• ELECTION 2008 AND THE FINANCIAL CRISIS

With the Presidential election heating up, America’s taxpayers are demanding solutions to their rapidly growing financial discomfort. Most are struggling to address an onslaught on their shrinking dollars from all fronts. The housing slump, layered with astronomical oil prices and rapidly rising food costs, are building a wall of confusion that most economists cannot climb. Relying on supposedly expert council, McCain and Obama are taking very opposing stances to salve taxpayer wounds. Are they doling out short-term painkillers or are they presenting a long-term cure?

Predictably following party lines, McCain is promoting a continuation of Bush tax cuts that have benefited the high incomes, in a warped belief in the trickle down theory, anticipating that pennies will rain on the lower echelons of the economy, which will in turn scurry to wipe the food store shelves bare of Spam. McCain’s advisors should present him a demographic map of the United States laying out incomes so that he understands whom the term middle class encompasses as it applies to America. McCain suggests that he will cut pork barrel spending and reduce government. That is an unlikely reality, since he will do nothing to curtail military spending without which other spending cuts will be meaningless. He should understand that spending reductions will be a necessity on the road to recovery.

Obama, also predictably rhyming with the party song, is calling for tax increases on the Democratic version of the wealthy, those making above $250,000, although he is apparently beginning to ‘skate’ on that, much the way he is now backtracking on getting out of Iraq. One wonders how much Obama can really collect from a few souls making millions and how much impact that can possibly have on the burden that the current administration has placed on America. The fact that the average household income in the U.S. is less than $50,000 (and that’s Household, not individual) seems to make his tax program a wash. OK, so he wants also to eliminate taxes on anyone earning less than $50,000, which should get plenty of votes, but where will the cash come from to fix the current economic challenge? Overall, Obama’s intent is to maintain tax cuts, therefore the net balance will not represent much increase on the revenue side.

Given the running deficit and the size of the debt, neither candidate can continue with Bush type stimulus packages, which would mean borrowing the money and increasing the depth of the well, nor should either print more dollars and reduce the dollar’s value even further. Borrowed stimulus packages are not sustainable. Although both candidates want to energize new industries, such stimulation will have to be carefully, if not creatively structured with the private sector, and depend on it for a majority of any long-term and capital investment, and management. Governments can be useful in leadership and emphasis, but inept and wasteful at execution. Give new industries some impetus then get out of the way.

America allowed its leadership to overspend throughout most of the past decade. Of the two candidates, Obama’s plan at least begins down a path suggesting a little more awareness of current reality. Increasing the treasury revenue is a no choice gambit for the new administration. The follow-up move will be to shave hundreds of billions from the budget.

A skillful financial magician well versed on reality will be required as the cardinal eminence grise advising the Oval office, guiding the country through the most difficult economic challenge since the depression of the 30’s. Neither McCain nor Obama may be experts in economics but both better present some knowledgeable remedies to the financial ills facing the voters lining their path to the White House.