The three candidates on the economy

The Washington Post, in a useful exercise, asked spokesmen for each of the three presidential candidates about what each of them would do to address our current economic problems. Go here, then click each candidate in turn.

The notion that Obama and Clinton have virtually the same policies does not hold, at least for this issue. And it is certainly not true that McClain is just like the Democrats. He stands for conservative free-market economic policies, addressing our problems through tax cuts, letting those who made bad investments fail, and refusing to bail out the financial industry. Obama offers a series of ingenious “incentives and guarantees” that would protect the little guys caught up in all of this, policies that would increase government’s impact in the economy, but which sound like they respect a free market and a free society. Clinton’s proposals, though, are full of government fiats: She would impose a 90 day moratorium on home foreclosures. The rhetoric is about what the government should permit and not permit. (E.g., “Complex lending vehicles for sophisticated financiers must ultimately be shown to benefit America’s working families”–shown to whom? who is going to have the power to approve or disallow such investments?) The point is, Clinton sounds far more hard-core statist than Obama does.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

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  • The Jones

    When traveling home for Easter, I wa able to talk to my Uncle who is some sort of Trust Fund manager or something. I really don’t understand what he does, but that’s not the point. The point is HE knows what he’s doing and he gave me a very overarching perspective on this whole “economic crisis” (read: election issue).

    He told me how this present economic crisis has so many tie ins to the economic crisis of 1907. Does anybody remember the economic crisis of 1907? I sure don’t. Point taken. What has happened is that a 100 year old law was repealed a few years ago that mandated a mortgage company and a bank be separate entities. (I think it was a mortgage company. If it is not, the general story still flows. Take my explanation with a grain of salt. I am not my uncle.) The reason the law was put in place was because Congress was afraid of the power that J.P. Morgan wielded on Wall Street. So they broke up his financial institution. When they put it back together, companies that used to make money on interest and loans, can now make money off of fees that they gain from financing mortgages. In effect, it is not nearly as important that these mortgages be SOUND, it’s only important that you get them, because now the companies make the money off of fees, not interest. Hence, “Sub-Prime” came about. Mortgage companies/Banks were offering NINJA loans (No Income; No Job, or Assets) and then selling the actual loan part to some other financial entity. Well, bad credit doesn’t hold up for long, and now the companies are learning what they can’t do.

    I bring all that up to say: this all started because big investment companies tried to stretch out too far when the playing field changed (the repeal of the law separating banks and mortgage companies). Those companies are now learning their lesson. As a consequence, many third parties (regular, non investment minded people) are feeling the economic hurt. However, the federal government’s policy is to bail out companies that are feeling this hurt in order to in turn help the third parties out in their economic woes.

    I say, let the bad investors feel the brunt of the fist of economic justice. Everything will work itself out as investors realize what they can and can’t do. What we are doing now is letting investment companies borrow directly from the Fed (i.e. printing billions of dollars that never existed before) to bail them out of trouble. Instead of doing this, we should let them learn their lesson so that it never happens again. And we should stop bailing them out because that is going to create a new economic crisis based on inflation.

  • The Jones

    When traveling home for Easter, I wa able to talk to my Uncle who is some sort of Trust Fund manager or something. I really don’t understand what he does, but that’s not the point. The point is HE knows what he’s doing and he gave me a very overarching perspective on this whole “economic crisis” (read: election issue).

    He told me how this present economic crisis has so many tie ins to the economic crisis of 1907. Does anybody remember the economic crisis of 1907? I sure don’t. Point taken. What has happened is that a 100 year old law was repealed a few years ago that mandated a mortgage company and a bank be separate entities. (I think it was a mortgage company. If it is not, the general story still flows. Take my explanation with a grain of salt. I am not my uncle.) The reason the law was put in place was because Congress was afraid of the power that J.P. Morgan wielded on Wall Street. So they broke up his financial institution. When they put it back together, companies that used to make money on interest and loans, can now make money off of fees that they gain from financing mortgages. In effect, it is not nearly as important that these mortgages be SOUND, it’s only important that you get them, because now the companies make the money off of fees, not interest. Hence, “Sub-Prime” came about. Mortgage companies/Banks were offering NINJA loans (No Income; No Job, or Assets) and then selling the actual loan part to some other financial entity. Well, bad credit doesn’t hold up for long, and now the companies are learning what they can’t do.

