Short Term and Long Term Politics

HARRY HOPKINS VS. JOHN MAYNARD KEYNES

President Franklin Roosevelt in a meeting with his advisers in the l930s was presenting the long term benefits of his proposed social security program. Harry Hopkins, one of his chief advisors, supposedly remarked, "But Mr. President, people eat in the short run." For this November's midterm congressional elections, Hopkins words take on added meaning, with a 2010 modification: eating in the short run means also having a job--now. President Obama clearly understands. His dilemma is that his newest business tax cut and infrastructure spending proposals are tied to long term politics and not near term jobs, if the two years before the 2012 presidential election can be considered long term. The business tax breaks and $50 billion for infrastructure spending inherently have no near term payoff on job creation and economic recovery.

One would think that with these new legislative proposals and existing issues -- mainly what to do about the "temporary" Bush income tax cuts -- on the table there would be enough moving parts for Congress to cobble together some kind of mutually agreeable package. This should be true when some of the major parts of what is now being proposed or must be dealt with soon clearly tilt in the direction of tax cuts--one half of the GOP fiscal policy mantra, the other half being spending cuts. Since Senate Republicans have leveraged their minority position into procedural blockages of some major legislation, one would be tempted to think that they would relish the buffet of opportunities to get some of what they want.

Here is where short and long term politics collide. First, in the short term there are just over seven weeks for Congress to act on anything before the November 2 elections, and even less time than that before calling it quits to go home to campaign. Second, there is no incentive for the Republicans to give Obama any legislative victory that will help him and his fellow Democrats in Congress to claim progress on jobs and economic recovery. Historically, the term Dead on Arrival (DOA) has been used at times to label the legislative prospects for presidential budgetary and other policy proposals to Congress. Obama's newest proposals would certainly seem to be DOA.

On his part, Obama has no illusions about his legislative prospects between now and the coming midterm elections. It seems an obvious fact that his latest proposals are tailored to long term politics, the next presidential election since they would have no job creating impact before 2011/12. But in the short term, the Democrats--at least some of them--can try to play the GOP obstructionist card. That is, blame past Republican policies and current GOP obstructionism in Congress as the root causes of the current and continuing economic distress of the country. Meanwhile, congressional Republicans can play the waiting game with polls showing voter sentiment is on their side with projections/speculation giving the GOP control of the House and perhaps even the Senate.

While Obama's newest tax and spending package may be DOA, there remains the more immediate political issue of what to do about the Bush tax cuts which expire at the end of this year. Obama has now made it clear that he wants to stick with the original Democratic plan to make the middle class tax cuts permanent while reinstating on January 1 the higher tax bracket for the upper income group, defined as an income above $250,000 for tax payers filing a joint return. Where the Democratic congressional leadership is at on this issue is less clear. Here again it is the short term versus long term politics, but this time the tug of war is between the President and his congressional leadership. The Democratic congressional leaders, who once shared the President's view on this issue, are driven by the short term need to preserve their threatened majority and thus may be persuaded to extend the upper income tax cuts for one or two years in order to help the re-election of their more conservative Democratic colleagues. The President, on the other hand, has his own form of preservation politics, seeing the issue as another way of tagging Republicans as the party of the rich and thus helping him to define his opposition for 2012. Perhaps after November 2, he will also feel both free and justified in further defining the GOP as the party of right wing extremism. That is, unless he continues his unrequited quest for bipartisanship.

I suppose it would be akin to drinking the Jonestown kool aid to think that somehow all of this short term vs. long term politics will find a happy compromised solution that will take care of both presidential and congressional needs--and maybe the country's needs. But perhaps the most realistic, if not the most comforting, way of thinking about this is to consider another quote, this time of British economist John Maynard Keynes, the father of pump priming economic stimulus: "In the long run, we're all dead".