Fiscally Conservative Outcomes Aren’t Necessarily Pro-Growth Outcomes
In a new research note, Goldman Sachs argues that keeping the political status quo in 2012–by re-electing President Obama and maintaining a divided Congress–would be the most fiscally conservative outcome for the country.
I wonder whether they also consider this the most pro-growth outcome as well. I highly doubt it. I argue that, in truth, electing a fully Democratic or fully Republican congress and executive branch would produce more growth than a divided government. It is in both party’s best interest to produce the growth necessary to maintain a tight grip in power; divided, the sections of government the two parties control will try to trip each other, leading to less than promising growth in order to wrestle control from the party with the executive branch (which always defines the government even if congress is controlled by another party).
So, sure, a divided government might be the most fiscally conservative outcome, but mostly because government will keep tripping over itself to screw each other up. Whether that’s the optimal electoral outcome for the health of the country is a completely different matter altogether, and I don’t think this fiscally conservative outcome would be the best.