Journalist Evaluates Obama, Romney Economic Plans

September 5, 2012

Guest: David Leonhardt

TERRY GROSS, HOST: This is FRESH AIR. I'm Terry Gross. We're going to compare the Obama and Romney economic plans. My guest is David Leonhardt, Washington bureau chief for the New York Times. We're also going to talk about Leonhardt's recent article, "Romney's First 100 Days," about what a Romney administration could do if Republicans kept the majority in the House and won a narrow majority in the Senate.

Leonhardt used to write the Economics Scene column for The Times, for which he won a Pulitzer Prize last year. In 2009, he won the Gerald Loeb Award for magazine writing for his Times magazine article "Obamanomics."

David Leonhardt, welcome to FRESH AIR.

DAVID LEONHARDT: Thank you, it's great to be here.

GROSS: Let's start with some of the differences in the party platforms on issues that affect the middle class. So let's start with taxes. Where do the Republicans stand?

LEONHARDT: Where the Republicans stand on taxes is that they've promised a big, across-the-board tax cut, 20 percent in everyone's rate, which would mean, in dollar terms, a much larger tax cut for people who make a lot of money. They pay more taxes, in part because they make a lot more money.

They've - Romney has then said, though, that this isn't going to add to the deficit at all, which is another way of saying it's not actually going to be a tax cut. And so he has promised every tax cut he gives people he's going to take away by closing deductions.

Now, economists really like this idea because it simplifies the tax code. It means rather than spending a lot of time trying to figure out what deductions and credits you qualify for, you can just go about your business. The problem is that Romney has not identified any of the tax breaks he would close.

And while we can all say we're in favor of simplifying the tax code, you start to lose people when you say you're going to take away their mortgage deduction or take away their tax exclusion for health insurance or the tax break for saving for retirement.

And so there's a lot of skepticism about whether he's actually going to be able to do that. What he says is that he'll cut tax rates, he won't add to the deficit, and he won't in any way add to the overall tax burden of the middle class. And when independent economists have looked at it, they've said he cannot do all those things mathematically.

And so, the big uncertainty here is so what does he then do? Does he go ahead and do it but actually add to the burden of the middle class, does he not cut rates as much as he says he will, or does he, as Republicans have in the past, Bush and Reagan, does he cut taxes and add to the deficit. And we just won't know the answer to that question until and unless he becomes president.

GROSS: Do you find it is therefore hard to judge his plan without knowing more of the specifics?

LEONHARDT: Yes, I do because for a long time, people have been calling for tax reform without being specific about what tax breaks they would get rid of. And because the large tax breaks are all politically popular, it's the things I just mentioned, it's for home mortgage, it's for health insurance, it's for retirement savings, even on the business side you hear Obama talk about closing tax breaks for oil companies. Those aren't nothing, but they're not the big ones.

The big tax breaks for companies are things that a lot of people, including President Obama, are in favor of, like tax breaks for research and development. And so, given how politically difficult it is to close tax breaks and reduce them, it's hard to take entirely seriously a plan that gives you all the candy up front, the cuts in rates, and says all the broccoli will come later - although maybe that's a bad analogy, I happen to like broccoli - and to believe they're actually going to do that.

And so I think there is some real uncertainty about what Romney would really do if he became president. I also think there's a very good chance he really would cut tax rates.

GROSS: So let's take a look at the Democratic plan for taxes.

LEONHARDT: Yes, the Democratic plan. So the Democratic plan in some ways is easier to describe because it looks more like the status quo than Romney's does, and that makes some sense because we now have a Democrat in office. So what President Obama says he wants to do is he wants to keep tax rates where they are for everybody making less than $250,000.

For people making more than $250,000, he wants to go back to the rates under Bill Clinton rather than the rates under George W. Bush, which is to say he wants to raise taxes on every household making more than $250,000 a year by a few percentage points.

The big uncertainty here is whether he can actually do that, and one of the reasons to have some uncertainty about that is it's not clear how tough Democrats are willing to be about that. When Democrats controlled the Senate and the House and the White House with President Obama, they had two years, really, in which they could have done that, and they didn't.

They were worried about putting in place any kind of tax cut during a terribly deep recession. They were worried about being cast as tax-raisers by the Republicans heading into the midterm. And then once they lost the House, the Democrats lost the ability to do that.

And so if President Obama wins re-election, we're going to end up in this fairly incredible situation in which starting January 1, for a whole host of reasons, tax rates are going to go up on everyone, all the Bush tax cuts expire, not just on the top end.

