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President McCain at Midterm

What if . . .

Nov 8, 2010, Vol. 16, No. 08 • By TOD LINDBERG
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Cash for clunkers? Probably not. One must congratulate the American people for responding rationally to a government offer to turn the worthless rusting pile of junk in their driveway into $4,500. But the sharp and temporary spike in sales in August 2009 came at a cost of $3 billion. Senator McCain himself was opposed to the initial $1 billion in cash for clunkers funding, which he found objectionable not only in principle but also for having been attached to legislation funding the wars in Iraq and Afghanistan. McCain also led an abortive GOP effort to derail an additional $2 billion for the program, notwithstanding the clamor of more Americans with old cars to cash in—which was obligingly described in media reports as the program’s “overwhelming popularity.” The best way not to get overwhelmed by such popularity is not to dangle $4,500 under people’s noses in the first place, as the McCain people would likely have concluded.

But cash for clunkers, for all its visibility, was hardly the biggest issue of economic and fiscal policy. There was the question of whether Ben Bernanke would get a second term as Fed chairman in a McCain administration—more likely than not, he would have, thanks to the argument that stability matters most in shaky economic times and McCain’s instinct to align himself with the Washington establishment on issues about which he has no strong feelings. Unemployment benefits would likely have been extended. Democrats care deeply about the issue, and jobs were quite evidently scarce enough to vitiate concerns among economists (including Paul Krugman, back when he was an economist) that extending benefits would encourage people to stay on unemployment rather than earnestly seek work. A McCain administration might have succeeded—where GOP minority efforts during the Obama administration failed—in funding the extension out of unspent stimulus money. 

By far the biggest economic policy issue on the McCain administration’s horizon would be the fate of the Bush tax cuts, which are set to expire two months from now, since the Three-D government couldn’t make up its mind what to do. A McCain administration, it makes sense to suppose, would have sought congressional action sooner and negotiated a compromise with the Democratic congressional leadership. 

I assume President McCain would have sought to retain as much of the Bush tax cuts as possible and would have had the most leverage on his side of the argument while the economy was still weak—which is to say, it would have made sense for him to try to get Congress to tackle the issue in 2009. The Obama administration’s incentives were the opposite: Hoping to implement a fairly large tax increase after the midterm election, they had good reason to postpone discussion of the expiring cuts until 2010, when they  reckoned that the economy would be making a strong recovery. 

What would the McCain compromise have looked like? The Obama campaign position—no tax increases for individuals making $200,000 or less or families at $250,000 or less—sets an obvious floor. If McCain had to give on top rates, he could surely have raised the floor. Maybe a new bracket 2 percentage points higher for those making over $1 million? There’s also the Democratic obsession with the taxation of “carried interest” at lower capital gains rates rather than as ordinary income. They would probably have had their way with the hedge fund operators, for whom this represents a lucrative feature of the current tax code. The thrust of the legislation would have been an extension of most of the Bush tax cuts, not all.

The question is whether McCain could get more breaks for, say, small businesses in order to offset the increases he would be forced to swallow. He would want that because the GOP base would be exceptionally unhappy to see him preside over a tax increase and would credit him very little if at all for making sure most of the cuts didn’t lapse. I think he would get his offsetting cuts on the strength of the argument that coming out of a Great Recession is no time for a net tax increase. That pitch means nothing to liberal Democrats for whom every day is an excellent day for a tax increase, but it does tend to work well with the party’s centrists. Nevertheless, the Republican base would have been extremely upset about the increase in top marginal rates. 

The rest of the domestic policy agenda of the McCain administration at midterm would have as its most distinguishing feature a large void where Obamacare is today. No massive effort to reform health care would have been forthcoming from the McCain administration, and it is blindingly clear that no such thing ever could have advanced minus strong White House backing. 

