Presidential Hopefuls as Lagging Economic Indicators

Any doubt that <a id="vf.o" title="James Carville’s mantra" href="http://en.wikipedia.org/wiki/It%27s_the_economy%2C_stupid">James Carville’s 1992 mantra</a>, “It’s the economy, stupid,” also applies in the 2008 presidential campaign should have been erased this week.

From Bear Stearns’ collapse and the Federal Reserve’s latest emergency rate cut to a Friday <a id="dou4" title="front-page story" href="http://www.nytimes.com/2008/03/21/business/21econ.html?ref=business">front-page story</a> in The New York Times that declared: “Economic Squeeze Moves From Wall St. to Main St.” and Paul R. Krugman’s column likening the current situation to the <a id="vq0e" title="banking crisis of 1930" href="http://www.nytimes.com/2008/03/21/opinion/21krugman.html?_r=1&hp&oref=slogin">banking crisis of 1930</a> (which he cites as the real cause of the Great Depression), there is plenty of reason to worry.

<img width="165" height="165" class="left" title="(Matt Mahurin)" alt="(Matt Mahurin)" src="/files/washingtonindependent/folders-pics-icons/Politics.jpg" /> As the crisis has deepened, public anxiety has continued to rise – three-quarters of Americans now think the economy is in <a id="tiun" title="recession" href="http://money.cnn.com/2008/03/17/news/economy/cnn_recession_poll/index.htm?postversion=2008031716">recession</a>. Yet even as more and more voters list the economy as their top issue, remarkably the presidential candidates have been a lagging indicator of this downturn. They have been hesitant — and perhaps unsure how — to respond. Instead, they have continued to focus on Iraq, which had been the key issue in this campaign.

As Simon Rosenberg, president of NDN, a progressive think tank, put it, “Washington has been slow to come to terms with the enormity of the economic challenges the country faces today, and the three major presidential candidates are not an exception.”

Jason Furman, director of The Hamilton Project, an economic growth project at the Brookings Institution who worked on John F. Kerry’s 2004 presidential campaign, agreed that the candidates should be talking more about the troubles on Wall Street, the housing crisis, the proper roles for government and regulation and other economic issues.

“They shouldn’t be trying, on a daily basis, to say what the Federal Reserve should do that day. We’re not electing the chairman of the Fed,” Furman said. “But there’s a lot the White House and Congress should be doing, and there is scope to hear a lot more of it.”

When the Democratic candidates, Sen. Hillary Rodham Clinton and Sen. Barack Obama, are out on the campaign trail, they often talk about strengthening the middle class, improving health care and protecting jobs from unfair foreign trade, while blaming the weakening economy on the policies of President George W. Bush. But, given the depth and drama of the current situation – reaching from the highest levels of the financial system to suburban cul de sacs and factory floors – their slow embrace of the economy as an overriding issue is stunning.

Naomi Klein, author of <a href="http://www.amazon.com/Shock-Doctrine-Rise-Disaster-Capitalism/dp/0805079831/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1207257971&sr=1-1">“The Shock Doctrine: The Rise of Disaster Capitalism,” </a>underscored a sense of waiting for economic leadership among liberals who gathered in Washington this week for Take Back America, an annual gathering of progressive activists. “It is a crisis for the Republicans and the question is: What is going to be the response of the left?”

Of course, Clinton and Obama have had many other issues to juggle. Clinton began the week with a long-planned speech to mark the fifth anniversary of the war in Iraq — and her vote in support of the Bush administration has been troubling to the party base. Obama, too, took on that topic, after making his landmark speech on race. Both their campaigns have also been grappling with the immediate demands of the primary contest, battling over superdelegates and how to handle the controversial primary contests in Florida and Michigan.

Yet, in recent days they have finally demonstrated a willingness to confront the economy — even as they continue to shy away from large-scale discussions of systemic problems.

