Worrisome Signs for Landrieu and the Left

Thanks to Louisiana’s unique election format, Democrats will be able to test a new campaign strategy formulated in the aftermath of last Tuesday’s defeat. Instead of downplaying the policy differences between themselves and President Bush, they will highlight them. But because of the electorate’s disfavor for Democratic positions where there is a genuine contrast, come December 8th, the day after the Louisiana Senatorial run-off election, Democratic strategists will likely be back to square one.

One of the most successful issues for Republicans in the midterm elections was the creation of a cabinet-level homeland security agency. Given the lack of attention to homeland security in government appropriation bills and the consciousness of lawmakers prior to September 11th, the need for a reassessment of the way the government defends its citizens against terrorist attack is obvious. But, as is the case with most of what Washington does, the devil is in the details. Would the new department streamline functions needlessly replicated by parallel agencies? Would the new agency create a clearly delineated chain-of-command and challenge the feudalistic mindset of extant bureaucracies? Could this be accomplished by reallocating funds instead of appropriating new tax dollars?

While the verdict is still out on each of these important questions, the Democrats in Congress not only asked the President none of them, they actually used their clout to ensure that the new department would be as large, sclerotic, and unwieldy as possible. Carrying the torch of federal employees’ unions – and Big Labor in general – the Democrats on the Senate Governmental Affairs Committee voted to burden the President and the new agency with a surfeit of civil servant regulations that would cripple its effectiveness and defy the rationale for its creation. It is quite likely that committee members Jean Carnahan (D-Mo.) and Max Cleland’s (D-Ga.) decision to side with labor on homeland security cost them their respective elections.

As one of the top recipients of public sector employee union contributions in Congress, Sen. Mary Landrieu (D-La.) would have undoubtedly sided with her deposed Democratic colleagues if forced to vote on the bill. Given her party’s new confrontational strategy for her run-off election, it seems Landrieu has drawn the unenviable task of explaining to voters why the new homeland security agency should be hamstrung with inflexible labor regulations.

Democrats may wish to be more politic when deciding which differences to highlight, but if Bush succeeds in getting homeland security to the Senate floor, Landrieu may be forced to choose between her benefactors and political fortunes. One unnamed Democrat told The Wall Street Journal that he believed the Bush administration was pushing homeland security in the lame-duck session “so Republicans can use it to try to unseat (Landrieu).” That could be, but a more plausible explanation is that the administration sees the department as a pressing policy priority, however inconvenient for Sen. Landrieu.

If the stark difference in homeland security is too discomforting to point out, Perhaps Sen. Landrieu will instead highlight the ways her party’s economic priorities differ with those of President Bush. This could include plans to rollback the Bush tax cut passed last year and issue another round of rebates, as proposed by Presidential aspirants John Edwards (D-N.C.) and John Kerry (D-Mass.).

Whether this proposal makes for good politics is unclear, but as a recent paper by economists Joel Slemrod and Matthew Shapiro explains, it is lousy economics. Slemrod and Shapiro found that between 16 and 21 percent of families that received the 2001 tax rebates spent the money. A majority said they paid down personal debt, while 30 percent said they saved the money. Far from providing a one-time “shot in the arm,” the tax rebates failed to increase consumption as consumers retrenched in the face of uncertain economic times. The paper also found that another round of rebates would be similarly ineffectual as consumers would pay-down debt and save in roughly the same proportion as 2001.

Conversely, the Bush marginal rate and death tax cuts change incentives, thereby inducing changes in behavior. Such tax changes lead to growth by reducing deadweight loss associated with tax and estate planning and increasing potential returns to productive endeavors. To quote economist Steve Hanke, “to join the ‘incentives don’t matter’ school of economics,” as Sen. Landrieu has in her reelection bid, “would be like a geographer joining the ‘flat Earth society.’” A difference yes, but likely not one to earn the admiration of voters.

Democrats confounded by their midterm defeat seem united in their move to the left to define better their differences with the president. But given the policy areas where those differences lie, perhaps the “me too” midterm strategy provided the best results for which the Democrats could have hoped.