By: Brian Bohnert
As Democratic strategist James Carville took the reigns of the Clinton campaign in 1992, he coaxed his team to stay on message with three themes he thought could beat George H.W. Bush – the economy, change and health care. The first theme became a rallying cry for the Democrats as they tried to take down a popular war time president and inadvertently gave rise to an American colloquialism. “Its the economy, stupid” seems as applicable today as ever with the news of two more mortgage giants folding and sending the market into the worst free fall since September 11, 2001 (see depressing chart here). Unemployment numbers are up, the strength of the dollar is down, and the American people seem to be on a hair trigger concerning the economy if the immediate response to John Mccain’s gaffe Monday about the “fundamentals” of the American economy is any indication. This response should not come as a huge surprise as currently, 56% of likely voters
indicatate that the economy is the number one issue facing America – a huge shift from 23% one year ago. Furthermore, most political observers agree that when the economy is good the party in power tends to stay there and if not, the challenger typically wins (google: Herbert Hoover+1932+great depression+worst response ever). While the bad economic numbers seem to work in Obama’s favor, the other key economic component to winning in November is taxes, (google: read my lips+taxes+Bush+actually, I hope you can’t read my lips, because I am going to raises taxes+1992 election) something the Democrats have not been able to overcome during the last two presidential elections. A quick study of the tax plans put forth by the Obama and McCain camps reveals a fairly typical liberal (demand side) and conservative (supply side) approach to economic policy, but a closer look is necessary as both Mccain and Obama have inched towards the center when you compare their plans to their respective historical counterparts – Reagan and Franklin D. Roosevelt. First, it is helpful to cut through some of the political and media spin which this article does quite nicely. The McCain folks would have you believe that Obama is scheming to tax anything that moves (or doesn’t in the case of your dead uncle Jerry who just left you his 3 million dollar estate) and claim that the Democrats would implement the largest tax increase since WWII. This simply is not true, nor is the false Republican claim that Obama will raise taxes on the middle class – something that Fox News (believe it or not) was sure to point out yesterday. A further analysis of the the plans reveals that in fact, Obama’s plan would tax individuals making over $250K/year with the highest tax burden shouldered by Bill Gates (not him personally, but his type). While Obama would extend Bush’s tax cuts for the middle class, he would expand the tax cuts for the lowest income earners. Predictably, McCain wants to extend Bush’s tax cuts for the wealthiest Americans and reduce the capital gains tax. If you don’t know what capital gains are, it probably means this won’t affect you since normally this only hits the investments of wealthy Americans (probably not most students at The University of Colorado At Denver). Moreover, Corporations will see a reduction in taxation under the McCain plan which according to classic conservative fiscal thinking will increase competition within the free market, allow access to more capital to create jobs and eventually everyone benefits. Regardless of the plan you prefer, you will most likely see a reduction in your overall tax bill which come April 15, might leave a few extra dollars in your pocket for malted hops and barley. While this will be great for a one time celebration of your good fortune, what the American voter needs to consider is some of the hidden costs of living in a faltering economy and the plain humanity of our society. As gas prices continue to soar, the costs of health care increase and tax payer money continues to bail out wall street mistakes, a supply side philosophy seems woefully out of touch with the majority of Americans. If you think that government can be a force for good and help those that might need an extra boost into the next income bracket (as economist Paul Krugman does) then it might be time to consider a change in our economic plan. If, on the other hand, you view those people who struggle to make ends meet as “whiners” (as McCain economic adviser Phil Gramm does) more of the same might be your style. Moving forward, as wall street tries to deal with the implications of the most recent collapse, look for the economy to take center stage and the talk of lipstick and sex for kindergarteners to fade away. This rough and tumble game of politics has real world economic consequences – it is just unfortunate that it takes an economic collapse on wall street and a hit in our wallets to remind us of that.