The absence of Obamacare would not only change the debate in the area of health policy but also with regard to the budget deficit and rapidly mounting national debt as a percentage of GDP. Everybody seems to know, in their heart of hearts, that broadening the ranks of the insured is going to cost more money, and that Obamacare does not “bend the curve” of health care costs down. Rather, it bends the curve upwards. Considerable uncertainty surrounds the question of how far up. This uncertainty is piled atop well-documented concerns about the long-term financing problems for Medicare and Social Security and the less discussed but rapidly growing disability and long-term care entitlements. A McCain administration would not likely have undertaken significant reform of these entitlement programs. But it would at least have avoided exacerbating the problem by some unknown multiple. How big a deficit is sustainable for how long, and how high the national debt can safely rise as a percentage of GDP, would still be big questions as the McCain administration approached the midterm elections, but they would be less urgent than they are under Obama. 

Surely there would have been financial reform legislation; equally surely, it would not have been as bureaucracy-empowering. The new Bureau of Consumer Financial Protection at the Fed and Office of Financial Research at the Treasury are “solutions” to things that were not problems underlying the financial crisis, as my Hoover colleague John Taylor has argued, and reform of Fannie Mae and Freddie Mac, which really were part of the problem, got kicked down the road. A McCain administration would likely have insisted on including Fannie and Freddie as a price of signing the legislation; such regulation was one of the key differences between Senator Chris Dodd’s bill and the GOP alternative. Senate Republicans also sought unsuccessfully to include a provision that would have made underwriters put some of their own money at risk when deviating from regulatory standards in writing residential mortgage loans—essentially a market-based protection against writing stupid loans and dumping them downstream. Although the alternative GOP bill created most of the same new offices, it granted them less sweeping powers—and, more to the point, less discretionary authority and less authority in the form of implementing regulations that have yet to be written.

The uncertainty for businesses here and elsewhere is the heart of my claim that the economy would be performing better by now under a McCain administration. Many Republicans argue that Obama’s policy choices are driving the economy downward. And indeed, those choices would not be my choices. But as Richard Fisher, the president of Federal Reserve Bank of Dallas, has argued, the bigger problem is the amount of uncertainty under which the economy is laboring. In a July speech, he pointed to the Wall Street reform bill’s 2,300 pages, 16 titles, and 38 subtitles, noting that in Title 1 alone, the Fed itself must or may promulgate regulations in nearly 20 areas, not counting requirements for Fed action in conjunction with other government agencies. The direction of fiscal policy, as noted, is highly unsettled. One might add the still largely unknown details of Obamacare’s impact on businesses large and small and the question of whether Three‑D Washington has much of a clue about how small businesses work and don’t work. Cap and trade is dead, but until it died, it too was raising uncertainty about the prospect of substantial new taxes on businesses. 

Washington is hardly the only source of uncertainty; the future intentions of American consumers are very much up in the air as well. Yet as Fisher noted, nonfarm, nonfinancial firms are sitting on $1.8 trillion in liquid assets and the banks have $1 trillion in excess reserves parked with Federal Reserve banks. With greater policy clarity from Washington, those assets could be driving a stronger, jobs-producing recovery. 

The Obama administration has seen two Supreme Court vacancies. Would two of the Court’s most liberal members have decided to retire with a GOP president in the White House? If not, they would probably have been doing the McCain administration a favor. Notwithstanding his pro-life voting record, McCain has a visceral distaste for social issues, and any battle over a Supreme Court nominee inevitably places those issues front and center. If President McCain tried to replace one of the Court’s liberals with someone in the mold of Chief Justice John Roberts, it’s doubtful the Democratic Senate would vote to confirm what would amount to a major shift in the Court’s balance. There would be a certain poetic justice in the retirement of the Court’s decider-in-chief, swing vote Anthony Kennedy, in that the combination of a Republican president and an overwhelmingly Democratic Senate might be expected to produce a new swing vote—but that’s on the assumption that there are still any potential justices out there who would be inclined to swing. 

Would McCain have bucked mainstream sentiment in his party and reached out to Democrats to work on immigration reform? Certainly that would have been the inclination of the McCain of 2007. But his campaign-season promise to put enforcement first would have made for heavy going in working with Democrats. I am not sure what the McCain White House’s response would have been had, say, New Mexico adopted the equivalent of Arizona’s SB 1070 on illegal immigrants. Perhaps opposition to the measure as misguided—but nothing on the scale of the Obama administration’s assault on the Arizona measure. But with SB 1070 coming out of President McCain’s own state, it seems likely he would find it expedient not to make much of the issue at all. There would, however, be no reason to suppose he would voice support for it, as he had to do as an incumbent senator facing a primary challenge from the right this year.