    I bring all that up to say: this all started because big investment companies tried to stretch out too far when the playing field changed (the repeal of the law separating banks and mortgage companies). Those companies are now learning their lesson. As a consequence, many third parties (regular, non investment minded people) are feeling the economic hurt. However, the federal government’s policy is to bail out companies that are feeling this hurt in order to in turn help the third parties out in their economic woes.

    I say, let the bad investors feel the brunt of the fist of economic justice. Everything will work itself out as investors realize what they can and can’t do. What we are doing now is letting investment companies borrow directly from the Fed (i.e. printing billions of dollars that never existed before) to bail them out of trouble. Instead of doing this, we should let them learn their lesson so that it never happens again. And we should stop bailing them out because that is going to create a new economic crisis based on inflation.

  • Carl Vehse

    The problem is that the “bad investors” have long since cashed in their chips and split, leaving white-haired grandmothers’ pension plans and workers’ 401K/IRA investments plans holding the bag.

    This game has been played so many times, one loses count. One that stands out in my mind is the Washington Public Power Supply System (WPPSS, pronounced “Whoops”), which in the ’70-80s was suppose to build a half dozen nuclear reactors on the Columbia River in WA, but went belly up after finishing one. Some pension plan bondholders and the ratepayers were left holding the bag.

    And there’s the Savings and Loan scandal in the ’80-90s and Enron in 2001.

  • Carl Vehse

    The problem is that the “bad investors” have long since cashed in their chips and split, leaving white-haired grandmothers’ pension plans and workers’ 401K/IRA investments plans holding the bag.

    This game has been played so many times, one loses count. One that stands out in my mind is the Washington Public Power Supply System (WPPSS, pronounced “Whoops”), which in the ’70-80s was suppose to build a half dozen nuclear reactors on the Columbia River in WA, but went belly up after finishing one. Some pension plan bondholders and the ratepayers were left holding the bag.

    And there’s the Savings and Loan scandal in the ’80-90s and Enron in 2001.

  • http://www.cockahoop.com/ tODD

    Veith, I don’t believe that link goes where you meant it to. Nor can I find the feature you mention on the Post‘s site.

  • http://www.cockahoop.com/ tODD

    Veith, I don’t believe that link goes where you meant it to. Nor can I find the feature you mention on the Post‘s site.

  • fwsonnek

    The issues around the colapse of the banking industry is not all that complex.

    there are two things. greed and coveteousness masked in a free market package.

    usury laws were gutted. This fueled alot of greed. credit cards and mortgages issued to those not credit worthy. people and municipalities trading to get highrates of return conveniently forgetting that interest is a function of time and risk. higher interest=higher risk. fundamental.

    In addition there is a “creditization” of our economy that has been quietly progressing for some time. “cash is king” is no longer true.

    There are ever present incentives of convenience and immediate gratification to make this part come about.

    where there used to be a high percentage of the population that actually owned there homes, now many people rent the very shirt on their back in the form of credit card payments with 30% interest rates and absurd penalties for the pettiest of infractions against the credit card terms.

    I do not see EITHER one of these two issues discussed at all. I have yet to see a single article on what to me seems like two major sea changes to our economic way of life.

    I find that rather interesting.

  • fwsonnek

    The issues around the colapse of the banking industry is not all that complex.

    there are two things. greed and coveteousness masked in a free market package.

    usury laws were gutted. This fueled alot of greed. credit cards and mortgages issued to those not credit worthy. people and municipalities trading to get highrates of return conveniently forgetting that interest is a function of time and risk. higher interest=higher risk. fundamental.

    In addition there is a “creditization” of our economy that has been quietly progressing for some time. “cash is king” is no longer true.

    There are ever present incentives of convenience and immediate gratification to make this part come about.

    where there used to be a high percentage of the population that actually owned there homes, now many people rent the very shirt on their back in the form of credit card payments with 30% interest rates and absurd penalties for the pettiest of infractions against the credit card terms.

    I do not see EITHER one of these two issues discussed at all. I have yet to see a single article on what to me seems like two major sea changes to our economic way of life.

    I find that rather interesting.

  • fwsonnek

    Read this: this puts obama head and shoulders above clinton and mccain in terms of understanding and seeing the impending economic problems…

    http://andrewsullivan.theatlantic.com/the_daily_dish/2008/03/obamas-prescien.html#more

  • fwsonnek

    Read this: this puts obama head and shoulders above clinton and mccain in terms of understanding and seeing the impending economic problems…

    http://andrewsullivan.theatlantic.com/the_daily_dish/2008/03/obamas-prescien.html#more

  • http://www.bikebubba.blogspot.com Bike Bubba

    The Jones, I do know that a few years back, banks were freed to offer other investments besides CDs and regular deposits, and it sure seems like everybody and their brother opened a mortgage company about a decade ago.