In his second speech of the week on Iraq, Obama sought to link <a id="goa9" title="the weak economy" href="../../../view/is-our-3-trillion">the weak economy</a> with the <a id="n0-q" title="link the weak economy with high costs of the war" href="http://www.reuters.com/article/newsOne/idUSN2060561020080320">high costs of the war</a>. “Instead of fighting this war, we could be fighting for the people of West Virginia,” told a crowd in Charleston on Thursday. “For what folks in this state have been spending on the Iraq war, we could be giving health care to nearly 450,000 of your neighbors, hiring nearly 30,000 new elementary school teachers, and making college more affordable for over 300,000 students.”

As the Bear Stearns saga unfolded on Monday, Clinton pointed out that she had <a id="pyvn" title="spoken with Henry Paulson" href="http://businessweek.com/magazine/content/08_13/b4077042381294.htm?chan=top+news_top+news+index_businessweek+exclusives">spoken with Henry M. Paulson</a>, the Treasury secretary, and the head of the New York Fed — a reminder, she hopes, of her readiness on Day 1. On Thursday, she called for a <a id="bwzi" title="a second stimulus package" href="http://www.hillaryclinton.com/news/release/view/?id=6644">second stimulus package</a> to address the housing crisis. “If we can extend a $30-billion lifeline to avoid a crisis for Wall Street banks, we should extend at least $30 billion in immediate assistance to at-risk communities and families facing foreclosure,” the Clinton campaign said.

Furman, the Brookings economist, said the press of other issues makes a greater focus on economic policy difficult. But, he added, it is also a hard area for the Democratic candidates to emphasize because they largely agree on the topic, at least so far. “To date, their plans haven’t been that different,” he said, noting that Clinton and Obama have both backed a plan from Sen. Christopher J. Dodd (D-Conn.) and Rep. Barnett Barney Frank (D-Mass.) that would allow the government to <a id="n19k" title="insure distressed mortgages" href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aC58vMe.RBUk&refer=home">insure distressed mortgages</a>.

Michael Dimock, associate director of The Pew Research Center for the People & the Press, said <a id="uo36" title="public sentiment about the economy" href="http://people-press.org/reports/display.php3?ReportID=395">public sentiment about the economy</a> hasn’t been so low since 1992 and, before that, 1979. “It’s really bad,” he said.

But he said the economy will not emerge fully as an issue until the general election, when Sen. John McCain’s support for free markets and lower taxes will contrast sharply with whoever is the Democratic nominee.

McCain, the Republican candidate, has <a id="z4hj" title="conceded his weakness" href="http://www.prospect.org/cs/articles?article=what_is_mccains_economic_agenda">conceded his weakness</a> on economic issues. He was overseas this week, focusing on what was <a id="v13q" title="supposed to be his strength" href="http://www.youtube.com/watch?v=v6GBdyws5YU">supposed to be his strength</a> — foreign policy.

As The Washington Times pointed out this week, a worsening economy may prove <a id="zq4f" title="problematic for McCain" href="http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20080320/NATION/553661609/1001">problematic for McCain</a>, whose reliance on free trade, tax cuts and spending cuts does not offer the kind of quick relief that voters may demand.

"If you go for quick fixes, my fear is you make mistakes," Douglas Holtz-Eakin, a McCain adviser and former director of the Congressional Budget Office, told the paper. "The sad reality is there is no $1,000 tax credit that is going to substitute for a job."

Rosenberg, of NDN, complained that all the candidates still have big work to do on the economic front. “I don’t think that any of the three major candidates’ economic agendas are adequate to deal with the challenges in front of us today,” he said. “This will be a major issue in the fall.”

Furman, speaking for policy wonks everywhere, did see one bright spot. “In a sense, this is an opportunity for a policy person on a campaign,” he said. “They are being handed a whole new policy area that they didn’t know last fall that they needed.”

szielinski

Another reason the Dems say little about the economy: They haven't a clue and lack the resources needed to implement a reform program that would address the causes of the crisis.

ajm8127

Paul Krugman's column is very insightful. I'm an engineer, not an economist, but it all seems to make sense. Also, I love Michael Dimock. "It's really bad" he says. Really?

But I agree with the author of the article. The Dems are trying to set themselves apart from one another, and a debate about the non-existent differences in economic policy would not really serve them well. Its a circus right now with the candidates leapfrogging each other in polls. I guess we'll have to wait until the general election for an economic debate.

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