Comments on economics, mystery fiction, drama, and art.

Wednesday, November 03, 2004

The Aftermath of the Election

Well, that certainly was not what I expected--or hoped for.

I do not expect the second Bush term to demonstrate more willingness to cooperate, more willingness to seek common ground. I expect less. I expect them to argue that they do have a mandate for their programs, because they won the electoral college, because they won a mojority of the popular vote, because they increased their majorities in the Senate and in the House.

What I do expect is the following:

*A continuation of the shift in the federal tax burden away from income from property and toward income from work. The perverse thing about this is that it discourages investments in human capital, at a time when those investments have, if anything, a higher payoff than they have had historically.

*A continued disregard of the interests and concerns of people who work for a living. I expect additional changes in overtime rules, making it easier not to pay overtime. I expect continued opposition to increases in the minimum wage. I expect rules changes that lead to less safety in the workplace. I expect new constraints on workers' compensation porgrams. I expect changes in Social Security that make the program neither "social" nor "secure." (Am I the only one who finds calls form "mandatory" savings programs which have to make use of equity instruments to be both risky and not, well, in keeping with individual liberty?)

*A fiscal policy that continues its lack of concern for large deficits. Now, I am not a deficit hawk. But large, and probably rising federal deficits will constitute a major problem for the economy, as they will be unconnected from any counter cyclical policy. And those deficits are all but certain to rise. This flows partly from the tax policy. Federal tax revenues will almost certainly fall, as the tax cuts are made permanent, and as additional cuts in taxes on income from property are enacted. Spending seems unlikely to be cut (overall). The deficits will grow.

*Rising interest rates. In fact, I think long-term interest rates have already begun to increase as a result of the federal budget deficits. And rising long-term interest rates will have consequences. First, firms will be likely to spend less on new caoital goods. Second, higher interest rates will support a higher international value ofr the dollar (at least in the short-term), which will encourage imports and price our exports somewhat out of world markets.

*Environmental policies that do too little to protect the environment. Do I need to make this case?

*A lack of concern for energy conservation. Now, I don't think energy "independence" should be a real policy goal. But policies that encourage energy use in ways that disregard the social costs of that energy use (such as the tax treatment of trucks and SUVs purchased for business purposes) are not a good idea. (Neither is it a good idea to subsidize the purchase of large vehicles, but that's a separate issue.) Rather, energy taxes should be something we look at seriously.

I don't even want to address foreign policy issues here, or domestic security/civil rights issues. Or Supreme Court (and other federal court) appointments.

I think it'll be a nasty four years.


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