And so Obama will be saying let's extend them all except on the very top, and Republicans will be saying let's extend them all. But if they can't come to a deal, taxes go up on everyone. The Congressional Budget Office says it would be such a big tax increase, and the economy is so vulnerable, that it would send us back into recession.

And it's going to be a game of chicken, and it's going to be quite fascinating to see who swerves off the road first.

GROSS: The Republicans, in their platform, they want to eliminate taxes on dividends and capital gains altogether. So what would that mean? And how would that affect people of different incomes?

LEONHARDT: Romney himself has said something slightly different and significantly different, in fairness. He has said that he would eliminate them for people I think it's under $200,000. So - but if you eliminated all capital gains and dividend taxes, it would be a huge tax cut for affluent households, and it would be a huge tax cut for a particular kind of affluent household.

It would not be a huge tax cut, or any tax cut, for some of them, for say a doctor, a surgeon making $400,000 a year. It would not be a tax cut for an athlete making a few million dollars a year, or a movie actor. Or it would not be a tax cut on the salary of a CEO.

It would be a tax cut on investments, and what that would say is it would move the tax code more toward we're taxing work rather than investments. There are arguments for doing that. People say, well, look, the investment money is already being taxed in a different way, and we don't want to double-tax it.

But the problem with that argument is we double-tax things all the time. When you go out, and you buy a sandwich today or buy a shirt and pay sales tax on it, you're paying double tax, essentially, on that. And so the question is how much do we want to move toward a tax structure in which we're taxing work and not taxing investments?

And if you think about we need a pot of money to pay for our government, to some extent, the more we take away taxes from one, the more we need to tax another.

GROSS: So if the Republican platform says eliminate taxes on dividends and capital gains altogether, but Romney is saying no, I wouldn't do that, I would only do that for, what was it, people making under $200,000?

LEONHARDT: Yeah, something like the bottom 98 percent of the population.

GROSS: What does it say to you when the person at the top of the ticket has a different position than the platform itself?

LEONHARDT: Well, we've always known that Mitt Romney was more moderate than the 2012 Republican Party as a whole. And one of the things that Romney has done since he was governor of Massachusetts is he has moved quite far toward the Republican Party and away from where he used to be.

There's that great clip, I don't know if you've seen it, of Romney calling himself a progressive when he was governor of Massachusetts. I mean, can you imagine him saying that now? And it's not just terminology, right? It's he was in favor of abortion rights. It's all kinds of things.

So I think one of the big questions that everyone's asking is if we get a President Romney, which one do we get? Do we get the moderate that many people believe he is in his bones? Or do we get someone who is the leader of the modern Republican Party?

And I'd lean toward we get more someone who is the leader of the Republican Party, for a variety of reasons. Some of them have to do with policy and history. Some of them have to do with Romney himself. I don't think we actually know, did Mitt Romney craft his positions on some of these issues in order to be elected governor of Massachusetts, and since then he's moved back to his real core, or has he changed since he was governor of Massachusetts, and was that the real him.

GROSS: If you're just joining us, my guest is David Leonhardt. He's Washington bureau chief for the New York Times and a former economics columnist for the paper. Let's take a short break here, and then we'll talk some more. This is FRESH AIR.

(SOUNDBITE OF MUSIC)

GROSS: If you're just joining us, my guest is David Leonhardt, he's Washington bureau chief for the New York Times and a former Pulitzer Prize-winning economics columnist for the paper. Let's look at the differences between Democrats and Republicans now on Medicare.

LEONHARDT: Yeah, a lot of this campaign has been about Medicare. So this is what I would say at the top. I don't think either party has a plan that gets our budget into balance in the long term, which is to say neither party has a plan that gets Medicare into balance in the long term because the budget deficit is overwhelmingly about Medicare. It's overwhelmingly about the fact that most Americans will pay much less over their lifetimes in Medicare taxes than they will get in Medicare benefits, even though people don't always realize that.

They think they pay for their Medicare, but the typical person does not come close to doing so. So neither party has a plan to get them into balance, but both parties have a plan that if you think about it philosophically would make a difference, would reduce the long-term Medicare deficit.

And so I think we don't have to get too precise and say, well, neither one of them has a plan that would work, and thus neither one of them have a plan that is meaningful at all. They do each have meaningful plans.

