The financial crisis, which the Wall Street Journal described today as the worst economic hit since the early 1930s, is beginning to drastically change the tide of presidential campaigns.
Election coverage has shifted away from the controversial VP pick of Governor Sarah Palin, and instead moved toward the candidates’ positions on financial markets and back to policies. It is obvious from the collapse of Fannie Mae and Freddie Mac, as well as the Fed’s bailout of AIG, that the fiscal climate will be addressed as a key factor in Presidential debates.
And debate they have.
This week Obama and McCain have spoken about their plans for the economy should either be elected. While historically Democrats are favored during tough economic times, Obama’s economic plans are nothing but reckless in the wake of economic downturn, while McCain focuses on precautionary tactics and measured tax cuts.
Newt Gingrich and Peter Ferrara addressed the extremism of Obama’s policies in an article last week in the Weekly Standard, “Tax Cuts, Real and Imaginary: Obama’s spending programs in disguise.”
Their assessments could not be more accurate.
While Senator Obama claims to be creating tax cuts for 95% of Americans, it is important to realize the cost at which he could do this. His proposal seeks to provide a $500 tax refund to Americans in all but the 5% top income bracket. This check given to the lowest 40% of income earners is nothing but a cash grant that the government cuts, increasing spending, not reducing debt. How would this stimulate the economy?
A second avenue of the Obama economic plan calls for a raise in the capital gains tax by approximately 33%. This would drastically decrease the worth of the middle class’ IRAs, 401ks, stocks and mutual funds. Now I am no business major, but essentially, by applying this cut in tax revenue, the middle 2/3 of the America population would see a slow in their savings and investments and there would simultaneously be an increase in the national debt. I ask again – how would this stimulate the economy?
Messrs. Gingrich and Ferrara conclude their article by pointing out, “Obama’s plans are the opposite of tax reform. Instead of closing loopholes and lowering rates, he is creating new loopholes and raising rates. ”
But what would McCain do? Are his policies any better? While Senator McCain does not propose an ideal fix to all the economic crises, his proposals are more obtainable and appropriate. McCain would stimulate the economy by creating a new government agency specifically designed to handle bailouts and failed investment institutions.
One may recall the Resolution Trust Corporation of the 1980s, which did a fine job handling the failure of savings institutions. This policy would create a protocol for dealing with financial institutions instead of the current arbitrary decisions on which companies are worth bailing out, and which should fail. McCain also seeks to tighten financial regulations insuring that access to federal loans and the roles of regulatory agencies are better managed. Now while this may not directly stimulate the economy it certainly provides a safer and more responsible approach.
As much as the country might wish it, there is no all-encompassing solution or instant fix to the current financial crises. Senator McCain’s plan to adjust the market oversight and increase regulatory control however, will go much further in alleviating economic stresses than his opponent’s suggestion to increase government spending under the rouse of tax cuts.
As much as Senator Obama promotes sweeping change, this particular change, if implemented, will do more harm than good.
Amy Saucier is a senior majoring in political science. She is working for Rep. Eric Cantor’s (R) in Richmond for the second year. She spent the summer of 2008 in Washington, D.C., working for a non-profit on Capitol Hill. She worked last semester in the Virginia General Assembly with Del. John O’Bannon (R-Henrico) during the 2008 session. She will be a new contributor to the blog.
