Nicholas Wapshott

There is the truth. Then there is the whole truth. Mitt Romney is still lagging behind the president in Ohio, the weather-vane state that has voted for every president since Abraham Lincoln and where Barack Obama is credited with saving millions of jobs in the auto industry. But the governor’s insistence in the second debate that Obama’s rescue of General Motors and Chrysler was the same as his plan was only half the story.

When Romney said “[W]hen you say that I wanted to take the auto industry bankrupt, you actually did. … That was precisely what I recommended and ultimately what happened,” he was leading voters to believe there was little difference between restructuring by the federal government car czar Steve Rattner and his own prescription: to let the firms go bust, let the markets clear, then reassemble the broken parts.

Romney’s surrogates blame a headline in The New York Times, “Let Detroit Go Bankrupt”, over an op-ed by Romney in October 2008 for fueling confusion over where their candidate really stands. The opening lines appear to contradict their version. “If General Motors, Ford, and Chrysler get the bailout that their chief executives asked for,” he wrote, “you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.” He went on to argue for a managed bankruptcy, but was vague about the role federal officials should play.

In February, in the heat of the GOP primaries, when Romney needed to appease those who believe the “creative destruction” creed of Joseph Schumpeter, he expanded on his thinking in the Detroit News and derided the auto rescue as “crony capitalism,” a cozy collaboration between government and private enterprise much derided by the Koch brothers, major funders of Romney’s super PACS.

“Obama stepped in with a bailout for the auto industry,” Romney wrote. “[The] indisputable bad news is that all the defects in President Obama’s management of the American economy are evident in what he did.” Obama’s plan saved millions of jobs, not only in the auto industry, but in the parts suppliers, dealerships, and all those who service motor production – and the storekeepers, realtors, teachers, and so on, who depend upon them – and, by the way, not only in Ohio but in all the Great Lake states and way beyond. Romney’s sly suggestion now that you can’t slip a cigarette paper between his plan and Obama’s is, to put it politely, far-fetched.

Romney likes to have it both ways with the bank bailout, too. When it comes to perhaps the core issue in this election, the role government should play in promoting growth – in brief, to intervene or let the market find its own level; Keynes v. Hayek, if you will — he is like a Hong Kong tailor. You want wide lapels or narrow? Want a vent or a flap? Buttons or a zipper? Turn-ups? You got ’em! Just so long as I make the sale.

When speaking to Tea Party types, Romney is against the bailout. “When government is trying to take over health care, buying car companies, bailing out banks, and giving half the White House staff the title of czar – we have every good reason to be alarmed,” he told a Values Voters Summit in 2009. But just a year before he had backed George W. Bush’s  Trouble Asset Relief Program, hosing billions of taxpayers’ dollars into banks without anything in return. “President Bush and Hank Paulson said, ‘We’ve got to do something to show we’re not going to let the whole system go out of business,’” he said. “I think they were right.”

The problem with Romney is that even he doesn’t seem to know what he believes. Like Woody Allen’s Zelig, when he is with conservatives he is a conservative. When appealing to the middle ground he is a moderate. In the company of dogmatists who obey the diktats of long-dead theoreticians like Ayn Rand, Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter, and the rest, he is an ideologue. In TV debates he is a pragmatist.

The nation faces a clear choice: whether to use the spending, borrowing, and lending powers of the federal government to end the lingering malaise that blights the languishing economy–or to wind down the pensions, health care, and drug benefits for the elderly, universal health care, and safety net for the needy and use the money to reduce taxes.

After five of the most tumultuous years in America’s economic history and after some of the most vituperative political debate ever to divide the nation, it is hard to understand voters who still cannot make up their mind. But Romney’s pushmi-pullyu impersonation, facing this way one day and that way the next, is beyond belief.

Obama is clear. As he said in the second debate, “[W]hen Governor Romney said we should let Detroit go bankrupt, I said, ‘We’re going to bet on American workers and the American auto industry’, and it’s come surging back. I want to do that in industries, not just in Detroit but all across the country.” The fact that Romney cannot without obfuscation state his position on the central issue facing the nation is troubling, not least to conservatives who intend to vote for him.

Nicholas Wapshott’s Keynes Hayek: The Clash That Defined Modern Economics has just been published in paperback by W. W. Norton. To read extracts click here.

PHOTO: U.S. President Barack Obama (R) listens as Republican presidential nominee Mitt Romney answers a question during the second presidential debate in Hempstead, New York, October 16, 2012. REUTERS/Lucas Jackson

Whoever wins on November 6, and however the president is thought to have done in the remaining debates, the only sure winner of the debate season is Joe Biden.