The Democratic plan is to make much less of a change to Medicare than the Republicans would. It is to say, through a variety of ways, we want to reduce the growth rate of Medicare spending. We want to say if there is scientific evidence that suggests this expensive new treatment doesn't actually make you healthier, well, over the long term, Medicare may not reimburse for that treatment as much as it would for a treatment that there is scientific evidence. You could still get it, but you'd have to pay for it.

It takes baby steps in that direction. Many health experts wish it would go father, but when you think about the whole debate over death panels, you realize why this is tricky terrain. So those are the kinds of things the Democrats would do. They also cut subsidies for private companies that participate in Medicare.

In a sense, they try to take Medicare, and they try to say we're going to make it more efficient, we're going to have it so the government is not so often paying for health care that doesn't make people healthier, and the government needs to make those decisions because Medicare is a government program.

The Republicans say no, no, no, the whole thing to some extent is broken, and what we need to do is turn it over to the private market, and competition will take care of this problem. And so the government will give you a chunk of money. You can go out, you can buy your own plan, and by competing for your business, the plans will get rid of those inefficiencies in Medicare.

The Republicans have backed off a little bit from some of that. In the original Paul Ryan plan, you had to move to that if you were 55 or under, everyone 55 and older got to remain in Medicare. In the new plan, it's sort of an option. But I don't think there's any doubt that philosophically that's what the Republicans want to move more toward.

And you can make an argument that that would make a big difference. There's also some reason to doubt that it would because historically the record of market competition working in health care is very mixed. It's worked for things like laser surgery; it hasn't worked so well for things like heart surgery or cancer care.

GROSS: So you think even if it doesn't happen right away, the direction the Republican Party is moving is toward turning Medicare into a voucher system?

LEONHARDT: Yeah, I think the short answer to that is yes. I mean, I'd rather - if they want to say, well, voucher isn't the right word, premium support's a better word, I don't have strong views about what the most accurate word is. But I certainly think it's fair to say the Republicans think Medicare as it is, as a single-payer government health insurance program, doesn't work and can't work in the long term and instead needs to move to a system that is more like a system of private insurance, essentially moving Medicare to something that looks more like health care for people under 65 than it does today.

GROSS: Republicans and Democrats are accusing each other of having plans that will have an adverse effect on people who use Medicare. And Paul Ryan, the vice presidential Republican candidate, is saying that, you know, Democrats are trying to take - was the figure $726 billion out of the system. So what's the real - what's the math there?

LEONHARDT: In the health care law that the Democratic Congress passed and President Obama signed, there are - cuts is a fair word. There are cuts within Medicare, mostly to the subsidies that go to private insurers. So they will not, if you're a Medicare recipient, it's not like you will wake up tomorrow, and you won't be able to get some form of care, or you won't get reimbursed as much for it. It will affect the companies initially.

But it's fair to say that something that affects the providers could ultimately affect beneficiaries. That's certainly true. What's frustrating to me about this debate is that both parties start out by saying Medicare is unsustainable, we need to cut it. And then they go on to accuse each other of cutting Medicare, as if that were the original sin.

The only way we can solve the deficit is to cut Medicare. And so it is true that...

GROSS: You don't mean cut it out, you don't mean eliminate it, you mean reduce it, reduce the expense.

LEONHARDT: I mean reduce the growth rate of the expense. So it doesn't have to shrink from where it is today, but it cannot keep growing at the rate that it is, or if it does, we would have to pay so much more in taxes than we now pay that it's hard to imagine this country being in favor of that.

So the question is how do you want to reduce the growth rate of Medicare? And that really is where the fight should be about. I think - I've spent a lot of time talking to Paul Ryan, as a lot of journalists in Washington have. I've heard him talk at length at how he would like to change the Medicare system to make it more sustainable.

You can like his ideas, or you can not like his ideas, but they are ideas, and they're worth grappling with, and I thought it was a shame that his convention speech focused so much on the Obama Medicare cuts than on describing how he would like to change Medicare.

And I would say the reverse is true, as well. Rather than the Democrats saying here's our vision for bringing Medicare into balance, and here's why we think it's better than theirs, the two sides are just accusing each other of undercutting Medicare when to exaggerate just a little bit, undercutting Medicare is exactly what we need to do. We need to reduce the growth rate of it so that we have a government that is solvent.

GROSS: On Labor Day, Paul Ryan asked the question, you know, are you better off than you were four years ago? And he basically said Democrats can't say that you are. Joe Biden said no, no, America is better off than it was four years ago. You study all of the economics, statistics that measure America's economic health. So the statistics that you know and with the economists who you read who weigh in on this, what do you have to tell us about whether America is or isn't financially better off than it was four years ago?

