The Australian Financial Review

Bush's Boldness Has Cost America

The most striking feature of the 2004 US elections is the sharply polarised views between the parties on what set of policies would be best for Americans. Behind the consensual goals sought by all Americans national security, economic prosperity, personal freedom, effective schools, affordable access to quality health care, safe communities, a clean environment lie very different beliefs on how the nation might best achieve them. And those conflicting beliefs are increasingly reflected in the competing world views of Democrats and Republicans.

A country long known for undisciplined parties with blurred ideological differences has become a cauldron of intense and bitter partisan warfare.

George Bush came to the White House after the closest and arguably most controversial presidential election in US history. Thanks to the idiosyncrasies of the system, Bush won the presidency despite losing the popular vote. Even on the decisive electoral vote, Bush won by the narrowest of margins only after a 5-4 majority on the Supreme Court halted a re-count of the dead-heat outcome in Florida. Furthermore, his party lost seats in both the House and Senate, leaving the first unified Republican government in a half century resting on an extraordinarily narrow electoral base.

Rather than shrink from an ambitious agenda in the absence of an electoral mandate, Bush has aggressively sought and achieved dramatic changes in domestic and foreign policy during the past three years. The administration has made three large tax cuts, expanded the federal role in primary and secondary education, softened environmental regulation, introduced a prescription drug benefit tied to some restructuring of old-age health insurance, increased police powers for dealing with terrorists, formed a massive Department of Homeland Security and devised a new policy of pre-emption for the war against Iraq. This illustrates the boldness and skill with which it pursues policy and political objectives.

Assessing the consequences of those policy achievements is another matter entirely. Lower taxes, sharply higher spending and reduced revenues from a stagnant economy have produced a breathtaking reversal of fiscal fortunes. The $US5 trillion ($6.6 trillion) budget surplus projected in 2001 for the decade following became a $US5 trillion deficit in 2003. Increased domestic and military spending and lower tax rates mean the US will be unable to grow its way out of this abyss. Recent news of a spurt in economic growth is most welcome, but $US500 billion annual deficits are likely to continue until the baby-boom generation begins to retire in several years, at which time deficits will grow even larger. Despite the massive stimulus from the administration's fiscal policy, unemployment remains distressingly high two years after the end of the last economic recession.

The huge budget and current account deficits will make it more difficult to revive the sustained economic expansion of the 1990s. Protectionist sentiment at home arising from job losses, meagre wage gains and economic insecurity threaten to derail global and bilateral trade negotiations and incite retaliation by other countries.

The "war" against terrorism is equally problematic. After swiftly routing the Taliban regime and al-Qaeda forces in 2001, the administration allowed Afghanistan to regress towards a state of lawlessness and instability. Iraq has proven much more difficult to stabilise than anticipated by White House and Pentagon planners, and the rising human and financial costs accompany only halting progress against the insurgency despite the capture of Saddam Hussein.

Moreover, the strikingly negative reaction of most of the world to Bush's muscular foreign policy and particularly to the war in Iraq has created new recruitment opportunities for al-Qaeda and other terrorist organisations.

At home, the war on terrorism has produced mixed results, at best. Massive bureaucratic reorganisation has absorbed time, energy and resources that might otherwise have gone directly into shoring up America's greatest vulnerabilities. The domestic counter-terrorism effort continues to suffer from inadequate collection and sharing of intelligence, just as first responders in local communities still lack adequate training and resources.

Few bright spots exist on the domestic policy front either. Mediocre performance continues to characterise elementary and secondary education. Escalating costs and budget cuts imposed by states in fiscal distress increasingly constrain opportunities for higher education. Health care is a crushing financial burden on employers and governments as well as a source of anxiety among citizens. After a period of relative price stability, health care costs have been rising at worrisome rates. The number of Americans without health insurance now exceeds 40 million. Finally, virtually no progress has been made in preparing for the financial burdens of an ageing society.

In short, the impressive political victories of this administration have not been accompanied by improvements in our economic wellbeing, physical security or social policy. A unified Republican government built on the slenderest of electoral bases has pursued a style and substance of governance that has further polarised US politics, deepened the problems faced at home and diminished the nation's moral authority around the world.

Americans need to break this cycle by empowering a government to move towards more moderate and responsible policies and processes. Whether and how this can be achieved next November is uncertain.