Towards A Good Samaritan World

Friday, November 03, 2006


I'm getting increasingly excited about the likely Democratic takeover of the House of Representatives. So is Larry Kudlow:

Nancy Pelosi told me last week on CNBC that the Democrats, if they take the House, will push for a balanced budget and spending restraint. She also said tax increases would only be a last resort...

Cheney noted that the administration has had to meet some "extraordinary" spending requirements. Yes, they have -- among them the high price of war and security in the long wake of 9-11. But here, supply-side policy once again matters: The deficit has dropped to a low percentage of GDP, historically speaking, thanks to the economic growth and revenues thrown off from the Bush tax cuts. Said Cheney, sounding very balanced-budget minded, "We have done a lot to exercise restraint in terms of spending."

So can we expect two years of Congress and the Executive Branch trying to outdo each other on spending control? Markets won't mind at all...

Adding all this up, key Democrats say they won't raise taxes if they take the House -- and if they do try, the president will be there with his veto pen. Think Grover Cleveland, who holds the American record for presidential vetoes. The Democrats also are at least talking spending restraint, as are Cheney and his boss. And not only is the veep saying no to new regulations, there could be bipartisan agreement that Sarbanes-Oxley has gone too far.

This could be the real message of the Goldilocks market: a Reaganesque policy mix of low tax rates, limited spending and less regulation. It would continue the greatest story never told.

On immigration, the political message from a Dem takeover would be spectacular. The Republicans pass a fence bill and immediately, just like that-- BOOM!-- voters give them the boot! The Pete Wilson lesson all over again. What's more, there are currently millions of people living in America who are locked out of the benefits of citizenship, who will likely get their civil rights within the next couple of years if the Dems take over. This is one place where Bush and the Dems could work together.

What about Iraq? I don't think Dems will rush for the exits, and if they try, Bush will gain in popularity because Americans aren't as war-weary as all that. Dems might be better-positioned to woo international support. Maybe jettison Rumsfeld... not that I necessarily buy the anti-Rumsfeld CW, but enough soldiers seem to hate him that it might be just as well to get him out of the way. Then there's Lieberman, set to win a new, unique, bipartisan mandate in Connecticut. Lieberman could play a real historic role here, the symbol to Democrats that they shouldn't be intimidated by the left-netroots into a hasty, premature withdrawal. It's risky putting the Dems in charge; they've looked pretty useless over the past couple of years. But it's worth the risk this time I think.

(It might be better to have the Senate stay Republican-- House/Senate gridlock is good!-- but it will be sweet sweet sweet to see Rick Santorum go down after his stance on immigration.)


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