LEONHARDT: Well, just taking those two sentences that you used extremely literally, Paul Ryan said people are not better off, and Joe Biden said America is better off. I actually think you can make a really good argument that they're both right.

Here's what that argument would look like. The country itself is better off. Four years ago, we were - in September, 2008 - we were just about to enter a horrific economic downturn. The collapse of Lehman Brothers set off the worst of it. If you look at something like world trade, stock prices, industrial production worldwide - an economist named Barry Eichengreen with colleagues has done some of this work - it is remarkable how similar 2008 looks like 1929 in terms of the speed of the declines in almost any global economic indicator of import that you look at.

In most of the ways, 2008 was a little bit worse than 1929, and yet of course we don't have anything that looks like the Great Depression, as bad as the economy is. We don't have unemployment at 20 percent. When you look at those measures, what you see is that in 2009, the economy really stabilized. It's remarkable to look at those lines continue to fall back in the '20s and the '30s and just sort of flatten out in 2008 and 2009.

The Obama administration can claim a lot of credit for that. They broke the back of this, along with the Federal Reserve, and, by the way, with an assist from the outgoing Bush administration, which was quite aggressive in its final months.

So is the country better off today or when it was in the very early stages of this really frightening crisis? I don't think there's any question that we're better off today as a country than we were then.

We are not at the beginning of something that looks like a Great Depression. And you could then even extend this argument to foreign policy, right? Osama bin Laden; there's reason to think that five years from now, mothers and fathers won't be greeting caskets coming home from Iraq and Afghanistan. There's a very serious argument that the country is better off than it was four years ago.

But there is also a very serious argument that a typical American household is worse off than it was four years ago, and that's because financial crises don't do all their damage at once. They do it over many months, and then there are long, slow, disappointing, painful recoveries. And I think one of the fairest indictments of the Obama administration is that it has consistently underestimated the severity of this crisis.

It didn't in 2009, but since then it has. It thought the recovery would be better than it really was. And the same goes for the Federal Reserve. And so most of the reason why we're not better off is just that's the way financial crises work, but some portion of it is that the policymakers, the Federal Reserve and the Obama administration, looked on the bright side a little bit too often and didn't take every step they could have taken.

When you look at something like household income, when you look at median wealth, when you look at the percentage of the population that's working, on all of those measures, we are lower than we were four years ago. And so I think it's fair to say the typical American household is not better off than it was four years ago, but the country is.

GROSS: David Leonhardt will be back in the second half of the show. He's the New York Times Washington bureau chief and used to write the column Economic Scene. I'm Terry Gross, and this is FRESH AIR.

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GROSS: This is FRESH AIR. I'm Terry Gross. We're comparing the Obama and Romney economic plans and talking about President Obama's economic track record with David Leonhardt, Washington bureau chief for The New York Times. He contributes to The Times' economics blog and used to write The Times column "Economics Scene." His columns won a Pulitzer Prize last year.

When we left off, he was saying that one failing of the Obama administration is that it consistently underestimated the severity of the financial crisis.

So if the president and financial advisers underestimated the severity of the financial crisis and didn't take action that they could've taken, what actions could they have taken that they didn't take, and are those actions that Republicans would've been likely to take?

LEONHARDT: Very fair questions. That is in a nutshell a version of the defense that the administration offers. And I think it has some significant truth to it and I think the administration takes it too far. And I know you weren't offering it, you were asking it as a question.

GROSS: Thank you.

LEONHARDT: So...

GROSS: Yes. That is correct.

(LAUGHTER)

LEONHARDT: The question of could they have taken more actions. I don't think there's any question that the answer to that is yes. And the way to think about this is if they had understood just how intractable this downturn would turn out to be, would they have done anything different? And I think the answer to that is clearly, yes.

The administration will say well, we couldn't have done this exactly differently and we couldn't have done that exactly differently, but I think that's sort of losing the forest for the trees. I think if they had seen or had even seen the risk that things would've been as bad as they were for as long as they were, knowing the political difficulty that would've caused them, they would've had a menu of options. So they didn't, they left a number of seats on the Federal Reserve open rather than appointing people to the Fed. If they had appointed more people to the Fed there's a very good chance Bernanke, the chairman, would have felt more internal pressure to be aggressive in 2010 and 2011, and that he would've been more aggressive, instead of continually being behind. Bernanke has just signaled he's about to take more action following a pattern in which he says, I don't think I need to take more action and then he says oops, I do need to take more action. That's one thing.

