Denver Post - "Economy polarizes politicians"
Ask Democratic Senate candidate Mark Udall what the biggest challenge facing the economy is, and he talks about redirecting resources from a misguided war to urgent priorities at home.
He talks, in other words, about what government can do.
Ask Republican Bob Schaffer about the economy's biggest problem, and out rolls a vision of government's fundamental limitations things it has no business doing in the first place.
"The dead hand of government is the biggest problem in general," Schaffer said of the country's economy, in pull-no-punches terms.
Within that brief diagnosis is a policy chasm that divides the two men running for Colorado's open Senate seat more than any other on taxes, on government, on the flailing economy and what lawmakers can do to fix it.
Asked over the weekend about the massive government bailout of the financial sector announced by the Treasury on Saturday, Schaffer blasted it as "a tragic response to an even greater tragedy," while Udall called it a necessary step as long as it "first and foremost protect(s) taxpayers."
With the collapse of Lehman Brothers and the takeovers of Fannie Mae and Freddie Mac, with rising unemployment and ballooning deficits, no election has been so defined by economic concerns since 1992, when Bill Clinton beat a sitting president with the mantra "It's the economy, stupid."
But even then, the country was swinging out of a recession that had already run much of its course. Candidates now are running just as the country tips on the edge of recession, something that hasn't happened since 1980.
In many ways, the terrain in the U.S. Senate race in Colorado follows the national debate, with President Bush's tax cuts a central dividing line between the two parties. (Schaffer would keep them; Udall would rescind them for households that earn more than $250,000 a year).
But deeply held ideas of the two candidates also create some significant departures differences rooted in the forces that long ago shaped them as politicians.
A fan of conservative economist Milton Friedman (he often quotes him on the stump), Schaffer would cut corporate taxes, eliminate the estate tax and roll the capital-gains tax back to 10 percent, further even than John McCain is willing to go.
When he was in Congress for six years, Schaffer ran his office on a shoestring and sent the money saved back to the U.S. Treasury (he returned $350,000 his first year in Congress, for example). But his ideological conservatism also sometimes led him to what many considered fringe positions.
He was one of five congressmen to vote in 2002 against a bill to fund child-abuse-prevention programs and one of four who voted against a 1998 bill to raise the amount of Pell grants available to college students.
"The fact that my mom's family fled the living hell of Stalinism and sought refuge in the United States of America is somewhat of a metaphor for my understanding of the strength of the American economy," said Schaffer, the son of immigrant parents. "On an annual basis, it seems that more laws passed in Washington have more in common with a highly centralized bureaucracy than an American tradition of decentralized freedom."
A compromiser by nature, Udall isn't willing to support a central tenet of Barack Obama's health-care proposal, the requirement that all employers either provide health insurance or pay into a government fund. The position is likely to win him support among business, but economists say it would put Obama's goal of insuring most Americans out of reach.
At the same time, Udall's embrace of an activist government can sometimes stretch beyond his party's presidential candidate. He calls the $150 billion over 10 years Obama wants to invest in promoting renewable energy and hyper-fuel-efficient cars "the floor" of what's necessary.
And his former support for an $8 billion Cabinet-level Department of Peace, which would include a peace academy modeled after the country's military academies, has been mocked by Republicans for months now. (After backing it twice, Udall pulled his support for the idea in 2003.)
"As Lincoln put it, 'What you can't do alone, you have to do together.' And the way you do it together is working through government," Udall said.
Economists say that perhaps more than any lawmakers in a generation, the new Congress will face a gauntlet of critical economic issues: the housing crisis, an economy shedding jobs, health-care reform, government regulation of the financial sector and perhaps even Social Security reform.
The candidates for Senate in Colorado cast their potential role in equally important terms.
Schaffer sees in the next Congress a chance to return to the fiscal conservatism of the late 1990s broad tax cuts, yes, but also strict limits on spending, creating a shift of resources from government into private hands.
"The last time the United States Congress was serious about trimming spending and increasing the rate of growth in the economy was in the years from 1995 to 2002," said Schaffer, highlighting a timeline that roughly matches his own years in Congress.
Udall sees a closing window on America's chance to maintain its leadership role in a global economy, one that underscores the urgency of new investment in education, infrastructure and next-generation manufacturing sectors such as renewable energy.
"We've got to pursue intelligence and invest in our people and the human capital we have. Our tax policy should drive that approach," he said.
Economists see problems with both approaches.
The Bush tax cuts which reduced federal tax income as a percentage of GDP to its lowest level since 1959 were seen partly as a way to leave more income in the hands of consumers and companies, who would then spend it and stimulate a sputtering economy. Five years later, the economy is still sputtering.
Schaffer believes without those cuts, the situation would have been worse and that the answer now is more targeted cuts on corporate taxes and capital gains cuts that would help stimulate job growth.
"If you believe tax cuts work, they're like pixie dust," said Roberton Wil liams, an economist at the Tax Policy Center, a Washington think tank. "If the answer is, 'Just think how bad it would be if we hadn't had the tax cuts,' there is absolutely no answer to that."
The think tank looked at the impact of both maintaining the Bush tax cuts and cutting the corporate income tax and found it would cost the U.S. Treasury $400 billion a year by 2013.
Since total nondiscretionary spending (leaving out entitlements and Defense) will be an estimated $570 billion, the combined tax cuts Schaffer is proposing would leave the government desperately starved of money, Williams said, even with Schaffer's proposal to cut earmarks (which would save at most $25 billion a year).
Udall has difficulty making his approach add up as well.
On the stump, the Democrat points out that the country's urgent domestic needs fixing health care, investment in human capital, jump-starting a green-energy economy can be largely paid for by ending the Bush tax cuts for the wealthy and bringing the troops home from Iraq.
"We're spending $2.5 billion a week in Iraq. That's money I want to see invested here," Udall said in a recent debate.
But that $2.5 billion is in reality deficit spending, and most economists say it should be considered emergency spending rather than available money. Eliminating the Bush tax cuts would save an average of $88 billion a year, economists estimate.
Now compare that to proposed costs.
Fixing health care under Obama's proposal would cost an estimated $65 billion a year, and Udall wants at least another $15 billion annually for green energy. Then there's Udall's call to increase education funding and build new highways and infrastructure, and his proposal to add a division to the Army.
None of that includes paying down the massive deficits being accrued.
Udall said he supports returning the Senate to pay-as-you-go spending (which requires cuts or taxes to offset any spending) and that after that, lawmakers will have to prioritize. But Wil liams, the Tax Policy Center economist, said that may still leave voters with an impression that the country is in a position to do more than it can.
"If you watch what's being proposed by the candidates, they are spending money multiple times. . . . (They're) going to save the money in Iraq and spend it on education . . . to save the money in Iraq and spend it on health care," Williams said. "It's not going to be an easy task for anybody to either cut revenues a lot or increase spending very much in the face of the deficits we're looking at.
"Reality will eventually strike."