President Obama said yesterday, “The only question is whether politics or ideology are going to get in the way of preventing a government shutdown.” This is indeed the interesting question: Is politics motivating the Republicans, or ideology? I realize that Obama meant to ask whether the government would be shut down. But humor me while I interpret the sentence the other way:   Politics versus ideology.

Most of what the Grand Old Party has done in the last two years can much better be explained by politics than ideology. For example, only politics can explain a systematic strategy of opposing whatever the White House favors, even when this requires changing one’s vote — for example on the fiscal commission bill that Senators like John McCain had previously been sponsors of. Only politics can explain the long-time refusal of so-called fiscal conservatives to name the specific spending programs they want to cut.

On Tuesday Representative Paul Ryan unveiled a new long-term budget plan that apparently comes closer to naming the specific programs he wants to cut.   Medicaid and Medicare.  Perhaps we are getting closer to the point where we can actually have a debate over ideology, over competing policy priorities. This would be an improvement over the nonsense that has passed for public debate in recent years.

If so, let us be clear that, despite the rhetoric, the policy priority of the Tea Party and Paul Ryan is not fiscal conservatism. Fiscal conservatism is supposed to mean the reduction of budget deficits, paying for what you spend, matching tax revenue to expenditure. Someone who was sincere about eliminating the budget deficits that we have inherited would propose a long-term plan that included roles for raising tax revenue and cutting defense spending, in addition to slowing the growth of entitlements and domestic spending. But the tax cuts in the Ryan plan in fact would lose revenue almost equal to its spending cuts. In other words, it mostly uses the cuts in federal medical care spending to pay for more tax cuts.  This pattern is not new. The supposed fiscal conservatives who were elected to Congress last November have increased the budget deficit. Their insistence on renewing the Bush tax cuts (for the rich, as usual) has added hundreds of billions of dollars to the current deficits, outweighing all the specific spending cuts that they have proposed, combined. Other ways they are adding to the deficit include trying to cut funding for IRS enforcement and trying to repeal the Obama health care reforms. (The Ryan plan would repeal the health reforms, but ignores that doing so would add to the deficit according to CBO’s scoring.)  These choices follow the tradition of those “fiscal conservatives” Ronald Reagan and George W. Bush whose budgetary policies created the majority of the national debt we have to live with today.

Even though Obama’s opponents in Congress cannot sustain the claim of being fiscal conservatives, it is possible that some will now genuinely lay claim to the other two-word ideological phrase: “small government.” Do they want to, finally, come out and say explicitly that their goal is to cut domestic spending (especially entitlements) in order to cut taxes, putting the priority on shrinking government rather than eliminating the budget deficit? Are they prepared to own Dick Cheney’s claim, “Reagan showed that deficits don’t matter”?

I am not sure if they are.  Ryan said Sunday “We are going to put out a plan that gets our debt on a downward trajectory and gets us to the point of giving our next generation a debt-free nation.” This incredible sentence suggests that he still lacks the requisite numeracy (or sincerity) that many have inexplicably attributed to him. The numbers in the plan that he proposed two days later don’t come close to the headline claims of shrinking the budget deficit by $4 trillion cumulated over the next decade, let alone eliminating it altogether.   But does Ryan even understand that to pay off the debt that Reagan and Bush bequeathed us we would have to run $100 billion surpluses for a hundred years?

Most prominent economists and the sensible political middle ground in Washington agree that the federal government must eventually address its long run fiscal problem; but they also know that it is not possible to begin to eliminate the budget deficit if tax increases and entitlements cuts are ruled out. The Bowles-Simpson Commission in December made specific proposals, many of which are the sort that we are going to need — all of them highly unpopular….proposals like raising the retirement age, limiting tax expenditures, and raising the gas tax. Many reasonable-sounding editorialists and commentators have said recently that President Obama ought to be brave enough to lead, by coming out in favor of unpopular measures such as those in the Commission’s report.  Supposedly the American public is mature enough to rally around such a candid position.

I think not.  (Whenever a candidate promises to “give the American people a government as good as they deserve,” I can’t help thinking, “no, no; don’t do that!”)   If Obama were to come out in support of the report’s specific proposals, his opponents would reliably and successfully attack him for wanting to raise taxes and “hurt seniors.”  As the White House puts it, this would poison the well:  After these attacks, the country would be a step farther from coming to grips with the problem, not a step closer.

I have a proposal. President Obama should send to Congress a bill to establish a bipartisan National Commission on Fiscal Responsibility and Reform. The body would be chaired again by Bowles and Simpson, who would be able to move more quickly this time, refining their previous proposals. (Ideally they would drop the tax cuts for the rich, the inadequate detail on medical costs, and the pipe dream that spending can be brought down to a lower level of GDP than where Reagan had it.)  One hopes that a majority of the Commission members, from both parties, would agree to join hands and come out together in support of a good package of fiscal measures.  (Of course, grandstanders like Paul Ryan will again vote no.)