They could've appointed a different person in charge of Fannie Mae and Freddie Mac and they could've been more aggressive on how they dealt with the housing crisis. They could have written reconciliation instructions into legislation so that they could've passed more stimulus in late 2009, or early 2010, without the 60 votes that you need to overcome a Republican filibuster.

I'm actually very sympathetic to the administration's argument that they couldn't have gotten a much bigger stimulus at the very beginning. I don't think Ben Nelson of Nebraska, Joe Lieberman of Connecticut, the real Democratic moderates, centrists, would've gone for much more. But I do think the administration could have come back and done more in any number of areas. And so, I acknowledge that this is 20/20 hindsight, but I think that the administration argument that their misdiagnosis of the severity of the economic situation had no material consequences, which is essentially their argument, is a tough argument to really accept.

To the second part of your question, would the Republicans have been in favor of most of these things? With the exception of housing, where John McCain in his campaign suggested a response to the housing crisis that was more aggressive than Obama, I think the answer is overwhelmingly no. The Republicans left to their own devices would have done less to respond to the crisis than the Obama administration did, and frequently blocked in Congress things that the Obama administration wanted to do in order to respond to the crisis.

GROSS: You recently wrote about what Mitt Romney might do, what a Romney administration might do in its first 100 days if Romney wins the presidential race, and if he could keep a majority in the House and win a narrow majority in the Senate. You say if that happened, then Republicans could embark on an aggressive legislative push. What's one of the first things you think Republicans would do if that scenario played out?

LEONHARDT: The thing Republicans have promised to do more than anything else is to repeal Obamacare. And so you have to assume for their credibility with the Republican voters, as well as their own philosophical beliefs, the Republican legislators if they had the White House, the House and a narrow majority in the Senate, and if you imagine a world in which Romney wins, they are likely to have the House and a narrow majority in the Senate, not certain but likely, you have to imagine they would set out to repeal certain parts of Obamacare. They can't do it all unless they get to a filibuster proof 60 votes. But they can do significant parts of it. They can basically defund large parts of the legislation through...

GROSS: Which parts could they defund?

LEONHARDT: Well, I mean there are two main ways in which the health care bill expands coverage - insurance coverage. One, it makes Medicaid bigger, which basically means more poor people qualify. And two, it sets up subsidies. So let's imagine you have insurance through your job, you're laid off from your job and then you can't go get more insurance, either because you can't afford it or because you have a kid who has a pre-existing condition or you yourself have a pre-existing condition. You're not poor but you can't afford health insurance on the individual market. What the health care law would do is it would give a big subsidy to anyone who isn't rich to go buy health care and essentially then create a market where you could do so. And so Republicans could get rid of both of those funding streams. They could get rid of the funding stream for Medicaid and they could get rid of the funding stream for subsidies for middle class people to buy insurance. And that would really go - it wouldn't repeal it, but it would get rid of a very large portion of the substance of Obamacare.

GROSS: How come it would be possible for the Republicans to overturn parts of the health care reform bill but not other parts?

LEONHARDT: This process known as reconciliation that Congress, that the Senate can do, that means it needs only 51 votes, a simple majority instead of 60, applies only to things that affect the budget. And so there are certain things in the health care law having to do with what insurers are allowed to do, and those sorts of rules for the insurance market don't affect the federal budget and so Republicans couldn't really do them through reconciliation. But they could repeal much of the bill through reconciliation. They would still leave some substantial parts of it is well.

GROSS: OK. So in the first 100 days of a Romney administration, if the Republicans remain a majority in the House and win a narrow majority in the Senate, they could repeal parts of the health care reform plan. What's the second thing you think that a Romney administration would be likely to do in its first 100 days under those circumstances?

LEONHARDT: I think if you look at recent history you would say that the Republican Party cares about cutting tax rates more than maybe any other domestic priority. And so I would guess that there would also be a big push to do something like the tax cut that Romney and many Republicans are in favor of.

We talked a little bit about this before. They have a problem there, which is the math doesn't add up in their plan and they haven't been very specific about it. So they would have to make a decision. Are we going to pass a tax cut that that adds to the deficit and just claim that we think economic growth will be fast enough in the future that in fact in the end it will pay for itself, even if history suggests that's unlikely to be the case? Do we go ahead with a tax cut and not worry about the fact that it adds to the relative burden of the middle class, even though Romney as a candidate said that he would not pass such a tax cut? Or do we shrink the kind of tax cut we're talking about?

