Traditionally, there were two Santa Claus parties in American government.
We had the Spending Santas, who were usually the Democrats.
And we had the Tax-Cutting Santas, usually the Republicans.
The late journalist Jude Wanniski popularized this as the Two-Santa Theory of the political economy. His March 1976 Santa Theory described what he viewed as the then predominant problem with the economy: the Republicans were refusing to play Santa.
It wasn’t a recent problem. As Wanniski saw it, the last real Republican Santa was Calvin Coolidge. After that we got Republican Presidents and Congresses more concerned with balancing the budget than cutting taxes. There was a glimmer of hope after Eisenhower was elected. But that was soon dashed.
As a result, there were eight years of Eisenhower economic stagnation.
This was a political boon for the Democrats, who got to play the role of both Santas during the Kennedy and Johnson administrations.
But it was bad for the economy, because the Democrats didn’t really have their hearts into it when it came to playing Tax Cut Santa. They always wanted to be Spending Santa—and so they gave the shortest-shrift they could to the Tax Cut Santa role. Eventually, they just gave up the role—confident that Republicans would never call for a tax cut so long as the budget was in deficit.
“The Democrats realized that the Republicans would never call for a tax cut unless the Federal budget were in surplus, so they engineered their spending programs in a way that would guarantee spending would always outrun revenues,” Wanniski writes.
In part because of Wanniski’s urging, the Republicans in the late 1970s and early 1980s once again became a Santa Claus party. This lasted until the first president George Bush “shot” Santa with his own tax hikes.
The record is mixed since then. The Democrats appeared to have slipped into the No Santa trap in the last decade, with the Republicans Ho-Ho-Ho’ing over both spending increases and tax cuts.
So where do we stand now? Well, it seems that both parties are working hard to snuff out Santa. The so-called Super Committee, in fact, seems dedicated to the principle that Santa must be shot out of the sky once and for all.
Don't be surprised if the economy sends us a figurative lump of coal this Christmas.
Questions? Comments? Email us at
Follow John on Twitter @ twitter.com/Carney
Follow NetNet on Twitter @ twitter.com/CNBCnetnet
Facebook us @