the OECD average level (the other Republican candidates would lower it still more), which would redress a major competitive disadvantage for American multinational companies’ global business.

A Republican victory would also most likely lead to a major push to open up many more energy-exploration opportunities within America, which Obama has stymied. Romney has promised tougher negotiations on trade and currency with China, but is generally far more likely to push new trade agreements than the labor-supported Obama administration. If, however, Democrats retain control of the Senate, this will be far more difficult to accomplish. A Republican president also would make appointments to many key policymaking positions, from the Federal Reserve and the Treasury to regulatory agencies.

If Obama is re-elected, and Republicans control the House and Senate, his legislative agenda will essentially be a dead letter, and he will spend the next two years, at least, negotiating its reform and rollback. In this scenario, the policy center of gravity in the Republican party would shift to House Speaker John Boehner, the chairman of the House Budget Committee, Paul Ryan, House Majority Leader Eric Cantor, and other key Representatives, including David Camp, Kevin Brady, and Kevin McCarthy, along with several Senators.

In that case, Obama would be wise to move to the center (as Bill Clinton did after the Democrats lost control of Congress in 1994) and work with congressional Republicans to shape sensible tax and entitlement reforms. But that seems unlikely: since the Democrats’ massive defeat in 2010, Obama has moved even further to the left, embracing a more populist agenda.

Regardless of the outcome of this year’s presidential and congressional elections, various Republican state governors are likely to gain a higher national profile. All of them – including Mitch Daniels of Indiana, Chris Christie of New Jersey, Bob McDonnell of Virginia, and former Governor Jeb Bush of Florida – declined to seek the Republican presidential nomination, but will be on the short list for 2016 should Obama win in November.

Supreme Court Justice Louis Brandeis famously described the states as laboratories: they should be allowed to experiment and learn from each other which policies work. For example, Clinton and the Republican Congress based landmark 1996 welfare reform on policies originated by Wisconsin Governor Tommy Thompson and successfully emulated by New York City Mayor Rudy Giuliani, both reformist Republicans. The current cohort of Republican governors offers similarly innovative state-level solutions – for example, on spending, debt, and unfunded pension and health liabilities – as models for the country.

Until November, divided government and contentious campaigning will most likely prevent significant policy moves. But, following the election, taxes and spending, trade policy, federalism, regulation, and defense will take a different course – how different depends on who wins – with important implications for America’s fiscal position, external balance, and much else, including its relations with the rest of the world.

Michael Boskin, currently Professor of Economics at Stanford University and a senior fellow at the Hoover Institution, was Chairman of President George H. W. Bush’s Council of Economic Advisers, 1989-1993.

Copyright: Project Syndicate, 2012.www.project-syndicate.orgFor a podcast of this commentary in English, please use this link:VIDEO: To hear more from Michael Boskin on current US affairs, download the video by clicking on this link:

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