Politics & Policy

Economics Election

Who's talking about the Federal Reserve?

As the Feds gave help, Bear Stearns got bought, and investors nervously watched their investments, National Review Online asked a group of economics wonks to quickly touch on the future of Washington economic policymaking: Of those running for president, who can help or hurt the economy and why? Here’s what they came back with.

John Hood

What’s striking about the presidential campaign at the moment is that as the markets are dropping and the economy is topping the list of voter concerns, none of the candidates truly seems engaged on the subject. John McCain is off in Iraq — good for him — while Hillary Clinton is scheming about primary re-votes and Barack Obama is running away from his nutty pastor.

Who’s talking about the Federal Reserve? I’m not hearing much from the candidates. It’s too bad. The Fed is in the process of bailing out huge, risk-taking financial institutions, and weakening the dollar with more inflation. It’s a foolish, even dangerous policy mix. I, for one, would like to see one of the candidates clearly stake out a position in opposition to the easy-money Fed.

As for traditional concerns, I suspect that Obama and Clinton are both exaggerating for primary effect their hostility to free trade. Sensible veterans of the Clinton administration would probably populate the higher levels of a new Democratic team, and they won’t try to renegotiate NAFTA (how, indeed, would that be done?) or impose significant new barriers to trade with China and India. The two parties are more clearly defined on taxes, a point that McCain ought particularly to emphasize as public sentiment worsens and the stock market continues to gyrate.

At the moment, it sure looks like the presidential election will be decided on economics, not the war. We’re likely to get a clear choice of action plans by the fall, though perhaps not until then.

– John Hood is chairman and president of the John Locke Foundation.

Raymond J. Keating

The presidency is not about economic cheerleading from the bully pulpit. It’s not about “change” nice talk. Nor is it really about experience. Instead, it’s about getting policies right, particularly on trade, taxes, and regulation.

Reduce trade barriers to expand international opportunities for U.S. businesses, while boosting competition and choice at home, and cut tax and regulatory burdens to boost incentives for working, investing, and entrepreneurship.

On trade, the last time we had a protectionist president — a.k.a. Herbert Hoover — world trade collapsed and a Great Depression resulted. Unfortunately, the two Democratic candidates for president — Barack Obama and Hillary Clinton — apparently have protectionist tendencies, for example, each railing against NAFTA and voting against CAFTA. In contrast, Republican John McCain has been a solid free-trader.

On taxes, last week’s budget resolution votes were revelatory. Obama and Clinton effectively voted for huge tax increases — namely, raising the top personal-income, capital-gains, and dividends tax rates — while McCain voted against these tax hikes. Of course, it should be kept in mind that McCain has flipped, flopped, and flipped again on taxes, going from a tax cutter to opposing the Bush tax cuts, to now favoring tax relief once again.

On regulation, the big mess on the horizon has to do with climate change. All three candidates — Obama, Clinton, and McCain — favor cap-and-trade schemes to reduce carbon-dioxide emissions. The results? Jacking up energy costs even further, and pushing economic activity and jobs overseas.

There’s a good deal to worry about right now regarding our economy. But those worries extend past November given that the two Democratic candidates for the White House are dead wrong on trade, taxes, and global-warming regulation, while the Republican is right on trade, foggy on taxes, and also wrong on climate regulation.

– Raymond J. Keating serves as chief economist for the Small Business & Entrepreneurship Council.

Daniel Mitchell

Advocates of economic liberty have little reason to be excited about the three remaining major-party candidates. The Democrats are hopeless. Senators Obama and Clinton both want the pro-growth parts of the Bush tax cuts to expire, meaning higher tax rates on work, dividends, capital gains, and death. Senator Obama is probably the worst candidate on taxes since he wants to impose the Social Security payroll tax on income above $200,000, meaning a huge 12.4-percent marginal tax-rate increase on entrepreneurs and others who contribute most to the economy’s performance. But Senator Clinton is furthest to the left on health care since she wants to coerce everyone into her plan. The only good news, so to speak, is that they probably are not mindless protectionists, notwithstanding their attempts to project that image during the Ohio primary.

Senator McCain is more difficult to categorize. On some issues, such as free trade, he has an excellent record. He also is the only candidate who seems even slightly interested in controlling the size of government — a mindset that is desperately needed after the reckless spending increases of the Bush years. On the other hand, Senator McCain has a less-than-perfect track record on taxes. His reliance on class-warfare rhetoric while opposing the Bush tax cuts was particularly unsettling. Moreover, he seems susceptible to getting lured into a “budget summit” with Congress, which inevitably would mean Republicans lose their shirts and the economy gets saddled with higher taxes and higher spending. Last, but certainly not least, his infatuation with global-warming alarmism suggests he would acquiesce — or even lead the charge for — a massive increase in the regulatory burden (though the Democrats surely would travel down the same path).

Daniel Mitchell is a senior fellow at the Cato Institute.

Grover Norquist

John McCain has called for reducing the corporate tax rate from 35 percent to 25 percent. For perspective, the European average is 25 percent and Ireland has a 12.5-percent rate. McCain has also called for immediate expensing — to replace long depreciation schedules. This would be a great help to all employers — particularly manufacturing. Add to that McCain’s support for school choice, free trade, tort reform, no earmarks. McCain supports the Shadegg/DeMint health-care reform to allow Americans to buy their health insurance from any state — avoiding costly and politically motivated “mandates” that keep insurance costs up 15 percent or more.

Now all McCain needs is a House and Senate that will pass this agenda.

Both Obama and Hillary would tank the economy by hiking taxes more than $2 trillion for starters by allowing the 2001 and 2003 tax rate cuts to lapse. Then Obama wants to add 12.4 percent to the top rate by extending out social security taxes above the present cap. Because it is a contested race both Obama and Hillary have promised the rich trial lawyers protection from tort reform, the unions protection from free trade, and government workers have been promised a pay increase.

Carter and Clinton had modest agendas compared to these . . . and back then there was a “moderate” wing of the Democrat party that could oppose a Democrat president on left-wing silliness. That no longer exists. Next stop: Argentina.

– Grover Norquist is author of the new book Leave Us Alone: Getting the Government’s Hands Off Our Money, Our Guns, Our Lives.

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