05-25-2002

ECONOMICS: America Has Two Presidents. and One Is a Capitulator

This week, you will have noticed, George W. Bush is in Europe for his
summit with Vladimir Putin and meetings with the leaders of France and
Germany. The prospect of cooler relations with Western Europe and warmer
relations with Russia (not the most promising ally, when all is said and
done) has elicited the expected share of hyperbole. Still, this trip
really does mark a stage in the building of a New World Order-fashioned,
to a great extent, by September 11 and its aftermath, but shaped also by
President Bush's distinctive vision of American interests and
priorities.


Admirers of the president can rightly see this as a time to reflect on his
virtues. George Bush is a man who, on the questions that matter most, has
utterly confounded his critics. In the most-testing circumstances, he has
impressed Americans and foreigners alike with his strength of character
and sense of purpose, and-for all the mockery of his intellect-with an
ability to see and seize opportunities that his cleverer opponents would
have missed.


The emerging new relationship with Russia is telling. Not long ago,
critics at home and in Western Europe, mustering all their powers of
condescension, deplored the administration's provocative stance toward
Russia, expressing horror at the plans for missile defense and the
recklessly unilateral scrapping of the ABM treaty. Now the concern in
Western Europe is that, despite pressing on with this supposedly
confrontational approach, President Bush may be building a more productive
relationship with Russia than he has with America's traditional allies.
Bush stands a fair chance of getting exactly what he wants from Putin,
while forging an important new alliance in the process. What do the
polished men of letters in the French foreign ministry think of that? Not
bad for a tongue-tied cowboy, is it?


This is the story of the moment, but Wealth of Nations will not dwell on
it any further just now. Let's see what the trip produces, and return to
these questions later. Readers already know that, on foreign and security
policy, Bush gets high marks in this space. Also, this column has been
suffering from mission-creep lately: too many guns and not enough butter.
So, churlish as it seems, this time I want to reflect on the main area in
which Bush has confounded not his critics, but his supporters-that is,
economic policy.


Anybody who voted for Bush in the hope that he would favor market forces
and oppose wasteful public spending-and you must admit, he did give that
impression-must be wondering what hit them. The farm bill is only the
latest hammer blow. My colleagues at National Journal have already said
plenty on this atrocity, but it is every commentator's duty to rage
against this policy.


The farm bill is a disgrace not merely because of the ludicrous expense;
or the patent intellectual dishonesty; or the undisguised failure to
direct much help to those people who may need it. Because of its
trade-policy implications, the measure is even worse than all that. By
artificially boosting the supply of American farm goods, it will drive
down world prices for many commodities, and that in turn will squeeze
incomes in many of the world's poor countries. Because of those broader
repercussions, and because of the steps that other countries will take in
response, the legislation poses a real threat to the talks on
international trade reform, which have barely begun at the World Trade
Organization.


In its wider effects, in other words, the farm bill threatens to waste far
vaster quantities of resources than those it spends directly, not just in
farming but right across the economy. And this tribute to economic
incompetence follows close behind the administration's decision on steel
tariffs, one of the biggest and most explicit reversals of recent years in
American support for open international markets.


What a contrast. On foreign and security policy, the president knows what
he wants and why, and in a measured way he moves purposefully ahead. On
trade and other aspects of economic policy-simpler issues, in many
respects, where it is easier to see where the national interest lies-he
has abandoned good government and been ruled by the shallowest
calculations of short-term political advantage.


On foreign policy, it seems to me, Bush has been a leader dedicated to
plain speaking, plain truths, and clarity of vision. On economics,
especially trade policy, he has been a prevaricator (as when explaining
how higher steel tariffs are consistent, really, when you think about it,
with his free-trade principles); a capitulator to narrow interests
(witness steel and farming alike); a maker of sorry excuses (as when,
instead of promising to veto the farm bill, he blithely observed that no
law is perfect); and, yes, an ignoramus. It is as though the United States
has two presidents: a foreign-policy president who knows what he is doing,
who leads and commands respect; and an economic-policy president without
goals, for sale to any passing lobby, who has abandoned his every belief
about economic freedom for the sake of a few votes.


Last week, my friend Jonathan Rauch devoted his column in National Journal
to a quest for something good to say about the farm bill. It is inspiring
to see somebody struggle that way against hopeless odds. Yet, ingeniously,
Rauch did find something good to say. He explained how the bill is
redeemed by being not routinely bad or even unusually bad, but by being so
remarkably and astoundingly bad that it is unsustainable and
self-refuting: It is bad enough, sooner or later, to be doomed. High
praise, under the circumstances-but too optimistic, I reckon.


The trouble with this too-bad-to-last theory is that the United States is
a very rich country. It can afford awesome amounts of bad government, at a
cost that would drive countries with more modest resources to ruin. The
farm bill, awful as it is, will not come close to testing the limits. All
kinds of ill-advised policies that are denounced by analysts as
"unsustainable" (Social Security is a good example) are
sustained, decade after decade, nonetheless.


The opportunity to reform entrenched systems of subsidy may come along
only rarely, when political and economic conditions are favorably aligned.
The opportunity to create new systems of subsidy, and new interests to
defend them, is ever present. What is so depressing about the farm bill is
that it dismantles, at a stroke, the hard-won and maybe harder-to-repeat
reforms of 1996, which removed the link between subsidies and production.
Now this link is back, and strengthened: Henceforth, the more you produce
of certain crops, the more you will be subsidized. Lunacy-but not too
crazy to last for years, or even to get worse before it gets
better.


The administration's defense of its tax-squandering, market-rigging,
anti-trade policies is that its new tariffs and subsidies are tactical
maneuvers. The steel tariffs were designed to secure congressional
approval of trade-promotion authority, without which the administration's
negotiators are hamstrung in cutting deals with other countries. Well,
despite the tariffs, TPA still got stuck in the Senate. As this column
went to press, it seemed about to get unstuck. In any case, one wonders
whether an administration with so little resistance to protectionist
arm-twisting actually deserves to be trusted with TPA. And the other
President Bush would need no reminding that appeasement does not tame your
opponents, it just creates an appetite for more concessions.


The administration is also pitching a tactical rationale for the farm
bill. This says, in effect, that if America builds up its own
market-distorting agricultural subsidies, it will be in a better position
to negotiate with the European Union and others in a process of
international farm-trade disarmament. Yes, the tired old disarmament
analogy-intellectually unsustainable, too bad to last, but here it is
again. The point about an arms race is that if you dismantle weapons
unilaterally, other things being equal, you expect to make your enemy
stronger and yourself weaker. An agreement for both sides to disarm in
parallel preserves the balance of power, while lowering the cost and the
risk for both sides. That is why multilateral disarmament makes
sense.


Trade is different. If you liberalize unilaterally, scrapping badly
designed subsidies and lowering trade barriers, you don't make yourself
weaker, you do the opposite. Farm bills and steel tariffs do not raise
American incomes overall. They make America poorer; they strengthen the
political forces in America that want further protection, which would make
it poorer still; and they mobilize additional political opposition to
trade reform abroad. It is bad economics and bad tactics, too.


It would be wrong to pretend that these terrible economic policies count
for as much these days as the administration's foreign and security
policies. Even so, when the good president gets back from Europe, he
really ought to find time to give the bad president a piece of his
mind.


Clive Crook

National Journal