The McCain-Palin campaign emphasis on energy might or might not have borne any fruit by this point. The urgency associated with $4 a gallon gasoline in the summer of 2008 dissipated that fall as prices declined and then disappeared altogether under the bigger worries of the financial crisis and recession. President McCain would have done whatever was within his executive authority to promote drilling—with serious consequences when Deepwater Horizon blew. On the conservation side, the big-ticket possibility would have been a gasoline tax increase fully offset by tax reductions for individuals. It’s hard to rate the chances of pulling off such a sensible reform as very high.

In the middle ground—or is it the bloody crossroads?—between domestic and foreign policy is the question of national security law. A McCain administration would have promised to close Guantánamo but would not have made the rash pledge to accomplish that objective within a year. A Republican administration would simply have been more sympathetic to warnings from its own lawyers that shuttering the facility would be extremely difficult. As for the actual closing, the congressional politics of transferring prisoners would have been no easier for McCain than for Obama, and the international politics of getting others to agree to accept prisoners might have been, if anything, harder, as McCain would have been on the receiving end of more criticism from abroad than Obama.

It is inconceivable, however, that the McCain Justice Department would have embraced the idea of trying Khalid Sheikh Mohammed in a U.S. courthouse in New York. It’s also hard to imagine the cock-up surrounding the arrest of the would-be Christmas day bomber Umar Farouk Abdulmutallab under a McCain administration. McCain has substantial personal credibility on the issue of detainee treatment, thanks not only to his POW experience but also to his having been at odds on the issue with the Bush administration.

On the international scene, the fog of the global superstar Barack Obama obscures the fact that McCain has vast experience in foreign policy and is respected internationally, even by the GOP-fearing Europeans who are suspicious of what they see as the cowboy tendencies McCain would have in common with Bush. My line during the campaign as a foreign policy adviser to John McCain was that I didn’t really have anything to do, since my candidate, unlike every other candidate in the race from both parties, didn’t need any advice on foreign policy.

It’s clear that winning in Iraq and Afghanistan would have been top priority for President McCain. We would have been spared the spectacle of conspicuous deliberation President Obama put on. In its place would have come a show of resolve, which the McCain administration would have regarded as useful to the war effort. The Afghanistan surge would have been unencumbered by the announcement of a proposed withdrawal schedule. The Obama administration has done a good job of keeping NATO and other allies in the fight. McCain has lengthy personal experience with NATO and European security matters, however, and though European disappointment over Obama’s loss would have been acute, respect for McCain and for his commitment to both the war effort and NATO would have made a similar outcome achievable. “New Europe” especially loves McCain because of his support for NATO enlargement and his senatorial outspokenness in opposition to Russia’s retrogression at home and its desire to dominate its “near-abroad.” A McCain administration would also have continued the Bush plans for missile-defense deployments in Poland and the Czech Republic, providing reassurance where Obama’s indelicate cancellation sowed confusion and uncertainty. 

There would have been no “reset” with Russia under a McCain administration. On the contrary, McCain would have relished using the bully pulpit on such matters as the continuing Russian military presence in breakaway regions of Georgia and on the crackdown on NGOs in Russia proper. McCain has been a proponent of reduced reliance on nuclear weapons, but not out of the expectation that a display of U.S. restraint would be an inspiration to others. A “New START”-style arms control agreement would have been unlikely. It’s fair to suppose that U.S. relations with Russia would be generally strained under McCain. Nor would Russia be the only instance, as McCain would be more outspoken in support of human rights and democracy from Venezuela to Burma to China.

McCain proposed creating a “League of Democracies” during the campaign. It’s unlikely that the diplomacy entailed in creating such an organization would yet be bearing fruit, as the resistance to viewing the world through the prism of a common political system remains strong in places such as South Africa, India, and Brazil. But again, the bully pulpit of the American presidency is certainly something McCain would have put to use. President McCain would have spoken out early and forcefully in support of the Green movement in Iran and its peaceful protests against the fraudulent June 2009 presidential election. And he would have denounced the Iranian government’s violent crackdown in no uncertain terms, unencumbered by illusions that he would be jeopardizing a deal with Tehran to end Iran’s nuclear weapons program.