    That said, I don’t know that I can blame “one thing” for the problem. Did it hurt that the Fed encourages boom-bust cycles by raising and lowering interest rates on about a five-ten year schedule? Yup. Did it hurt that peoples’ reluctance to take on debt has been eroded since 1913? Yup. Did it hurt that we increasingly separated debt issuance from those that profit or lose when it’s paid or defaulted upon? Yup.

    Did it hurt that the Fed and others relaxed reserve rules and other bank regulations due to the 1977 Community Reinvestment Act? Yup. Did it hurt that people thought they could make a quick buck issuing loans with iffy documentation? Yup.

    Can I point at a single causal factor? Nope, not even the Fed and Congress, as much blame as they deserve for this.

    And the politicians on this? Well, look at the candidates for blame, and realize how many of the factors I mention involve government.

    And Obama being prescient? Sorry, but no. The foreclosure wave had already started by the time he said that. His glittering rhetoric is ample demonstration of the principle that “if you can’t blind them with brilliance….”

  • http://www.bikebubba.blogspot.com Bike Bubba

    The Jones, I do know that a few years back, banks were freed to offer other investments besides CDs and regular deposits, and it sure seems like everybody and their brother opened a mortgage company about a decade ago.

    That said, I don’t know that I can blame “one thing” for the problem. Did it hurt that the Fed encourages boom-bust cycles by raising and lowering interest rates on about a five-ten year schedule? Yup. Did it hurt that peoples’ reluctance to take on debt has been eroded since 1913? Yup. Did it hurt that we increasingly separated debt issuance from those that profit or lose when it’s paid or defaulted upon? Yup.

    Did it hurt that the Fed and others relaxed reserve rules and other bank regulations due to the 1977 Community Reinvestment Act? Yup. Did it hurt that people thought they could make a quick buck issuing loans with iffy documentation? Yup.

    Can I point at a single causal factor? Nope, not even the Fed and Congress, as much blame as they deserve for this.

    And the politicians on this? Well, look at the candidates for blame, and realize how many of the factors I mention involve government.

    And Obama being prescient? Sorry, but no. The foreclosure wave had already started by the time he said that. His glittering rhetoric is ample demonstration of the principle that “if you can’t blind them with brilliance….”

  • JSH

    Carle Vehse is absolutely right. While the govt is bailing out the big “investors” who created derivatives on top of derivatives, they are in reality bailing out you and me. Because ALL investors are being affected. All 401Ks and IRAs! In a purely free market economy those big guys would take us all down with them. I for one don’t like the idea of my hard-earned retirement being wiped out through no fault of my own, so I want the fed to do what is necessary to stabilze things. Then let them step out and free market take over again.

  • JSH

    Carle Vehse is absolutely right. While the govt is bailing out the big “investors” who created derivatives on top of derivatives, they are in reality bailing out you and me. Because ALL investors are being affected. All 401Ks and IRAs! In a purely free market economy those big guys would take us all down with them. I for one don’t like the idea of my hard-earned retirement being wiped out through no fault of my own, so I want the fed to do what is necessary to stabilze things. Then let them step out and free market take over again.

  • http://www.geneveith.com Veith

    OK, tODD, I fixed the link. Thanks for pointing out that the Post changed what was on the original page. This goes to an index in which are listed the three articles in the series: “The Next President’s Plan.”

  • http://www.geneveith.com Veith

    OK, tODD, I fixed the link. Thanks for pointing out that the Post changed what was on the original page. This goes to an index in which are listed the three articles in the series: “The Next President’s Plan.”

  • Joe

    “Then let them step out and free market take over again.”

    I think we have about 200 years worth of historic evidence that once the gov’t steps in it never steps out.

  • Joe

    “Then let them step out and free market take over again.”

    I think we have about 200 years worth of historic evidence that once the gov’t steps in it never steps out.

  • JSH

    You’re probably right too, Joe. I don’t see any way they can NOT step in, so step in and maybe get out. Time will tell.

  • JSH

    You’re probably right too, Joe. I don’t see any way they can NOT step in, so step in and maybe get out. Time will tell.


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