How could yet another commission solve the problem? Why would it succeed when the first Bowles-Simpson Commission failed? Obama should include in the legislation a provision that the recommendations of the Commission would automatically go to Congress for an up-or-down vote. Those knowledgeable in the ways of Washington have long known that this is the way to solve the problem, by giving individual politicians in each party some protection against the attacks from opportunistic critics in the opposite party.

Does the idea of a bipartisan ex ante agreement to promote the Commission’s findings, before the gory details are visible, sound familiar? President Obama pushed for precisely such legislation in Congress in January 2010. Among the sponsors of the bill had been John McCain and five other Republican Senators. But when they saw that Obama was for it, the Republican sponsors switched sides and voted the other way. (They were for it before they were against it.) The bill was defeated 53-46. Obama, in February 2010, was then forced to create the Bowles-Simpson commission by Executive Order instead, knowing full well that without the critical congressional pre-commitment the Commission was unlikely to be able to break partisan logjams. And so it was.

Why did these supposedly “fiscal conservative” sponsors vote against the bill? So far as I know, nobody has ever offered any explanation other than the obvious one: they would rather make political hay out of trying to pin unpopular tax increases or medicare cuts on Obama in the 2010 congressional elections, than to make progress on the deficit. As Alan Simpson (R - Wyo) said, their purpose was “to stick it the President.” Well, they got their 2010 congressional elections. So let’s try the same proposal again now. Maybe it would pass this time. More likely it would fail, for the same political reasons. But at least if the Republicans again refused to support the commission when it is an ex ante abstraction, then it would be hard for anyone to deny that they would be sure to oppose the White House if it were to support the specific recommendations after they became known.  The exercise should at least clarify who is serious about necessary reforms and who is more interested in political gamesmanship.

     Some conservatives are attacking current U.S. monetary policy as being too expansionary, as likely to lead to excessive inflation and debauchment of the currency.   The Weekly Standard is promoting a letter to Fed Chairman Ben Bernanke that urges a reversal of its policy of QE2, its new round of monetary easing. The letter is signed by a list of conservatives, most of whom are well-known Republican economists, some associated with political candidates.  Apparently the driving force is David Malpass, who was an official in the Reagan Treasury, and he is taking out newspaper ads later this week.  This follows similar attacks on the Fed by politicians Sarah Palin, Mike Pence, and Paul Ryan. 

     If the National Journal, Wall Street Journal and Politico are right that the Republicans are trying to stake out a position that Democrats are pursuing inflationary monetary policy, they are on shaky ground.   I will leave it to others to make the important point of substance:  the risk of excessive inflation is low now compared to the risk of an alarming Japan-style deflation, with the economy having only begun to recover from its nadir of early 2009.   Or to acknowledge that Quantitative Easing is only a second best policy response to high unemployment.    (Fiscal policy would be much more likely to succeed at this task, if it were not for the constraints in Congress.)

     I will, rather, respond to the political component of the National Journal’s question by pointing out some insufficiently understood history:

1. Republican President Nixon successfully pushed Fed Chairman Arthur Burns into an excessively easy monetary policy in the early 1970s — leading to high inflation which the White House tried to address with wage-price controls.  Nixon, of course, also devalued the dollar, and took it off gold, thereby ending the Bretton Woods system of fixed exchange rates.
2. Republican Presidents Ronald Reagan and George H.W. Bush tried aggressively to push Fed Chairmen Paul Volcker and Alan Greenspan into easier monetary policy, especially in election years.  This is documented in Bob Woodward’s 2000 book Maestro.   The White House succeeded in making life unpleasant enough for inflation-slayer Volcker that he eventually declined to be reappointed, prompting Treasury Secretary James Baker to exult “We got the son of a bitch!” (p.24).  Baker is also the man usually credited with the Plaza Accord and the associated 50 % depreciation of the dollar from 1985 to 1987.
3. Democratic Presidents Jimmy Carter and Bill Clinton are the two presidents in the last four decades who scrupulously refrained from pushing their Fed Chairmen (Volcker and Greenspan, respectively) into inflationary monetary policy.  
4. Under Republican President G.W.Bush, monetary policy once again became excessively easy, during 2003-06, contributing substantially to dollar depreciation, the housing bubble and the subsequent financial crash.

     Thus if the other party were to accuse Democrats of pursuing excessively inflationary monetary policy, it would be akin to them accusing Democrats of pursuing excessively expansionary fiscal policy.    Perhaps such accusations will strike some who don’t pay close attention as superficially plausible, even after all these years.  But they nonetheless fly in the face of history.   Another case of the pot calling the kettle “red.”   Yes, I know, the usual saying is about the color black.  But red is the color of deficits, overheating, … and Republicans.

    I document the history in “Responding to Crises,” Cato Journal 27, 2007.