So I think there's a lot of uncertainty about what kind of tax cut they would do. But I assume they would pursue a tax cut. And then I also assume they would pursue probably fairly substantial cuts to Medicaid, which is the health insurance program mostly for poor people as well as for some long-term care for elderly people who at least in their lives were not poor. And I think in some ways that is an easier target for - budget target for Republicans than Medicare, which comes with all of the fraught political issues.

GROSS: Medicaid is easier because it affects a lot of low income people who don't necessarily vote in as high a percentage as say, middle class people or people on Medicare who feel they have a very vested interest in the future.

LEONHARDT: Precisely. The typical Medicare recipient is much more likely to vote than the average American. The typical Medicaid recipient is much less likely to vote than the average American.

GROSS: And the assumption is nobody else cares?

(LAUGHTER)

LEONHARDT: Well, that's, right. There's a question of do people who don't benefit actually care about what's going on? And I think that's a really good question.

If Republicans got the Senate, the House and the White House, and decided to go ahead with some of the ambitious spending cuts that they have long said they were in favor of, I think we would find out how Americans feel about spending cuts. I don't think we know because when you ask Americans do they favor spending cuts, in huge numbers we say yes. But then you ask us about specific spending cuts and in large numbers we say no. And so what Republicans want to do is they want to take Americans at face value when they say we want spending cuts and they are willing to buck public opinion on some of the specifics. And they say they're willing to buck it. And if they actually went through with that, if they actually began to put in place big changes to Medicare, if they actually cut Medicaid, if they actually cut basically all non-military spending done by the federal government, I think we would start to find out how much people actually liked those things and how much of Americans felt like they could live without them. And I don't think we know the answer to that question.

GROSS: So do you think by the time we found out whether Americans were in favor of certain cuts those cuts would have already been made?

LEONHARDT: I think that one of the advantages of having a democracy is you have an opposition that can point out some of the potential problems with what the majority problem wants to do. The Republicans have done that a lot in the last few years. And I think you can have confidence that Democrats would do a version of that if we had an all Republican control of Washington.

And so I think Democrats would start to get into real detail, hey wait a second, you're not just cutting Medicaid, you are removing X number of poor people - and not just poor people, also elderly people on long-term care from having health insurance. You are reducing the budget for the NIH, which is to say the budget for scientific research, medical research, by this billions of dollars. So I think we wouldn't really know about many of the effects for a while. And so I do think there is some chance that Americans would decide up front those cuts sound good and come to regret them later. But I think it's more likely that people would be presented with some amount of evidence and could make some kind of decision about whether they really wanted drastic cuts.

And all that, I mean that question gets right to the heart of what you believe Romney would actually do. I mean there's an interesting debate about this. There are a lot of people who say, look, I believe Romney would do what he says he's going to do. That is the history of what presidential candidates do. By and large they do some subset of what they say they're going to do. And then there are other people who say no, no. The Republican agenda sounds good in the vague terms but when you get down to the specifics it's going to be very hard to sell to the American people. Mitt Romney is smart enough to know that and he's going to try to restrain the Republican Congress.

I don't know the answer to that but I'm somewhat more skeptical of that second view because I think if Romney comes to office and basically then says I'm going to start vetoing a lot of bills that a Republican Congress passes, I'm going to put pressure on them not to do it, I think you'd see an enormous amount of discontent from Republicans in Congress and from conservative activists who helped get Mitt Romney to the White House.

GROSS: And the person who would be his vice president, Paul Ryan, would be totally behind the, you know, massive cuts.

LEONHARDT: Yes. It would put Paul Ryan in a very difficult position if Mitt Romney decided to govern much more moderately than he campaigned. Because Paul Ryan for a while now has been the intellectual leader of the conservative wing of the Republican Party on economics, and if he is left to be a salesman for a Romney administration that is considerably more moderate than the rest of the party, that would be a tough spot for him to be in. Now maybe he could pull it off better than anyone else, but it would be a tough spot.

GROSS: If you're just joining us, my guest is David Leonhardt. He's Washington bureau chief for The New York Times and a former economics columnist, and he won a Pulitzer Prize last year for his columns.

Let's take a short break here and then we'll talk some more. This is FRESH AIR.

(SOUNDBITE OF MUSIC)

GROSS: If you're just joining us, my guest is David Leonhardt. He's Washington bureau chief for The New York Times. He's a former economics columnist. Last year, he won a Pulitzer Prize for those columns.

