Democrats and Republicans: Different Kinds of Santa Claus

     Jude Wanniski was the originator of this concept in the 70s.

      http://www.amazon.com/Way-World-Works-Jude-Wanniski/dp/0895263440/ref=sr_1_1?s=books&ie=UTF8&qid=1364303580&sr=1-1&keywords=jude+wanniski

       The important point is that the GOP could and should play Santa Claus as well .Until then, the party had basically been the party of Scrooge: balance the budget, keep inflation low, limit government sending. On the subject of tax cuts they insisted that there should be none until after spending was cut. Indeed, the big tax cuts were done under the Democrats-Kennedy but also the Dems in Congress.

       Wanniski urged the GOP to change it's stance as Scrooge will never beat Santa Claus.

       "Simply stated, the Two Santa Claus Theory is this: For the U.S. economy to be healthy and growing, there must be a division of labor between Democrats and Republicans; each must be a different kind of Santa Claus. The Democrats, the party of income redistribution, are best suited for the role of Spending Santa Claus. The Republicans, traditionally the party of income growth, should be the Santa Claus of Tax Reduction. It has been the failure of the GOP to stick to this traditional role that has caused much of the nation’s economic misery."

        "Only the shrewdness of the Democrats, who have kindly agreed to play both Santa Clauses during critical periods, has saved the nation from even greater misery."

       http://www.cnbc.com/id/45768718

       http://capitalgainsandgames.com/blog/bruce-bartlett/1701/jude-wanniski-taxes-and-two-santa-theory

      This strategy would pay big dividends. However, it seems that the problem of the GOP now is that it's no longer playing Santa Claus. This is the lament of Larry Kudlow.

      http://www.stationcaster.com/player_skinned.php?s=1251&c=6381&f=1218021

      The above link is Kudlow's radio show. It's pretty interesting-he also interviewed Sumner. Seems some conservatives are finally responding to Sumner's clarion call.

       This may be as Kudlow is admitting that the "glasses and green eyes shadow" look of the GOP isn't a winner. Still, the question is why is the GOP abandoning a strategy that worked quite well for them since Reagan's 1980 landslide?"

         "Somehow we’ve come full circle. The age of austerity apparently means that the Republicans have given up their role as Tax-Cut Santa, which is terrible not just for the Republicans but for the economy. We’re deep in an economic slump and Americans are severely overtaxed.
       
         I think this misses the point. The GOP hasn't changed it's strategy. Actually, it's the Democrats who have. What we have seen since 1980 is a kind of "bifurcation" for GOP fiscal demands. During Republican Presidencies, it's "Deficits don't matter"; when a Democrat is in the White House they matter again. 

         The important idea of Wanniski is to not wait for the spending cuts first and then have the tax cuts for the rich. Do the tax cuts first and then the beast will be starved. The demand for spending cuts flows from the tax cuts. Republicans are not "Austerians" when they have the White House. Indeed, they go on a "spending binge" of a kind but this is financed by Republican priorities: tax cuts for the rich and a big military buildup. 

          When the Democrats get back in there's all of  a sudden "no money." The result is a sharply procyclical fiscal policy-if we had the level of state government spending we had under Bush we'd be closed to at the end of the woods now. To be sure this is exacerbated by all those states that insist on having balanced budget amendments. 

           Obama has outraged the GOP by not playing according to the Wanniski script. Clinton had did what they wanted: he placed balancing the budget as the first priority and left stabilization policy as the prerogative of the Fed. Obama had the stimulus and has expanded the role and increased the size of government with ObamaCare and Dodd-Frank, etc. 

            I recall during the election where Morgan Warstler thought it was inevitable that Obama would lose as he had broke the Wanniski contract. What happened?

            What happened is a two things in particular:

            1.) Obama came into a situation where the country was having the worst downturn since Depression. 

            2). In 2009, unlike 1993, the Republican party has been largely discredited both as the party whose policies got us into the mess and in addition the corruption and abuse of power of the W. Bush White House. 

            You probably shouldn't then overstate the differences between Clinton and Obama. Clinton has a much better economy and the Democratic party was much weaker then making "triangulation" perhaps the most effective policy. However he did set the table for Obama. 

            P.S. Say this for Morgan: unlike many conservatives, he's a much quicker learner. 

             http://diaryofarepublicanhater.blogspot.com/2013/03/morgan-warstlers-bold-gambit-to-auction.html