Monday, September 22, 2008

Who can be a better steward for the economy, the Republicans or the Democrats?

Given the current anxiety over the economy and financial system, it is to be expected that the Republicans will be blamed for all the bad things that have happened "on their watch" (ignoring the fact that the Democrats have "controlled" Congress for the past two years), but that begs the question of who can really be a better steward for the economy. After all, does anybody really have a credible, non-partisan accounting of the past eight years that can tell us whether the dot-com hangover, the impact of 9/11, and low interest rates were not at least partially responsible for the mess we are in? Did the Democrats ever complain that interest rates were too low? Did the Democrats ever complain that too many lower-income families were getting mortgages beyond their means? Actually, there were a few, but very, very few who did in fact complain that subprime mortgages were "abusive", but mostly almost everybody, regardless of party, was thrilled that housing was booming. Now, the Democrats blame the Republicans for the housing boom. Still, all of this continues to beg the question of who can credibly claim to be the better stewards of the economy.

In my book, Bill Clinton can claim credit for being a great steward of the economy. But, he was a centrist, and as Barack Obama (with Hillary's "assistance") has shown us, the Centrists are now out of favor in the Democratic Party. The Progressives are ascendant. Yes, they are gunning for power, but they actually do not have any economic track record to speak of.

What the Democrats can credibly claim is that they are better at building and deploying economic and financial safety nets, including Social Security and FDIC back on FDR's watch. Wall Street just showed us that they were a high-wire act performing without a safety net. Sure, the U.S. Treasury is now "rescuing" Wall Street, but that is more like arriving at a train wreck and helping the survivors rather than using a net to prevent a disaster. Besides, many millions of Americans have now been negatively impacted by Wall Street's death spiral, so it is rather difficult for the Republicans to claim that they protected any of us from Wall Street. Sure, the belated Treasury money market fund guaranty program is reasonably "progressive", but I believe that is an exception to the Republican M.O. rather than something we can expect from Republicans on a regular basis.

OTOH, the non-Centrist Democrats cannot even begin to credibly claim that they have they faintest clue as to how to rebuild the economy and create new jobs. Sure, the Republicans are struggling right now too, but that is mostly because that is the way things are when an economy is in or near a recession. Once the contractionary forces have dissipated, the outlook will change and change dramatically.

The key is of course to have the right mix of regulation and safety nets. The centrists understand this, but the Republicans overall have a misguided loyalty to under-regulation while the Democrats overall have a misguided loyalty to over-regulation.

In short, both parties are mediocre stewards of the economy and the economy actually survives in spite of Washington rather than because of what happens in Washington.

So, where we are right now is that McCain is talking tough but seems likely to want less regulation overall and Barack Obama is outraged that the Republicans have somehow mismanaged the economy and Wall Street and seems likely to introduce an excess of regulation.

Where are the Centrists when you need them? Bill and Hillary are exiled off to left field to smile and say a lot of nice words about Barack Obama, but otherwise not do anything to actually help the economy. Others have retired from Congress because being non-partisan is disdained these days.

Personally I think both McCain and Obama are a bit more centrist they their political chatter suggests. A lot of what they say is designed to inspire "the chorus" rather than appeal to the center majority of America.

From where I sit now, I think that Barack is a bit smarter and more sensitive to changing trends so that he is better positioned to sense the direction that the economy and Wall Street should head in the future. I also know that a number of heavy-hitters at the New American Foundation, a centrist think tank in Washington, D.C., are involved with advising the Obama campaign, so I have at least some reason to suspect that economic and financial policy in an Obama administration has at least a plausible chance of having a centrist tone.

In short, I think Barack will be a somewhat better steward of the economy than McCain, but that is in spite of his being a Democrat rather than because of his party affiliation. OTOH, I think McCain can handle the job as well, but I do worry that he is being a little too much of a conventional Republican these days to be a first choice.

Contribution from Biden and Palin? Ummm... how about "none of the above."

-- Jack Krupansky


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