Today's question: Do presidential politics help or hurt election-year economic policy? Did McCain's campaign "suspension" have any effect? Previously, Kuttner and Foster debated Obama's and McCain's economic plans and the state of the U.S. financial system.
Exposing the right's hypocrisyPoint: Robert Kuttner
The presidential campaign is helping clarify this crisis by smoking out the right's complete hypocrisy and political bankruptcy. After being the enablers of casino capitalism for 30 years, House Republicans are suddenly trying to sound populist and anti-Wall Street. But nothing remotely consistent with their worldview of deregulation and enfeebled government can fix what's broken. Poor John McCain tried to fish in troubled waters, only to tip the boat. His campaign "suspension" was a cynical and transparent ruse -- the TV ads and attacks by surrogates went on uninterrupted. Voters noticed.
Because this is billed as a debate, I have to say that your Wednesday post, J.D., reads like McCain campaign talking points, only less convincingly. I am not participating in this Dust-up to score points for Barack Obama but to argue for a Roosevelt-scale recovery program. I do think we are more likely to get this from Obama than from McCain, but even Obama still has a ways to go in embracing sufficiently bold remedies.
If you truly believe that "with luck, the next president will take office with an economy ready to rebound," I'd enjoy a hit of whatever you have been smoking. The far greater likelihood is that, four months from now, the economy will still be on a downward spiral -- because of the policies advocated by the Heritage Foundation and carried out under George W. Bush.
For example, on energy, more drilling will not deflect us from the current path that has caused skyrocketing prices and global warming unless we drill all the way to Saudi Arabia. Even there, there's not enough oil in the ground, and least of all in the U.S. and its territorial waters. It's far better to invest in a renewable energy path.
There's no such thing as "free trade." All trade requires rules. The current trade regime, promoted by business elites, most Republicans and too many Democrats, gives priority to rules that protect business. These include tough defense of property rights -- including intellectual property -- and the rights of private financial elites to trample the regulations of other countries.
For more than a century, Americans have struggled to balance business rights with other rights to protect consumers, keep financial markets from going berserk and assure workers decent wages. But it takes a political democracy to legislate these offsetting rights. Globally, there is no citizenship and no countervailing powers, so business gets to restore the system that it enjoyed circa 1890 -- all property rights, no social rights. As the Church Lady on " Saturday Night Live" used to say, how convenient.
So this argument is not about "free trade." It's about the ground rules of global commerce -- who benefits, who suffers. Lately, the benefits have gone mainly to business elites.
Taxes will need to be increased, but they should be increased on the top 2% of the population -- which has enjoyed such a party until lately -- and especially on the top one-tenth of 1%. Other Americans deserve a tax cut. Taxes on the wealthiest should be increased to finance the public investment that we need to compensate for the financial collapse and to restore public sector capacity that has been looted under Bush.
And sooner or later, the next administration will realize that universal health insurance is not just fairer but a lot more cost effective than the patchwork mess we have of insecure coverage and far too much money going to middlemen in the private insurance industry, at the expense of doctors and patients alike. Every other advanced country manages this, via universal insurance, for under 10% of gross domestic product. Their people are healthier and live longer. Ours healthcare system costs 16% of GDP and is spiraling out of control, even as people are losing their coverage and premiums and out-of-pocket costs are rising.
If you like this result, then bring on more of the Heritage-style "free market," which is a polite term for middlemen picking our pockets.
American Prospect founder Robert Kuttner's new book is "Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency."
Putting politics aside to address a crisisCounterpoint: J.D. Foster
The American people are rightly frustrated that politicians at all levels of government seem unable to resist the temptation to politicize every event, statement and issue. The nation is facing serious challenges, from the financial markets' meltdown and a looming recession to problems with our healthcare system and international competitiveness. Promised benefits to retired state employees threaten to plunge many states into a fiscal funk. And the federal government is running wildly unaffordable entitlement programs.
These challenges must all be faced squarely. Political squabbling and sniping accomplish nothing.
Congress is working on a package needed to help restore financial markets so they and the housing markets can continue to fix their own problems. There was every reason to believe that this work would be impossible in an emotionally charged election year. Liberals pine to regain the White House. Conservatives hope to hold it to counteract a far-left Congress. And everybody is rightly mad about the mess in financial markets.
When Treasury Secretary Henry Paulson announced his proposed market rescue, he was met with anger and incredulity. And he kicked up a firestorm of political sniping. The left tried to blame the financial mess on deregulation. The right tried to blame it on Fannie Mae and Freddie Mac. These political reactions are common, but they likely will be seen in calmer moments as a little weak on facts.
As Washington began to draft the package, McCain suspended his campaign. Even before that, Republicans and Democrats were acutely aware of the political setting, but to that point the two campaigns had stayed in the background. By engaging directly, McCain injected campaign dynamics directly into the legislative process. This probably was unhelpful. On the other hand, McCain supported the package in general, and he was able to meet his Republican colleagues to hear their concerns and encourage them toward his position. On balance, McCain's maneuver, like Obama's absence, probably had little net effect.
It's fair to say that nobody on Capitol Hill or in the administration is happy about the Paulson plan. Yet despite an election-year atmosphere, anger over the financial fiasco and initial political harping, Democrats and Republicans laid aside their partisanship and misgivings and hammered out a package that would achieve Paulson's goals. The bottom line: In about the worst imaginable environment, our government has worked, so far. We should take comfort and courage in that, and even more so when Congress finishes.
Many Americans strenuously oppose the Paulson plan, and the opposition comes from the far left to the far right. But the plan outlines the one meaningful step Congress can take now to help mitigate the credit crunch-driven recession barreling down on American workers and families. The recession -- and likely a sharp one -- at this point is a certainty. Only its depth and duration -- and what Congress intends to do -- are in question.
J.D. Foster, PhD, is the Norman B. Ture senior fellow in the economics of fiscal policy at the Heritage Foundation (heritage.org).