The optimistic scenario
At this stage, as I’ve said, I think a Kerry victory would produce the worst of all possible worlds – responsibility without power. The alternative looks awful, but I thought I’d sketch out the optimistic scenario, which is, roughly speaking, a repeat of Reagan’s second term.
In his first term, Reagan was, in many respects, worse than Bush has been. His buildup of nuclear weapons, undertaken with the support of advisers such as Perle, ran a severe risk of destroying the entire world. In economic policy, he discarded the mainstream Republican economic advisers and went for what George Bush senior called “voodoo economics”, massive tax cuts undertaken on the basis of the supply-side economic theories of people like Arthur Laffer and Jude Wanniski. This produced a peak deficit equal to 6.2 per cent of GDP in 1984, considerably higher than the peak under Bush so far.
In his second term, Reagan ignored his foreign policy advisers and signed the Intermediate-Range Nuclear Forces Treaty with Gorbachev. Whereas Perle and others saw Reagan’s rhetoric about bargaining from a position of strength as mere words, covering the creation of a nuclear capacity that could fight and win the inevitable showdown with Russia, Reagan actually believed it, and when he found a suitable partner in Gorbachev he put it into practice. START I, initiated by Reagan and Gorbachev, followed in 1991.
Meanwhile, on economic policy, Reagan listened to his mainstream advisers and took steps to wind back the deficit. He left the US with a big increase in public debt, partially unwound under Clinton, but the outcome was far better than it would have been if he hadn’t changed course.
At about the same time, the Plaza Accords produced a concerted policy of depreciating the overvalued US dollar and reducing the trade deficit.
What are the chances that we’ll see something similar from Bush? In foreign policy, this would entail a shift towards bilateral or multilateral peacemaking, and in domestic policy, a serious attempt to balance the budget and the trade account. In my judgement, close to zero. But I’d be interested to hear what others have to say.