Posted: 3:26 am
September 20, 2008
A WEEK that began so badly for John McCain on economic fundamentals ended on a comparative high.
In dueling speeches yesterday, McCain outthought Barack Obama, thanks to a greater, if still clearly limited, awareness of the realities of the Wall Street meltdown.
McCain went further in identifying the root causes of the current financial crisis and the wider economic slowdown. And, unlike Obama, he touched on some common-sensical ways to improve the situation and was on firmest footing describing how we got into this mess.
"The financial crisis . . . started with the corruption and manipulation of our home-mortgage system," McCain said in Green Bay, Wis. "At the center of the problem were the lobbyists, politicians and bureaucrats who [persuaded] Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac."
Belatedly, a presidential candidate has hinted at the role Washington played in creating a crisis that has bequeathed taxpayers a trillion-dollar debt. The push to make every American a homeowner - no matter that a third or more couldn't afford it long term - has put our financial system in cardiac arrest.
McCain failed to connect the financial dots that made all of this possible. The vast size and scope of the federal government serves as a veritable honey pot, irresistible to an ever-larger army of lobbyists.
He did, however, outline the positive economic contributions made by the banks, investment firms, mutual funds and insurance companies that comprise the financial-services industry.
That said, McCain still wants to have it both ways on taxpayer bailouts. He isn't anti-bailout on principle, just anti-bailout by the Federal Reserve.
He was right to say the Fed needs to stop bailing out failed financial institutions and get back to "its core business of responsibly managing our money supply." But he's open to Treasury Department bailouts, so long as they follow consistent guidelines.
Still, half an economic loaf on the policy shelf is better than none. Obama revealed in Miami that his cupboard is bare of ideas. He simply confirmed that his economic instincts are incorrigibly interventionist and outdated.
Continuing his acceptance speech's theme, he basically promised (to paraphrase the famous pro-Herbert Hoover ad) "a chicken in every pot and a car in every back yard."
Obama declined to go into detail, saying he didn't want to roil the markets, but the Democratic nominee spoke generally of "an emergency economic plan for working families, a plan that would help folks cope with rising gas and food prices, spark job creation through repair of our schools and roads, help states and cities avoid painful budget cuts and tax increases, help homeowners stay in their homes, and provide retooling assistance for America's auto industry."
And you think this week's bailout will be expensive?
Like McCain, Obama seems to believe that a government can actually create jobs. Both want to spend untold billions "creating" green jobs - as if "environmentally friendly" jobs are cost-free, when in fact the taxpayers will foot the vast bill for this dubious project.
But Obama wants to go much further than McCain down the public-works road to nowhere. He wants the government to literally give the unemployed a shovel and start paving highways.
To his credit, Obama did state that any bailout by the taxpayers "must be temporary." Of course, if anyone can name a taxpayer subsidy that has ever turned out to be temporary, then (to steal Obama's line from last week) I have a bridge in Alaska to sell you.
The presidential candidates' responses to the financial crisis are their first real-time opportunity to demonstrate economic-policy know-how. Based on yesterday's performances, Sarah Palin isn't the only one who should be cramming for her final exam.
Patrick Basham is director of the Democracy Institute and a Cato Institute adjunct scholar.