Now I know you can't really predict what President Obama would do if reelected and if he served a, you know, a second term. But we've already seen what he's done in his first term. So any projection of what you think he might do in terms of economic policy in a second term?

LEONHARDT: Obama has not really laid out what he would do with a second term. But the election is still really consequential because he did so much in his first two years - health reform, some of the long-term stuff that was in the stimulus bill, on electronic medical records, on clean energy, the financial regulation, the changes in education, that the Republicans want to undo many of those things.

...the financial regulation, the changes in education, that the Republicans want to undo many of those things. Many of them are long-term things. If the Republicans win, they will succeed in undoing some substantial part of that. So to some extent, this election is a referendum on what Obama did in his first term, and in - particularly in his first two years.

And I don't think that's an answer you're going to hear a lot from the politicians, because it's not that exciting, but I do think it's the truth. The main way that this election matters is that it determines whether all kinds of things that have passed in the law actually go into effect.

Beyond that, I think probably if you were to ask President Obama what he would most like to do with a second term, I think he would say he'd like to figure out a way to come to a deal on the deficit and remove that from being the thing that every president, every Congress has to deal with first, some sort of grand bargain that involves changes - which is to say cuts - to Medicare and Social Security, as well as tax increases, particularly on the affluent.

And then you imagine a situation which, going forward, the government doesn't always have to be cutting. It can also imagine increasing spending on something like clean energy.

GROSS: When you look at the future, economically, you run into the Bush tax cuts expiring. No matter where you look, you run into that. If you've looking at the fiscal cliff, you run into them expiring. If you look at, you know, what a President Romney would do or what a second-term President Obama would do, you look at, well, where would they stand on the expiration of the Bush tax cuts?

So why are the Bush tax cuts expiring? Why were they - when the legislation was created, it was created to expire. Why?

LEONHARDT: For political reasons. The Bush administration and its allies in Congress set them up to expire early. The Congressional Budget Office, which is the official scorekeeper of Congress, judges everything on a 10-year budget window. And the Bush administration deliberately had these tax cuts expire before the end of that budget window to make them look less expensive so that when the Congressional Budget Office was analyzing the Bush tax cuts, they didn't actually exist for the final year of that window. And as a result, they looked less expensive.

So it was the architects of the tax cuts that had them expire early, figuring we'll get the political support for the tax cuts now because they'll look cheaper, and once they're in place, they'll be very difficult to undo. And on that second point, they appear to have been prophetic.

GROSS: So I'm curious, I know you've been paying attention to the campaigns. I'm sure you watched the Republican Convention last week and will be watching the Democrats this week. Is there, like, a fact-check thing that is really bothering you on either or both sides, something that's been said and repeated about the economy that just isn't true?

LEONHARDT: I think we can't do full analysis of this yet, because we haven't finished the Democratic Convention. So what we can do is we can analyze the Democratic and the Republican ads, and we can analyze the Republican Convention. And coming out of that, I think the short answer to your question is, yes, I think we are seeing some worrisome use and misuse of facts and other things in this campaign.

The litany of questionable assertions in Congressman Ryan's speech has now gotten a lot of attention, right. There's the notion of the GM plant in Janesville. I think that there's a defense of the Janesville. I know everyone doesn't agree with that. He never said it closed under Obama. He suggested Obama was going to reopen it. That, to me, falls somewhere in sort of the general realm of politics can be tough.

I know some people disagree with that and think it absolutely crossed a line. But then you look at some of the other things in the speech. You look at the notion that Paul Ryan criticized President Obama for not embracing Bowles-Simpson, when Paul Ryan himself was one of the people who torpedoed Bowles-Simpson. He was on the commission. He voted against it.

And he did so for real philosophical reasons. But why couldn't his speech have contained those reasons, the reasons why he thought Bowles-Simpson was not a good idea, rather than criticizing President Obama for rejecting something that Ryan has actually rejected more than Obama has?

And likewise, you look at some of these welfare ads from the Republicans. There are some really questionable assertions there. And so I guess what I would say is that both parties have played fast and loose with some facts.

There was an ad from Priorities USA, which is a group associated with Obama, that made some assertions about a Bain worker that seemed pretty hard to defend. So it really has come from both sides. But I think if you get to the end of the Republican Convention, it is also fair to say that Republicans, so far in this campaign, have pushed the bounds of what is factually accurate much more than Democrats have. And it will be interesting to see if we still come to that conclusion at the end of this week.

