John McCain: the accidental Austrian candidate? (Tweaked and bumped)

It’s been four days since I last posted here on the Republican race for President.  My visit to New Jersey imposed upon me some downtime to take perspective of the race, in particular the for-now front-runner, John McCain.  What I have concluded will surprise some, and likely startle everyone else.

The pundits on Fox News were all discussing how the economy has moved front and center this year.  Naturally, McCain, winner of the South Carolina primary, was asked his views on the economy.  He repeated his mantra that the economy’s biggest problem is an excess of government spending -

- and that’s when it hit me.  No presidential candidate had openly said government spending has damaged the economy at any point in my life prior to the 2008 campaign (for the record, I was born after Barry Goldwater’s 1964 run).

This really shouldn’t surprise anyone as much as it does.  After all, government spending is mother’s milk to politicians, especially in the post-World War II era when the Cold War made government spending in some form a positive good across the political spectrum for the first time in American history (defense on the right, non-defense on the left).  Politicians love to drone on and on about what they have done for us with our money.

Moreover, the economic experts on which the politicians have relied for advice have also been comfortable with government largess.  The dominant economic school of thought (the Keynesians) saw government spending as a direct benefit to the national economy, while their leading political opponents - the “supply-siders” - generally avoided the spending argument.  In fact, the supply-siders insistence that tax rate reductions would lead to increases in government revenue led some to wonder if they had any argument with big government at all.

Only the Austrian school, which to this day (and I’m oversimplifying here, of course) insists that government spending merely crowds out private sector investment, is prepared to categorically condemn government spending as a negative to the economy.  Thus, even in the 2008 campaign, only two candidates have publicly called for government spending cuts specifically to improve the economy.  One is, as would be expected, Ron Paul.

The other is McCain - and that’s where things get interesting.

The odds are fairly good right now (at 2AM now 10AM on January 22) that John McCain will be the Republican nominee.  Thus the man who succeeded Goldwater in the U.S. Senate may very well be the first major party nominee since Goldwater to publicly endorse budget cuts as a way to improve the economy.  Of course, spending cuts have been supported by presidential candidates before, but only in the vagaries of supporting limited government as the American ideal.  Even they (Reagan included) assumed budget cuts as an economically painful but nonetheless necessary course of action.

McCain is taking it one step further by insisting less government spending is an economically good policy per se.  If he’s going to hold to it, odds are he’ll want economists with academic pedigrees to back him up - and that’s where the Austrians come in.  At first, this may sound opportunistic - or even cynical - on the parts of both McCain and the Austrians.  However, we should remember that Ronald Reagan was not a supply-sider when he began his political career as Governor of California.  In fact, the supply-side school didn’t even exist in 1967, when Reagan began his first term as Governor (and signed a major tax-hike into law).  It wasn’t until the late 1970s that he adopted supply-side as his own, making it the biggest challenger to the crumbling Keynesian conventional wisdom.

One could even say that for conservative Republicanism - long attached to the balanced-budget-at-all cost orthodoxy of Herbert Hoover and later Dwight Eisenhower - to adopt supply-side theory was itself a radical and unexpected notion.  Certainly Bob Dole, who by as late as 1976 was considered firmly on the right of the GOP, was stunned to see himself called a moderate because he didn’t consider supply-side to be viable.  Yet, twenty years later, Dole himself endorsed a tax cut right out of the supply-side playbook, and picked as his running mate the supply-side high priest (and current McCain adviser) Jack Kemp.

So while McCain becoming an Austrian apostle and champion seems strange, I would submit that stranger things have already happened.

From where I sit, McCain really has only two objectives (Oops!  That should read “two choices”): adopt the Austrian theory as his own, or publicly change his view on government spending.  I don’t see him doing the latter, which means this race has one major, unexpected turn coming that could not only rewrite the narrative of this campaign, but the entire economic and political history of the 21st Century.

For decades, the Austrian school has been the “civil society” - as it were - of economics: the home for respected, and even revered, critics of government policy.  If McCain goes where I think he’s going, the Austrians would find themselves in power and politically popular for the first time in its (”their”, sorry again) existence.  It would also be the first time in over 150 years that an agenda that explicitly rejected government spending for economic reasons was elected by the American people.

Thus, a McCain Administration could actually be the transformative force that limited government supporters have wanted for more than a century.