He has moved from the nearly man to the coming man, from also-ran to man-to-watch. Why so? Biden attracted a great deal of criticism from conservatives for his grimacing in the veep debate in Danville, Kentucky, for laughing in the face of GOP vice presidential nominee Paul Ryan, for shamelessly grabbing all the attention so that even when Ryan was speaking, everyone was watching Biden’s scoffing antics on the split screen. The Democratic base loved every second.

In a practical lesson on how to hug the limelight and dominate the conversation, Biden showed President Barack Obama how he should have torn into GOP presidential nominee Mitt Romney in Denver -- and how he will have to make up lost ground in the few remaining weeks.

There is a great deal to recover. Before Denver, Obama enjoyed a clear lead over Romney in every head-to-head poll, bar a handful, since mid May. In the two weeks since, Obama has lost the precious momentum that propels into the White House the candidate who persistently looks a winner. Obama the hoopster dropped the ball, and safe-hands Biden picked it up and drove for the basket.

Biden not only showed Obama how to do it – with his passionate defense of the middle class, his calling out of the Romney-Ryan ticket for their plans to privatize Medicare and their fibs about the insolvency of Social Security, his use of personal anecdotes and pouncing zingers (“Oh, now you’re Jack Kennedy?”) – but he warmed the heart of newly nervous Democrats, who saw victory slipping from their grasp, with a landmark performance that has ensured his place on the party’s Mount Rushmore.

But Biden’s bold attempt to focus the president on reelection next month has also changed the 2016 race. No one who has come so close to the top ever really gives up hope of making it all the way. Would he stand a chance of winning?

The conventional narrative is that Secretary of State Hillary Clinton will stand down in January and bide her time in Chappaqua, New York, until the clamor for her to re-enter the fray becomes so overwhelming she will faux reluctantly start running for president.

It was always assumed she would be given a clear path. In 2008, many felt she deserved it; this time, having dutifully fallen in behind Obama and turned in an impeccable performance at State, she is thought to have earned it. Her husband’s dazzling delivery on the stump sealed the deal.

According to this dream scenario, Biden, far too old, far too much of a gamble and far too prone to gaffes, would gallantly bow to Hillary Clinton’s inevitable rise, while the newbie, Governor Andrew Cuomo of New York, would step in then step aside, to reserve himself a place in 2020 or later. Only a little-known outsider – the Bill Clinton or Obama of their time – could upset the sort of stately ordered succession that European monarchs dream of.

But now there’s a clear alternative to Hillary Clinton: Battling Biden from Scranton, PA., who barnstorms for the middle class. Is he too old? He was born nearly 70 years ago, which used to be thought old. The most cited precedent is Ronald Reagan, who became president at that age. Biden is a whole generation younger. Now, 70 is the new 50.

He suffered a brain aneurysm in 1988, when he first ran for president. But that was an age ago, back when Sue Ellen took her gun to J. R. in “Dallas” and Clinton was still governor of Arkansas. He shrugged that off, just as he survived in 1987 being caught stealing word-for-word a speech by the British Labor leader Neil Kinnock.

Does Biden want to be president? He has been running, on and off, since he first considered it in 1984. Having lived for four years at 1 Observatory Circle, and having been so closely integrated into Obama’s White House, it would be perverse if such an ambitious and able pol, the loyal sidekick for so long, did not want his chance to shine.

Could he  win the nomination? Probably. Though it will be hard to beat Hillary Clinton.

In the last six years, Clinton appears to have been forgiven whatever sins she was thought to have committed as first lady. Her favorability has risen from 50 to 67 per cent, according to a CNN/ORC poll in May, while her negatives have slumped from 42 to 29. Since becoming vice president, Biden’s figures have climbed from 27 favorable to 41 per cent -- but his unfavorables have also risen, from 22 to 44 per cent.

Clinton clearly has the edge. But this was before Biden buried Ryan with laughter.

So, will Biden run? If he remains vice president, it will be easier. He will benefit from the confidence, dignity and position an incumbent enjoys. As Obama’s trusted ambassador to Congress, he has endlessly proven his worth as a catalyst of compromise. If he gets some bold-faced names behind him who cannot bear the prospect of the Clintons back in the White House, or believe Clinton cannot win however much she has rehabilitated herself, Biden has between Election Day and Clinton entering the race sometime in the fall 2013 to establish an unassailable lead.

Then there is still this general election. After the veep debate, conservatives who used to think Biden a liability to the Obama campaign have stuck the black spot on him and deemed him a suitable case for demonization. It will not be easy.

But being elected president never is.

