The last time a Mr Bush left the White House, the US economy had its back to the wall. This time, when another Mr Bush does so, the economy might well be on its knees. If history repeats itself, then a Democrat administration should succeed Mr Bush again. But will it be as effective for the US economy and the world as the last one?
As Hillary Clinton and Barack Obama leave behind Ohio, Texas, Rhode Island and Vermont in their relentless struggle to collect primary delegates and an eventual presidential nomination, there?s merit in examining their economic agendas. Wherever else they might differ, their positions on economic issues, at least superficially, are strikingly similar. It?s not surprising that they have been uncharitably described by some analysts as ?economic twins?. Both display overwhelming concern for the American middle class ?a segment they feel never featured on President Bush?s priority radar?and whose lot they pledge to improve through generous tax cuts. They voice pretty much the same concerns on rising healthcare costs, peg identical budgets of $30 billion for avoiding home-loan foreclosures, and are equally keen on extending and expanding unemployment insurance. Their analogous posturing reflects efforts to woo the same constituencies?middle-income groups, blue-collared workers and the unemployed. These are traditional Democrat strongholds.
Over the last few months, differences have also narrowed on one of the key economic issues that used to distinguish Hillary and Barack: outsourcing. Hillary Clinton, who has usually refrained from committing herself on this sensitive issue, appears to have succumbed to political compulsions. Her recent posturing shows her as a hardliner on outsourcing as she promises to withdraw tax breaks for American companies that ship jobs overseas. Obama, of course, has been consistently opposing domestic tax policies that encourage outsourcing. Now with Hillary also deciding not to remain a fencesitter any longer, the attack on outsourcing has resumed with fresh vigour.
The issue of American jobs getting ?exported? to faraway shores, including India, has forced both presidential hopefuls to articulate their positions on trade policies. Obama has struck a sharp note by declaring his unhappiness with the Central American Free Trade Agreement (Cafta) and his intentions of rewriting the North American Free Trade Agreement (Nafta). The latter, he feels, was not only ?oversold? to Americans, but has also been responsible for shifting jobs out of the US. He tried gathering a few brownie points by arguing that Hillary was a staunch supporter of Nafta, which came into force during Bill Clinton?s presidency. Needless to say, this provoked a strong retaliation from Hillary who claimed that she was being falsely accused.
Acrimonies apart, the agendas of both candidates on outsourcing and free trade converge to common cores. Whoever is the final nominee, if he/she indeed gets to capture the White House, the economic policies of the new administration are likely to have both populist and protectionist tinges. Populist because some of the typical election-driven assurances, particularly those aimed at the middle class and workers, have to be implemented. While both Hillary and Obama strongly argue in favour of these measures, the impact of these on an economy saddled with high deficits, weakening currency, and subdued housing and stock markets, is difficult to predict.
For China and India, the evolving Democrat economic agenda underlines a sterner approach to bilateral trade matters. While Obama wants to revisit trade policies for creating new American jobs, Hillary aims to stop export of American jobs by withdrawing incentives. And both are keen to reverse the trade imbalance with China. Indeed, the current US trade deficit with China that has amounted to a staggering $232.6 billion has motivated both to encourage punitive action against cheap Chinese goods flooding the American market. They clearly perceive the pegged Yuan to be the major force behind the success of Chinese goods in America and are likely to push for its revaluation.
Who would be a better bet for India as far as economic ties are concerned? Given Hillary Clinton?s pronounced soft corner for India, many presume that the re-entry of Clintons to the White House means better economic prospects for India. But Hillary?s recent outburst against outsourcing might dampen such optimism. The rest of the economic priorities ?Hillary or Barack?underpin large doses of protectionism. These are likely to manifest themselves through non-tariff barriers (NTBs) in the form of stiffer labour and environmental standards.
Irrespective of who leads the final Democrat charge, can a relatively inward-looking and ?populist? approach to globalisation and world trade, as is being promised by both, the appropriate remedy for an ailing US economy? The staggered rate cuts over the last seven months have left little room for manoeuvre for the Federal Reserve. Inappropriate policies can cripple it further. And then, history, despite being given the chance, may fail to repeat itself.
The author is a visiting fellow at Icrier. These are his personal views