How the 2012 Presidency was Determined a Decade Ago

Republicans historically have had two powerful tools in presidential elections: opposition to taxes and increasing budget deficits.  Reagan assailed Carter as a big spender and promised to cut government.  Reagan trounced Carter, even though Reagan later wound up raising (and cutting) some taxes.  Four years later, Mondale exclaimed that he would raise taxes and assailed Reagan for not declaring the same.  Mondale not only lost after self-identifying as a tax increaser, he was wrong about Reagan.  Reagan did not raise taxes in his second term.  (The deficit did not do particularly well under Reagan, but the strength of the economy greased that claim from sticking.)

Most remember that in the next presidential election, candidate George H.W. Bush baldly promised “no new taxes” and lambasted Dukakis as a tax raiser.  This, coupled with the goodwill that he carried from the Reagan era, strongly helped create a Bush victory.

When Clinton promised to raise taxes on upper-income earners while running against the first Bush seeking a second term, then President Bush could not paint a stark distinction given his blatant violation of his unambiguous self-imposed no-tax pledge.  Absent the ability to label the Democrat the taxer, Bush lost handily.  It is noteworthy, however, that Clinton did not garner a majority of the vote in winning the presidency, given Perot’s strong third-party showing—in part, likely, because of the tax issue.

Bob Dole’s long history in the Senate included many tax increases (and cuts).  That made accusations in the next presidential election of “taxer” by either side feckless.  Furthermore, Clinton at that point had an economy that was a speeding train (much like when Reagan ran for reelection), and assertions of “big taxer” carry much less punch when overall take-home income for the middle and higher classes is increasing.  In addition to gutting the taxer claim, Clinton was also able to turn the tables on the deficit issue as the first modern president to reverse the balance on government income and spending and to apply consistently a pay-as-you-go fiscal policy.  Clinton had some help from an economy surging in part as a result of drivers unrelated to his policies, however some of the fuel pushing that economy undoubtedly resulted directly from Clinton’s actions.

In the next election, George W. Bush tried to imprint Al Gore as a big taxer, and Gore certainly had enough history that such a claim could be cherry-picked from his record.  While the outcome of that race was a virtual tie, the taxer label was nonetheless applied by the winning Republican to the losing Democrat.

Thereafter, Bush (who had by then significantly cut income taxes—but not payroll taxes) was somewhat effectively able to brand Kerry as a taxer, although the even bigger attack came on the Senator’s seeming vacillation on the war.  Again, the taxer label was applied by the winning Republican on the losing Democrat.

However, Bush’s well-known tax cuts portended doom for Romney, as they could only be implemented by having them sunset after 10 years.  Enacting them without the expiration date would have shown them to be damaging to the nation’s budget deficit—a value that Bush claimed a desire to protect.  Bush’s refusal to put the costs of war on budget ultimately showed that this assertion was far more lip service than a commitment to conservative fiscal values.  This would not have been nearly so apparent had the economy not quickly fallen into recession at the end of Bush’s second term due to the intersection—perfect storm, perhaps—of overly aggressive mortgage-issuance policies (partly driven by a left-driven socio-banking philosophy), insufficient regulation of derivatives, and a very loose money supply.

So, when Romney ran against Obama, Romney was robbed of two key arrows in his quiver: taxes and deficit reduction.  Obama did not run on raising taxes.  Rather, he ran on renewing tax cuts on most Americans, while letting those taxes on the richest—which he had already extended—simply expire.  At the same time, Obama tied this expiration to fiscal responsibility—pointing out the very cost of extending some of the Bush tax cuts that the Congressional Budget Office highlighted over a decade prior.  That is, the basis on which Bush was able to enact his tax cuts in the first instance—i.e., their time-limited effect on the deficit—was used to argue for their planned expiration (but only on the top bracket) to protect the deficit.  Moreover, Bush’s spending on the war—driving up the deficit—highlighted a justification that would have been far more theoretical during, say, Reagan’s or Clinton’s second terms.

To be clear, Obama’s first-term resulted in the single greatest increase in the deficit, but Obama was deftly able to paint this as a short-term (albeit enormous) cost for long term gain that would actually decrease the deficit.  That is, unlike most deficit-increasing expenditures, Obama’s self-styled stimulus package was expended with the asserted goal of reducing the deficit by spending money.  Having not appreciably succeeded in reversing the downward spiral of the economy, Obama certainly faced the risk of having this claim discredited.  But the issue was muddied enough so that Obama was able to escape (like Reagan) the claim that he increased the deficit.

It’s not news that Romney was hurt by the Bush presidency.  But the conventional wisdom has been that the causes were war fatigue and the precipitous collapse in the economy triggered by the exposure of much of the securitization market, significantly including credit default swaps, as a sham.  Politically, these were indeed powerful tools for Obama, because Americans have far more stomach for starting wars then seeing them through—although our protracted stay in Iraq properly came to be viewed as a function of military/political inertia; and, although the claim that Bush bears primary responsibility for causing the recession is simply false, it had far more stickiness because it was exacerbated by the huge budget deficit that he, in fact, owned.

However, Romney might well have been able to distance himself from these Bush-associated issues had Obama not been given the gift of not having to run on raising taxes to improve a very large deficit—either by not having an expiring tax cut or not confronting a dramatic shortfall during a bad economy.  Then Romney could have applied the tax label to Obama, unless Obama sought no increase in revenue whatsoever—a theoretical occurrence that has proven difficult for Democrats.  Instead, Romney had both no labeling device and no significant new proposals.  His suggestion was to continue the Bush tax system that hadn’t cured the economy under Obama, while Obama was able to push that he was going to increase revenue—while critically not having to call for new taxes.  The latter for sure was no bold proposal at all, but certainly no less so than the alternative.  And the distinction between raising taxes and allowing cuts to expire was perceived, with some merit, as very real—in part because the boogey-man that their imposition could have been came to be seen much more a phantom given their previous imposition during a vigorous economy under Clinton.

Ultimately, all elections are unique and based on the highly varied preferences of millions of voters, but Romney was certainly saddled with a political burden sowed over a decade prior that, coupled with other factors, produced the fairly dramatic loss that he suffered.