Stopping that program would almost certainly have been McCain’s top priority apart from the wars. He has said repeatedly that the only thing worse than military action against Iran would be an Iran with nuclear weapons. He always sounds like he means it. The mullahs have been unresponsive to Obama’s outreach. I doubt they would have been more responsive to McCain’s stridency. Obama’s sanctions are beginning to bite, as would McCain’s, but if the regime doesn’t change course, a military strike on Iran’s nuclear facilities would seem to be inevitable. Of course, in late summer 2010, Washington was abuzz with rumors of an imminent Israeli strike—without U.S. participation (or, more plausibly, with covert U.S. support). A McCain administration would likely have concluded more emphatically that a nuclear-armed Iran is a threat to vital U.S. interests and would accordingly be less inclined to let Israel bear the entire burden of military action. 

As for the aftermath, one should probably assume the worst under either Obama or McCain. Would the mullahs be more restrained in targeting U.S. interests because Israel carried out the strike without overt U.S. participation? Unlikely. In the better-case scenarios, say revolutionary conditions in Iran, McCain would provide moral and material support to the Green movement. I find it hard to believe that the Obama administration would still be offering engagement as a lifeline for the regime after an Israeli (or an American) strike, but the more I think about it, the less sure I am.

The Obama administration has taken a tough line with Israel, and especially with Prime Minister Benjamin Netanyahu, for whom there is very little sympathy to be found anywhere in the Democratic party. Where most Obama critics have detected only ham-handedness and an anti-Israel bias, I would allow room for the possibility of cunning: Losing sleep every night thinking about Iran and knowing that the United States would have to protect Israel (diplomatically and otherwise) following a military move, the Obama administration may have wanted to make a show of testy relations with Israel beforehand in order not to be seen as working hand-in-glove. It also seems that more security dialogue about Iran has been going on between Israel and its Sunni Arab neighbors than we have been briefed on, and this seems likely to have involved U.S. facilitation. 

A McCain administration would have been very different in terms of atmospherics and substance. Call it the Elliott Abrams policy: Keep Israel close, because Israelis are most likely to moderate their own expectations when they feel more rather than less secure. Meanwhile, seek to buttress the ability of Abu Mazen and the PA to deliver tangible benefits to West Bank Palestinians. And don’t expect too much.

These are the high-profile areas in which differences in approach between President Obama and President McCain could be expected to be most pronounced. There is always more bipartisan continuity in American foreign policy than people anticipate. That’s a good sign, because it suggests that both sides of the partisan divide perceive the world they have to deal with similarly. Nevertheless, a consequential range of choices is available, and these are the most important things McCain would have done differently.

We come at last to the consequences for American politics of a McCain victory in 2008. Although I have made a case for McCain’s greater success in dealing with the issue of chief importance to Americans, the economy, I don’t think that even if the economy were growing at a 3 or 4 percent annual rate, and unemployment were below (say) 8 percent and declining, that would necessarily make McCain an especially popular president. 

McCain might not have fallen by now as low as President Obama has. He certainly would not have fallen as far, since he would never have begun as high as Obama did, and expectations would have been lower. The tendency among Republicans to approve of Obama’s handling of the job in his early days in office would not have been matched by Democratic favor for President McCain. Democrats would have been too bitter about losing a race they thought they had in the bag.

Nevertheless, it’s hard to see how McCain would be looking at anything better than break-even on job approval/disapproval. In the first place, even if the economy were doing better, it would not be roaring. Then, too, McCain and his senior officials would likely have committed bungles, made misstatements, and uttered major gaffes at about the same rate as all of their predecessors. 