PHOTO: Vice President Joe Biden answes a question during the vice presidential debate in Danville, Kentucky, October 11, 2012. REUTERS/John Gress

We are in the midst of a presidential race lacking in passion. After four years, with the economy languishing, the optimism Obama appeared to represent last time is absent. Democrats will go to the polls without a spring in their step, to keep Romney out rather than save Obama’s neck. Even the president himself, if his hangdog look in the first debate is any guide, has lost his mojo. Obama has achieved what Romney could not: He has angered his own supporters for not fighting hard enough for the ideas they cherish.

On the Republican side, conservatives and libertarians will vote for Romney more out of duty than in the belief he will represent their views in government. They feel the Republican establishment has foisted Romney upon them because he seemed likely to appeal to middle-ground voters who decide elections. They think his lack of genuine commitment to conservative ideology means he will win the White House, then ignore their wishes, just as the Bushes, father and son, did before him. Conservatives will be voting as much to prevent Obama’s second term as to elect Romney.

These seem the perfect circumstances for a third-party candidate. In fact there are others offering themselves as president, though you may be excused for not knowing their names. They include Gary Johnson of the Libertarians, Jill Stein of the Greens, even the comedienne Roseanne Bar, who promises to legalize marijuana, forgive student debt and end all wars. But none of the above, or a further seven nobodies on the ballot, stand a chance. Without billions to spend and a popular head of steam, they are ignored by the press and cannot penetrate the public consciousness.

In the past, third-party candidates who have made a mark have either, like Ross Perot, Steve Forbes, and John B. Anderson, paid for their own campaign, or, like Ralph Nader and Pat Buchanan, enjoyed a national reputation. In 1992, Perot’s brief candidacy took support away from George H.W. Bush and helped ease Bill Clinton into the White House, while many believe Ralph Nader’s intervention in the 2000 photo finish made George W. Bush president.

If there is a lack of enthusiasm on both sides this time, why has a third candidate not emerged? First, no towering figure backed by billions is prepared to run. There was briefly a lot of excited talk about New York’s mayor, Michael Bloomberg, entering the race, but it fizzled. Ron Paul’s failure to win the GOP nomination encouraged his supporters to think he might run as an independent, but Paul appears to believe challenging Romney would diminish his son Senator Rand Paul’s chances of eventually winning over the Republican Party to libertarianism. Having failed to gain traction in the Republican race, Donald Trump might have offered himself as an independent, but even he was not prepared to fund such an expensive ego trip.

Second, there is little appetite for a third man (or woman) in the race. Americans Elect prepared the groundwork for an independent candidate, including saving a place on the ballot, a requirement that has stymied more experienced politicos. But the initiative failed to catch fire, too few took part in the campaign’s online primaries and the effort was abandoned. Americans Elect promises to try again next time.

It is common in high-stakes, closely fought contests for the middle to be squeezed. This election offers a stark choice between liberal, interventionist, “Keynesian,” and socially progressive Obama and conservative, pseudo-libertarian, somewhat “Austrian,” and socially regressive Romney. The country is equally divided between red and blue. Obama may have led Romney narrowly in all but a handful of national polls since the beginning of the year, but Romney is enjoying a bounce from the first debate, and the race remains too close to call.

There is little feeling, however, that if only there were a third candidate, the choice facing Americans on Nov. 6 would be any easier. Nor is there a rash of independent candidates out in the states taking advantage of the face-off at the national level. This time there is a distinct shortage of entertaining maverick candidates like Arnold Schwarzenegger and Jesse Ventura.

In Europe, however, mainstream parties of both left and right are being challenged by a rash of independents as punishment for attempting to cure their economic ills by imposing austerity. France threw out a conservative president, Nicolas Sarkozy, and replaced him with a socialist, François Hollande. Spain voted out a socialist, José Luis Rodríguez Zapatero, and elected a conservative, Mariano Rajoy. But the true winners in each case, and in other similar European ballots, were smaller, more extreme anti-austerity parties.

In France, the National Front’s Marine LePen, an avowed racist who dismisses the Holocaust as “a detail,” persuaded one in five to vote for her. In Spain, one in four backed minor peripheral parties. Europe has seen the emergence of half-laughable, half-sinister iconoclasts and apostates not seen for a couple of generations, including Italy’s colorful Beppe Grillo, described by the New Yorker as a “combination of Michael Moore and Stephen Colbert,” and German agitator Thilo Sarrazin, whose extreme anti-immigration, anti-Muslim views chime with half of his country’s voters. If the next American administration follows the European example and starts to tackle the deficit by cutting spending too sharply too soon, new faces will start emerging here, too.

Nicholas Wapshott’s Keynes Hayek: The Clash That Defined Modern Economics has just been published in paperback by W.W. Norton. Read five extracts here.

