THE 2008 presidential election was supposed to be about Iraq, following the midterm election trend in 2006. Candidates were talking about the "surge," what we needed to do to get out and who would be the best president to stabilize the country. That was 2007. This is 2008, and the new leitmotif of the campaign is the worsening economy. A torrent of recent and gloomy data has sent presidential hopefuls scrambling to propose grandiose economic plans. As usual, Republican plans emphasize tax cuts as the time-honored panacea; only the Democrats offer something that will actually stimulate the economy.
Until just a few days ago, there was widespread uncertainty over whether the economy needed a stimulus plan. Some even said that we are not in a recession, nor are we heading for one. Those doubts, so to speak, have left the train station -- both the White House and Federal Reserve Chairman Ben Bernanke now agree that the economy deserves a quick, well-calculated boost, and both are working with Congress to materialize that wish. While addressing a House committee Thursday, Bernanke championed the idea of "putting money into the hands of households and firms that would spend it in the near term," according to the Associated Press. Bernanke encouraged the government to act swiftly and eschew foolhardy decisions that could negatively influence the economy. Despite their less-than-amicable relationship, this stimulus plan could actually bring the White House and Congress together to solve a ballooning problem.
The presidential candidates have also gotten the message, but not all of them are responding appropriately. Republicans continue touting their archaic visions of tax cuts, which are like candy to their base. The tax cuts are aimed mainly at the rich -- exactly the people who don't need help. To be sure, several Republican candidates now, like Romney and McCain, are supporting a stimulus package, but their focus still ignores the primary engine of growth, the middle class, and places too much emphasis on corporate and other tax cuts.?
And what about the Democrats? Hillary easily has the best plan because it is the only one that delivers a powerful jolt; it's a plan that recognizes the exigency of the situation. Hillary's $70 billion package freezes short-term mortgage rates and injects $55 billion towards precluding or derailing high heating costs and rising foreclosures. In other words, it helps exactly those who need help: the middle class and low-income people. Although the plan could also be construed as an overreaction if the economy is not totally tanking.
Obama's plan is acceptable, but not stellar. Much of his $75 billion stimulus package aims to give $250 tax cuts to those earning less than $75,000; Obama would allocate roughly $10 billion to help people deal with foreclosures. The plan does give fast money to those who need it and are likely to spend it, but it's not very extensive: the economy is going south largely because of the devastation in the lending markets, and any successful stimulus package must help those reeling from the aftershocks, which Obama's plan does not do as effectively as Hillary's.?
Both camps have attacked each other's plans as misguided. Ultimately, however, which plan is superior depends on the condition of the economy. If it nosedives into a deep recession, Hillary's plan is better. If not, Obama gets the nod.
There will be plenty of time for politics later; right now the government better get a grip and provide some much-needed relief. Efforts focused at homeowners would be particularly effective precisely because they are the segment of the economy threatening to demolish the other parts. The Democrats have the best ideas on how to respond to these new economic challenges, and some Republicans are reacting in a manner reminiscent of Hoover, telling the country everything is fine as the economy tumbles into the abyss.
Granted, we are nowhere near another Depression, but the government must respond appropriately to keep it that way. The Congress may concoct some relatively novel plan, but the fundamentals will center on rapidly giving a whole lot of dough to a whole lot of struggling people.
Erald Kolasi's column appears Mondays in The Cavalier Daily. He can be reached at ekolasi@cavalierdaily.com.
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