GROSS: Well, David Leonhardt, I want to thank you so much for talking with us.

LEONHARDT: Thank you for having me.

GROSS: David Leonhardt is the New York Times Washington bureau chief. He contributes to the Times' economics blog. You'll find a link to his articles on our website: freshair.npr.org.

Coming up, Maureen Corrigan reviews the new novel by Zadie Smith, whose debut novel was the bestseller "White Teeth." This is FRESH AIR.

TERRY GROSS, HOST: Although she's been writing a lot of nonfiction recently, Zadie Smith's last novel, "On Beauty," came out seven years ago, which is a long time in the anxious world of publishing. This week, her new novel, called "NW," came out in this country. Our book critic Maureen Corrigan has been considering the crucial question: Was it worth the wait?

MAUREEN CORRIGAN, BYLINE: This fall book season is bristling with lots of new novels that share the distinction of being long-awaited. Prominent authors like Martin Amis, Tom Wolfe, Michael Chabon and Zadie Smith have kept readers waiting for a while, which means, of course, that our expectations are as high as an elephant's eye. Trim them down a bit. That's my advice, at least in the case of Zadie Smith's just-published novel "NW."

Like a stalk of late-summer corn that's blighted at its very tip, "NW's" narrative is four-fifths ripe, golden deliciousness, one-fifth barren cob. As she did in her terrific debut "White Teeth," Smith gives us an ambitious city novel in "NW." Smith structures her story around the lives of four people, now in their 30s, who grew up in the same subsidized housing estate in Northwest London, definitely not one of the posher districts of the city where Wills and Kate might party in their downtime.

Here's a slice of that Northwest London skyline as seen from a train: ungentrified, ungentrifiable, boom and bust never come here. Here bust is permanent. Disappointed city, living for those tired of their countries. As anyone who's read Smith's fiction knows, her genius dwells in her language. She excels at Gertrude Stein-inspired lines that whip together sound and nonsense and fleeting zigzags of insight.

In "NW," the two female members of this dusty quartet of former project kids supply most of the conversation, as well as internal monologue. Natalie Blake, whose first name used to be Keisha, has climbed the highest on the social ladder. She's now a barrister, an all-too-rare black face in a white wig, and she's married with two children.

Thinking back to a fellow scholarship student at university who came from an even rougher district and who eventually flunked out, Natalie empathetically reflects that the girl had been asked to pass the entirety of herself through a hole that would accept only part.

Growing up, Natalie's best friend was a red-haired Irish girl named Leah, who's now married to a hairdresser of French-African descent. These days, Leah works at the local housing office, and as the only white girl with a college education in the place, she's got to monitor herself. Here's Leah sitting at a meeting in the office, drifting in and out of a stream-of-consciousness riff about her boss.

Former prison guard, social worker, local counselor - how did she get anything done with those talons, long and curved and painted with miniature renderings of the Jamaican flag? Clawed her way up through the system, born and bred, is weary of those like Leah, whose degrees have thus installed them. To the boss, a university degree is like a bungee cord, lowering in and pulling out with dangerous velocity.

The rich, intertwining plotlines of "NW" emerge out of the old history shared by the characters, as well as through the chance encounters - some brutal - that any city affords. In the first pages of the novel, Leah opens her front door to a hysterical young girl begging for money. Unwittingly, Leah has also ushered in chaos.

Natalie struggles with holding on to her authentic self, even as more and more she goes through her life feeling as though she's in drag, mother drag, wife drag, court drag, rich drag, poor drag, British drag, Jamaican drag. It's Natalie's bizarre remedy for her own alienation, however, that causes this novel to crumble in its final 70 pages or so, endangering its credibility and the wealth of its accumulated, smart observations about contemporary London.

I hope that Smith might one day have the chance for a rewrite that was afforded to that other fine London novelist, Charles Dickens. "Great Expectations" actually didn't need that rewrite. Dickens was only bowing to popular opinion when he tried to force a treacly, conventional finale on his original version of the novel.

With the preposterous ending of "NW," however, Smith has nowhere to go but up.

GROSS: Maureen Corrigan teaches literature at Georgetown University. She reviewed "NW" by Zadie Smith. You can read an excerpt on our website, freshair.npr.org, where you can also download podcasts of our show. And you can follow us on Twitter, @nprfreshair, and on Tumblr at nprfreshair.tumblr.com.

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