Nothing’s certain in politics, and if you don’t believe me, ask President Al Gore. But there may be an emerging exception to the rule: the man from Nambour, Wayne Swan. For whatever Australia’s Treasurer says about America’s Republican Party and its policies, the opposite is always and everywhere true. Call it the Wayne Principle.
Swan displayed this uncanny skill for the first time last month when he told a Melbourne crowd: ‘Don’t let Australia become a Down Under version of New Jersey, where the people and communities whose skills are no longer in demand get thrown on the scrap heap of life.’ This, of course, would come as a surprise to most actual Jersey residents, who have seen their fortunes improve under Republican Governor Chris Christie, the most reform-minded leader the Garden State has had in a generation. Admittedly it’s a low bar when your predecessor is Jon Corzine and various other former local Jersey politicians languish in jail, but I digress.
Then came last Friday’s speech to the Financial Services Council in Sydney, where Swan asserted that ‘the biggest threat to the world’s biggest economy are the cranks and crazies that have taken over a part of the Republican Party,’ a nod to Tea Party-backed Congressmen elected in 2010 who favour federal spending restraint, lower taxes and streamlined regulation to stimulate the private economy. Again, the Wayne Principle at work.
Consider: America’s trillion-dollar annual deficits and permanently higher spending baselines; bankrupt entitlement programs; banks on a capital strike; regulators like the Environmental Protection Agency and the Consumer Financial Protection Bureau, which are crushing companies’ ability to hire, invest and innovate; a Justice Department that’s extorting money out of banks, using shaky legal theories; a bipartisan housing lobby promoting more taxpayer-backed anti-foreclosure programs to prevent that market from finding a bottom; ballooning student debt — the list of troubles goes on, and on and on.
Pish, say Swan and his Labor caucus chorus. The problem with the world’s largest economy is that its government isn’t spending enough, and those Tea Party types are the ones getting in the way — because what America really needs is more Congressional spending, not less. And why not, really: since September 2008, the Federal Reserve has bought 77 per cent of that debt and kept interest rates, and thus financing costs, helpfully low. You can see where Wayne gets these brainstorms.
So let’s roll the tape. In February 2009, the Obama administration and its Democratic Party-controlled Congress launched an $830 billion stimulus, promised it would create three million new jobs and that unemployment would fall to six per cent. Top White House officials like Larry Summers and Peter Orszag touted the fabled Keynesian ‘multiplier’ and promised that $1 of government spending would produce $1.50 of returns (which the supposedly non- partisan Congressional Budget Office believes too). Moody’s economist Mark Zandi, the chief Keynesian on the Street, cheered. The administration also churned out a few ‘targeted and temporary’ measures like the first-time homebuyer’s tax credit and cash for clunkers.
More than three-and-a-half years later, GDP growth is anaemic, at best. Unemployment is at 8.1 per cent, the 43rd straight month in a row it has landed above eight per cent. The labor force participation rate sits at 63.5 per cent, the lowest share of Americans over the age of 16 in the workforce since the early 1980s. Minorities are suffering most; according to the August employment report, black unemployment is at 14.1 per cent, and for young blacks, aged 16 to 19, that figure is a staggering 37.9 per cent. Meanwhile, median wages, adjusted for inflation, have declined by more than $4,000 since President Obama took office.
The American economy may be growing, but Americans sure don’t feel good about it. In fact, they feel downright horrible. They’re living through the weakest recovery since the Great Depression.
If anything, the US economy needs less spending and more focus on creating conditions for private businesses to thrive — exactly what the Tea Party supports. On Friday Swan conceded: ‘Congress must outline a credible medium-term plan to assure markets that the US can put its budget back on a sustainable footing over time,’ meaning in the long run, whenever that is, he’s not for more spending, either. He promises.
But in the short run, the Treasurer frets that a combination of the expiration of the Bush-era tax rates plus mandated spending cuts ‘would tip the US economy back into recession — the CBO estimates the US would contract at an annual rate of 2.9 per cent in the first half of 2013’, he says. Taxes on income, capital gains, dividends and estates are all set to rise on 1 January, and rise a lot. So Swan advises that Congress ‘resolve an agreement to support growth in the short term’, which is code for ‘keep spending’. And when is the best time to curb that spending? Swan doesn’t say, but what he will say is that it’s all the Tea Party’s fault.
It’s easy to ding the Tea Party as the root of all evil. Lots of liberals do it. Bill Clinton, MSNBC’s Rachel Maddow and the Huffington Post (which Australian media oddly quote as a neutral source) are vocal critics, by political necessity. How else to explain why, when the Democrats did everything they wanted to do in the first two years of the Obama Administration, none of their policies worked? That must be an uncomfortable truth for Swan too, who has engaged in a spending spree of his own with Australian taxpayers’ money, with mediocre results.
So expect Swan to keep bashing Republicans like Chris Christie and conservative national coalitions like the Tea Party while it suits him politically. Given the accuracy of the Wayne Principle to date, I would feel a lot better about our November presidential election if he started denouncing Mitt Romney’s chances loudly and often, too. What do you say, Wayne?
Mary Kissel is an editorial board member of the Wall Street Journal.