It may be a bit of an exaggeration to say that 2017 was the best of times and the worst of times for classical liberalism in the United States but not much of one.
The right and left wings of the Republican and Democratic Parties do not appear to have symmetrical tactics. The right, usually in the House but often in the Senate, refuses to compromise even when that refusal will generate a worse short-term result from their perspective. For instance, the right in the House has refused to vote for federal spending bills even if they were written by the Republican leadership. In 2012, the most conservative caucus refused to vote for a bill that would have limited tax hikes to those earning over a million dollars a year. And they have blocked some of the compromises that might smooth the passage of a partial Obamacare repeal and health care reform.
As a result, the Republican leadership has had to rely on Democratic votes for the budget, leading to higher spending. Without the leverage of the House bill taxes went up on couples earning over $450,000. The prospects for any substantial legislative reform of health appear dim.
In contrast, the Democratic left is willing to compromise. They all voted for Obamacare, even if it was not a single-payer plan. And I do not recall any substantial opposition to budgets passed in the Democratic Congress. What explains this difference?
Ray Fair, a fine Yale economist, has the best economic model for predicting the outcome of presidential and congressional elections. The model has the virtue of simplicity, weighting incumbency, length of time a party holds the Presidency, and news about the economy on growth and employment relatively shortly before election. It has not been perfect in predicting each party’s share of the two party vote, but it has been good–good enough to be taken seriously outside the academy. The New York Times in fact devoted a whole interview to him, sadly marred by the seeming inability of the interviewer to understand why, Fair, despite being a Democrat, used his model to predict a Republican victory!
But the relative success of his model makes one doubt how strong is democratic accountability for the economic performance of government. Few, if any economists, would say that the news about growth and unemployment shortly before an election is a good proxy for that party’s economic stewardship. Business cycles are not in the control of the government. And perhaps more importantly, the most important policies a government undertakes likely take longer than a few years to bear fruit. Thus, the tax cutting policies of the Reagan era may be largely responsible for the prosperity of the Clinton years as businesses and people invested more.