Economy in Focus

Last week’s passing of the revised bail-out bill (expanded to 450 pages, from George W Bush’s original three) came as a relief, but doesn’t mean the economy is safe – far from it. While the bill is likely to lessen the problems of bank failures and emergency rescues, the financial system is still close to disaster and, as we wait for the bill’s effect, we might well fall over the edge of global recession.

The issue is expected to stay on top of the presidential campaign and will be crucial in the election as voters will only elect a president they believe can lift the nation back onto its feet (or so I hope).

Looking at national polls the crisis seems to have boosted Barack Obama and may even win him some swing states (such as Florida!). To explain this boost let’s look at the differences in the candidates’ tax plans, which are quite astonishing. While John McCain like to accuse the Obama campaign for making (rich) people pay higher taxes, his own tax cuts would not do much for growth (GPD growth after Mr Bush’s tax cuts were estimated at a tiny 0.7 %), but rather boost the national debt by $758 billion! (Mr Obama’s plan would, in contrast, reduce it by $748 billion)

Having been more active and called for $50 billion to be spent on public infrastructure, aid to fiscally strapped states as well as tax rebates of $1,000 per family (financed by a five-year tax on oil-company profits), it is obvious Mr Obama has a strong advantage in this crisis. Nevertheless he too has faulty policies. (One of which even makes a whole hearted supporter like myself cringe.) 

Living in a globalized world Mr Obama’s support for farm and ethanol subsidies does not go well with free traders. His underlying argument that free trade can only advance once workers no longer feel threatened by it does not, I’m afraid, justify the consequences of subsidies. I quote economist Paul Collier when he says:

“This is the least defensible of indefensible aspects of OECD trade policy; not only do we waste our own money subsidizing the production of crops but we also close off opportunities for people who have few alternatives.”

Despite the current crisis the U.S South does have alternatives to its farming activities; farmers in Chad and such countries are not as lucky.

As Mr Obama moves closer to the precidency I (amongst others) hope that he shifts his support from this doomed-to-fail policy and redirects it into a policy which would better reflect the true meaning of change.

Saying this, it is unlikely Mr Obama’s voting record on free trade will be decisive in the election; Mr McCain has (I am happy to say) drawn the short straw here. The facts about his tax cuts as well as his confession that he does not know enough about economics are truly death blows to his campaign. 

— Kajsa, Admin Future for America


~ by politicsoftomorrow on October 6, 2008.

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