It’s American as apple pie that issues in presidential elections blossom overnight and seize the campaigns, completly rejiggering the outlook. It’s that way this year as the economy has soared to the number one, if not only, issue on the minds of candidates this month. There’s good reason for this shift of course, with a possible recession looming.
Yesterday the New America Foundation sponsored a very interesting and informative discussion, wtih the economic advisers to four candidates: Barack Obama, John Edwards, John McCain and Hillary Clinton. Mike Huckabee’s economist had hoped to be there, but had to cancel at the last moment. New America’s program title was — As the Economy Screams: Perspectives and Proposals from the Presidental Campaigns.
The campaign economists are all distinguished in their own right:
Austan Goolsbee (for Obama) is a professor of economics at the University of Chicago’s School of Business; Leo Hindery (for Edwards) is managing director at InterMedia Partners; Kevin Hassett (for McCain) is director of economic policy studies at the American Enterprise Institute, AEI; Gary Gensler (for Clinton) is a former undersecretary of the U.S. Treasury Department and Goldman Sachs executive.
So what did they say?
There wasn’t much discord among them, so for anyone expecting fireworks, they will have to wait for debates between the candidates themselves. The three Democrats had similar prescriptions for a stimulus package: there should be more long-term investment in education, technology and energy. The middle class needs to be strengthened and a stimulus package should be directed at them, especially those at the bottom of the wage scale who would spend it right away.
They agreed that the subprime mortgage crisis was more than just a problem faced by poor people, that it is, in their view, part of a wider, pervasive problem of an economy hooked on too much debt, including credit cards, corporate borrowing and the U.S. government itself, which finances a large budget deficit.
Leo Hindery was particularly vocal in speaking about a credit crisis and said that it was a problem that dates back 25 years. He went on to say that in his view, 90 percent of Americans have flat incomes and that we currently have the widest income inequality since 1928. He and others fingered the Fed and irresponsible regulators for prompting the current crisis (but surprisingly they said nary a word about Congress having any responsibility!) Wall Street was called to task,too, and greater transparency in their activities was called for. There seemed to be consensus that the Fed’s monetary policy independence should be respected but that its role as a bank and consumer regulator has not been well executed.
Kevin Hassett from AEI did not share many of these perspectives. He pointed out that most economic stimulus packages don’t work because they come too late or are only targeted at pet constituencies. He believes a permanent tax cut, instead of a temporary one, is the only medicine that will revive the economy. He’s the only economist who addressed the need to boost private sector competitiveness by addressing the tax inequality between the high tax U.S. and the lower tax areas in Europe and Asia and went so far as to say the U.S. is not a friendly tax place. He also pointed out that strengthening corporate performance is the best path to strengthening the middle class through job creation.
There were numerous questions from the floor and it’s interesting that a member of the audience had to ask about international trade since it had barely been mentioned. There was some competition about who had coined the phrase “smart trade” which several said meant that the U.S. would enforce trade agreement violations more rigorously than the Bush administration. Generally all supported the concept of open markets and Gensler pointed out that trade policy has evolved so that now agreements, such as the recent one with Peru, include labor and environmental standards. Unfortunately, no one really touted the positive benefits of trade and how the current export boom is offsetting the GDP impact of the financial meltdown. This is, of course, a sea change in opportunities for the manufacturing sector.
Finally, soverign wealth funds and their increasing investment in U.S. assets were discussed with a general feeling that we needed to know more about their operations and motives, without discouraging their activities here. Hassett noted that if not watched carefully, national security could be compromised.
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