PHOTO: U.S. flags are seen at the Veteran Stand Down event at the American Legion Post 390 in Hempstead, New York, July 16, 2012. REUTERS/Shannon Stapleton

By Nicholas Wapshott
The opinions expressed are his own.

In medieval times, a key member of a monarch’s retinue was the food taster, a hapless fellow who ate what his master was about to eat. If the taster survived, the food was deemed safe for the king’s consumption. President Obama has a taster of sorts in David Cameron, the British prime minister, who has embarked upon an economic experiment that echoes the recipe of wholesale public spending cuts and tax hikes needed if both sides in Congress are to agree to raising the federal government debt ceiling. How the British economy is faring offers Obama an idea of what a similarly radical policy of cutting and taxing here would mean to the American economy.

Cameron’s election in May 2010 coincided with the start of the Greek debt crisis. The Bank of England governor Mervyn King warned him that the public debt in the UK was so large that Britain, too, might see its lending become impossibly expensive, so Cameron decided that there was no time to lose in putting the fiscal books in order. He decided to slash public spending by 25 per cent over four years and immediately raise value added tax on goods and services from 17.5 to 20 per cent. Such a radical remedy found favor with the rump of British Conservatives who felt that Margaret Thatcher’s free-market, small government, “sound money” policies of the Eighties had not been pressed to their limit. In turn, Thatcher’s prescription to reduce the size of the state derived from her favorite thinker Friedrich Hayek, the author of “The Road to Serfdom,” who believed like many Tea Party supporters that government intervention inevitably leads to tyranny.

Cameron’s experiment in applying a radical cure to the British economy caught the attention of a number of conservatives here, among them George W. Bush’s speechwriter Michael Gerson, who wrote in the Washington Post, “If Cameron’s approach works -- dramatically cutting deficits without stalling economic growth -- it will be an obvious, powerful example for America.” “If only the Obama administration and the U.S. Congress had been so courageous. Instead, they are choosing to put off these big decisions,” moaned Matthew Bishop, New York bureau chief of the Economist, in a piece co-authored with Michael Green in the Wall Street Journal. Even Treasury Secretary Tim Geithner thought the British experiment worth trying. “I am very impressed, as one man’s view looking from a distance, at the basic strategy [Cameron] has adopted,” Geithner told the BBC.

So, how is the British economy doing? Under Cameron’s Labour predecessor, Gordon Brown, Britain fell into depression, with the economy shrinking during the worldwide banking meltdown to minus 2.1 per cent in the last quarter of 2008 and the first quarter of 2009. By the time of the general election in May 2010, however, growth had slowly climbed to 1.1 per cent per quarter. With Cameron taking the reins and announcing his radical economic plan, the economy slumped back to minus 0.5 per cent in the fourth quarter of last year, before returning to growth of 0.5 per cent in the first quarter of this. But the latest economic growth figures, released this week, show a slowdown in economic activity, to a miserable 0.2 per cent growth between April and June. Cameron’s chancellor George Osborne has blamed the poor figure on widespread partying that accompanied the wedding of Prince William and the effects of the Japanese tsunami. The double-dip recession that Cameron’s critics predicted has not yet taken place, but the figures are clearly headed in the wrong direction.

What exactly is causing the slowdown in Britain is not clear. The cuts have only just begun. The total spending reduction over four years will amount to no more than 1 per cent of government expenditure, though even that Osborne believes will put 1.3 million public sector workers out of work by 2015, though he hopes private companies will create 2.5 million new jobs to make up. The faltering economic recovery suggests he is being optimistic. The independent Office of Budget Responsibility estimates that the decision to raise VAT will cause economic growth to fall by 0.3 per cent in the fiscal year 2011/12. The tax hike has already dampened consumer confidence, leading in turn to a wave of retail store bankruptcies.

In his address on Monday, Obama suggested cutting government spending “to the lowest level it’s been since Dwight Eisenhower” coupled with new taxes on “millionaires and billionaires.” He assured Americans “the cuts wouldn’t happen so abruptly that they’d be a drag on our economy,” though that is plainly wishful thinking. Looking across the Atlantic, it seems that he, like Cameron, may be too optimistic about the true cost of slashing government spending and raising taxes at a time when the economy is still recovering from the Great Recession.

Nicholas Wapshott’s “Keynes Hayek: The Clash That Defined Modern Economics” is published by W.W.Norton in October. To read an extract, access https://sites.google.com/site/wapshottkeyneshayek/.

PHOTO: Britain's Prime Minister David Cameron plays with a volleyball at the beach volleyball site for the 2012 Olympic Games, at Horse Guards Parade in London July 27, 2011. REUTERS/Stefan Wermuth.