More broadly, Democrats would be united in their criticism of McCain. They would be denouncing him for the weakness of the recovery much as they denounced George W. Bush for the “jobless recovery” of his first term, and there would be a booming market for that line of attack. It is also hard to imagine support among Democrats for U.S. policy in Iraq and especially Afghanistan approaching the level it commands under Obama. More likely, congressional Democrats would have moved into near-unanimous rhetorical opposition to the war in Afghanistan on grounds of its supposed unwinnability. I doubt Democrats would be any more able or willing to pull closed the purse-strings for Afghanistan than they were for Iraq in 2007-08. But an “Afghan Study Group” would by now have issued a report counseling face-saving U.S. withdrawal, and McCain would be acting in defiance of an emerging establishment supermajority.

But if President McCain was thinking that the Democrats were a tough crowd, Lord knows what he’d be muttering under his breath about his fellow Republicans. The party’s base has never been fond of McCain, and by now he would certainly have reminded many of them why. His need to do business with Democratic congressional majorities would alone whip up a reaction of anger. Add, say, a tax increase on top earners or an attempt to address immigration, and the combination would be explosive. Imagine the presidency of George H.W. Bush—with the tax-raising budget deal, passage of the Americans with Disabilities Act, and extension of the Civil Rights Act, but without the liberation of Kuwait. McCain would by now be surveying the conservative landscape and wondering what rough Pat Buchanan-type beast would be slouching to New Hampshire to haul in 38 percent of the GOP primary vote against him in 2012.

Most of the forces that brought the Tea Party to life would still be present during a McCain presidency: big bailouts, massive stimulus spending, high deficits, the expectation or reality of rising taxes. The big difference is that the Tea Party would not manifest itself as a massive anti-Democrat, anti-Obama wave that could carry Republicans to victory without them having to worry too much about their own internal divisions and uncertainty. Rather, the Tea Party would have taken shape as an insurgency within the Republican party. It would be directed against McCain and Republican leaders. It would be gathering as the main peril to McCain’s prospects for reelection, and backing independent challengers to Democrats and Republicans in the midterms. It would be one of the main considerations driving McCain to ponder whether, turning 76 in August 2012, he would really want to run for a second term.

This brings us to the one character on the political landscape perhaps no less interesting in this 2010 hypothetical McCain administration than in current reality: Vice President Sarah Palin. 

The first thing to note is that against the sum of all Democratic fear-mongering, McCain is still alive and well in 2010; Palin would not have been thrust unprepared into the Oval Office. And by now, presumably, she would be well-briefed and fluid in her discussion of policy topics, though perhaps prone to colloquialisms and neologisms that would come back to haunt her.
 

Would she be a second coming of Dan “P-o-t-a-t-o‑e” Quayle, who never recovered from the initial impressions of him as a lightweight? There were, of course, calls on Bush 41 to dump Quayle from the ticket in 1992—not that doing so would have helped Bush in any obvious way; indeed, it would only have antagonized conservatives further. But Palin is Quayle-squared: She is a political phenomenon, polarizing and galvanic, capable of drawing and exciting a crowd as well as becoming a totemic object of fear and loathing for her opponents. It likely would have fallen to Palin to keep conservative Republicans from eating McCain alive, and if anyone could, she would have pulled it off. 

A Vice President Palin would be an even more fascinating figure in calculations of the future of the GOP than she is as an outsider phenomenon. We certainly know enough about her to say that she would not willingly retreat from the limelight, as Quayle mostly did after leaving office, only to reemerge in 1999 in a short-lived bid for the GOP presidential election and discover that there were insufficient reservoirs of goodwill toward him on which he could draw to make a comeback. Come what may, Sarah Palin would remain where she thinks a mama grizzly belongs, namely, in your face.

No, I will not conclude this scenario with McCain deciding not to seek reelection and Palin emerging as the 2012 GOP frontrunner—although I do hope Harry Turtledove runs with that plot line. I’d like to read it, even though it won’t be right. Of course McCain would run for reelection—when McCain goes down, he will go down swinging.

And to all those who, in my scenario, sport bumper stickers saying “Don’t Blame Me, I Voted for Obama,” I say: Don’t blame me, I voted for McCain.

 

Contributing editor Tod Lindberg is a research fellow at the Hoover Institution, Stanford University, and editor of Policy Review.


 

 

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