Do either of the candidates know what to do about the economy?

September 16, 2008 By 13 Comments

It doesn’t sound like it. Then again, does anyone?

It’s hard to see how higher taxes on the wealthy, as Obama is calling for, will produce jobs, stabilize the housing industry, or shore up the stock market. (Is it that higher taxes will give the government more money to do things? Is that the rationale?) McCain, like Obama, is calling for new regulations for investment banks. That might prevent future problems, but it isn’t clear what that will do for the ones we have today. Both candidates support the Fannie Mae takeover but are against bailing out Lehman Brothers and the other big financial companies in trouble. Actually, both sound pretty much alike in their prescriptions, except on taxes, but taxes don’t seem to be the issue one way or the other in the current finance crisis, which was precipitated by the collapse in the home mortgage industry.

Aren’t these economic woes like a hurricane that just has to run its course, whereupon we then just have to clean up, help the survivors, and rebuild?

Filed Under: Economics, Politics 13 Comments
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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  • fw

    to your last question. NO! we are seeing just the very tip of the iceberg. The problems are systemic not incidental. the system is broken at almost every level. we are seeing the results.

    if AIG insurance fails, you will see things turn badly rather quickly…..

  • fw

    by the way, this is not a democratic or republican thing… both sides are fully complicit. so what to do?

  • Dennis Peskey

    Increasing taxes on the “wealthy” will not solve our nations problems. I believe the answer is to increase everyone’s taxes. Until our government is willing to do what every household is required to do monthy – pay for what you want and get, we will continue down a long, painful road. The prime example of foolishness was the recent bonus “rebate” checks mailed to all Americans. Who paid for that money? At the time of mailing, noone. The reality is coming due much faster than I expected. Government money is not free – it is our money and we must back our wallets with our work. When we live as though the US credit card has no limits, we have no reason to decry the loss of financial standing in the world and the eventual day of payment.

  • Bryan Lindemood

    The nice thing about a monarchy would be that we #1 wouldn’t have to go through these darn election cycles. #2 we could always just blame the king (or queen) for anything bad in the economy. We wouldn’t ever have to feel responsible for the financial well being of the nation. Is there such a thing as a good tyrant? Oh yeah, I live in Utah, it doesn’t matter how I vote anyway.

  • Manxman

    fw – you’re correct – the problem is systemic. Our un-Biblical financial system is sick at its very core because our money supply is dependent on nothing but debt and ever-increasing levels of spending & consumption. It’s all smoke & mirrors, and when something happens like this mortgage crisis, the real nature of our financial system is revealed – it’s all built on IOU’s. Our currency has no real value – it’s all promises to pay.

    The Federal Reserve system is an abomination and has to be eliminated, and until we understand the implications of what it does and how it does it, we will not have economic security or stability. We will be slaves of the Fed and those who control it, and slaves of the over consumption & debt that’s used to fuel our money supply. It’s a choice between God & Mammon, and neither party seems to fear God enough to do what’s needed.

  • Don S

    Dennis @ 4 is right, in that the folks who are going to pay for those rebate checks are our children and grandchildren. A rather irresponsible action, to say the least. Talk about taxation without representation!

    I think Dennis’ prescription — raise taxes on everyone — is borne out of the frustration that comes from seeing our government absolutely powerless to reduce spending to reasonable levels. Clearly, raising taxes is the worst possible solution for an economy in a liquidity crisis, starved for investment capital. But our government is spending money at levels only previously seen in 1944, at the height of WWII — over 21.2% of GDP. Adding state and local spending into the mix places us over 40% of GDP. Entitlements and pension obligations appear poised to drive the government spending levels ever higher. And yet, we have Obama and Biden once again demagoguing over Social Security — insisting it is sound and the Republicans want to ruin it.

    When we have politicians who are willing to do what is right, and who refuse to politically attack those of the other party who are willing to do what is right in the name of short term electoral gains, we will begin to turn the corner. Otherwise, we are doomed to lurch from crisis to crisis, applying band-aids and bail-outs, financed on the backs of our children and grandchildren, until such approaches are no longer an option.

  • L. H. Kevil

    There are many issues here, which should be teased out and examined individually. Let me tackle just a few.

    First, “tax cuts for the rich.” We must be careful to distinguish between changing tax rates and the effect on the taxes collected. The two do not necessarily go in the same direction. It has generally been the case that reducing tax rates on the well-to-do gives them the incentive to increase their productive economic activity and so increases the taxes collected. In other words, reduced tax rates can increase the taxes collected. This has been the case with the so-called Bush tax cuts, which have resulted in the wealthiest taxpayers paying more than before and a higher percentage of income taxes collected.

    The second (and last) point: the Fannie and Freddie scandals have not been well reported. Those two public-private organizations operated under laxer accounting regulation than did Enron. Enron execs went to jail, yet top Fannie and Freddie executives, like Franklin Raines, are barely mentioned. They are largely appointees from the Clinton Presidency. But they were equal opportunity givers to congressmen of both parties (though Obama came out particularly well.) They were free to cook the books, set the financial goals that would increase their compensation, and purchase highly risky mortgage packages that rewarded them with huge bonuses. By their takeover the feds have increased the national debt by over 50%. Off the books, of course. Members of the Fed railed for years about the abuses, but Congressional protection failed to halt the good times.

    To problems like this, there are two general responses: more government or less. When government is at the center of the problem, it would appear wise to return to a free market. I hope that is what happens.

  • fw

    #7 don

    brother don. it won´t take that long. we will start suffering before our children do. all this on top of the two wars is gonna spend down all the accumulated wealth of the country. don´t forget the savings and loan bailout under reagan. that was another drain….

  • TK

    Regarding AIG, their insurance assets are vast, but recent legislation (by Eliot Spitzer) mandated the separation of various parts of the company (ie, financial and insurance). Therefore, AIG was prevented from using assets on the insurance side to bolster the financial side. (AIG insurance holders have no worries – it is a separate company). More proof of its viability is that the government was even willing to bail out AIG; their overall assets are sound. The loss was more paper-based, due to the implementation of FASB 157 and required loss-taking. The government was not willing to bail out Lehman Brothers because their assets were not sound.

  • fw

    Ok, here are the two presidential candidates ad addressing the economy back to back.

    which is more detailed? which looks less like politics as usual.

    which plays the blame game?

    http://andrewsullivan.theatlantic.com/the_daily_dish/2008/09/read-my-plan.html

  • Don S

    FW @ 11: Andrew Sullivan again? And you are obtaining your information regarding economic plans by comparing ads?

  • fw

    ok!

    Now. being somewhat fluent in spanish, I am hearing that MCCain is blanketing latino markets with advertising saying that he supports amnesty for undocumented immigrants and that Obama voted against meaningful immigration reform.

    really.


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