Michael Wolraich's picture

    It's the Economy Stupids

    This post is not about the horse race or who "won" the debate. This post is about the greatest problem facing America today, a greater problem than we have faced in many years. This post is about the economy. I'm sorry to say that neither of the candidates took the opportunity to address it in a serious manner.

    Let's begin with McCain, the stupider of the two. What's McCain's solution to our economic travails? Reducing earmarks. As Jim Lehrer pressed him on how to address the current crisis, McCain responded with earmark reform and more earmark reform. Earmarks are certainly a problem. We waste a lot of money on local projects that serve not the nation's interest but the interest of reelecting certain congresspeople who have proven their worth by staying in office long enough to head choice committees. Great. Let's cut the earmarks. According to the O.M.B., we spent $16.5B on earmarks in 2008. That's a lot of money to you and me, but to the Federal Government, it's chump change. The total Federal Budget in 2008 was almost 3 trillion dollars, of which earmarks make up one half of one percent. Let's say McCain were to be elected President and, against all odds, succeed in banning earmarks completely. The Federal Budget would still be 3 trillion dollars. What does shaving 0.5% (at most) from the Federal budget have to do with stabilizing the economy?

    But it's worse than that. Ever since Keynes, it's been widely accepted that governments should spend money during recessions in order to stimulate the economy. Whatever limited value earmarks have for the nation, they at least pump money into the economy. So McCain's solution to the recession is to cut Federal spending which would accomplish the exact opposite. 2009 is the worst moment in recent history to cut earmarks. McCain's solution not only offers minimal benefit to our economy; it's actually counterproductive. Did I say stupid?

    Obama's turn. Obama, to his credit, spent a minute or two discussing the bailout plan, which is more than McCain was able to muster. But the bailout is a stopgap measure meant to stave off a massive collapse. It's the first step in what must be a comprehensive plan to rebuild the economy. So what else did Obama have to say about the economy? Tax cuts for the middle class. Everyone who makes less than $250K will receive some kind of tax cut. Rolling back the Bush tax cut for the rich will cover the cost. Income distribution and the shrinking middle class are major problems which need to be addressed, and I'm very glad that Obama intends to address them. But those plans do not address the economy in the near term. The tax cuts do not constitute a stimulus package. Obama's plan simply that shifts the current tax burden to wealthier Americans. It does not provide any solution to our immediate economic malaise.

    The correct answer to Lehrer's question about what we need to cut would have been to say that now is not the time to reduce the deficit. What we need right now are stimulus packages for the top, the bottom, and the middle. We need to inject capital into the economy and restore confidence. We need a plan to protect the country from a long, deep, painful recession. Neither candidate has offered even the glimmer of such a plan.



    great points genghis. both candidates definitely avoided giving their opinion on the bailout plan, but the plan is still being worked out and discussed, so it would be tough to them to say whether or not they support a plan that doesn't yet exist.

    (my girlfriend also got pissed that they didn't answer the 'what in your agenda would you give up to pay for the bailout plan?' but i didn't mind their non-answers on that one, not just cuz the plan isn't ready yet but also cuz that's a no-win question (kind of like the 'what's your biggest weakness' question in a job interview)).

    to his credit, obama did repeat his framework for how a bailout plan should be set up. i still have very little idea what mccain wants or expects out of the plan. I think he wants generally the same things as Obama, but my guess is he's still trying to decide whether to throw another one of his political Hail Marys by opposing the publically unpopular plan.

    btw, i like your answer as to what this economy needs, but also feel like the goal shouldn't be to avoid economic malaise by further wrecking the balance sheet of the U.S. government. We've done enough damage putting future generations in a deep, ugly hole by being myopically concerned with avoiding any short-term pain.

    What we need is enough capital injection and liquidity to stave off a systemic financial collapse and subsequent decade-long depression. And we should do that by investing in long-term value-creating initiatives like education, infrastructure, alternative energy.

    But economic cycles happen. The piper has to be paid.

    (The real problem is that the spoils of the economic 'boom' of the past decade went mainly to a select, limited segment of the population, which isn't sustainable, and why Obama's fairly modest income redistribution policies are necessary.)


    There are certainly limits to what we can spend, and I don't expect that we can make the recession disappear no matter what we spend, but now is not the time to focus on the deficit.

    And I agree on income redistribution. I wasn't suggesting that it's not important, just that it's not a solution to the financial crisis.

    Look guys, there are no middle class jobs left other than govt payroll. All the major industries are gone... or on their back.  Construction is down 60%... the last real manufacturing job.  All the cash is gone.  We owe $10T.  Interest payments are 10% of the fed budget.  The states are broke, especially here in California.  Our export / import ratio is incredibly bad... especially for petrol. 

    We did not face this kind of total systemic breakdown 75 years ago.... there were different problems.  All we can do is try to borrow some more money from the Chinese... which digs an even deeper hole for us.

    There is no magic bullet to fix this mess.  That's why it's not being addressed by either candidate... and will not be, IMHO.

    And all the Wall Street sharks are sailing off to the Caymans on their 150' yachts and will soon be tapping into their Swiss bank accounts... and will live happily ever after.

    Are you suggesting that the candidates throw up their hands and announce, "We're fucked"? It is bad, and there is no silver bullet, but that doesn't make the Federal government helpless.

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