Obama and McCain Focus on the Economy

McCain and Obama aim at the White House under extremely difficult economic conditions. Each of them has different methods in order to overcome the crisis… but deficits might make their task even more complex. Let’s summarize:

“It’s the economy, stupid…” While the United States is being hit deeply by the crisis, Barack Obama and John McCain remember Bill Clinton’s winning motto, back in 1992.

All of the economy’s status lights have turned red.

Economy has become a major theme in the race to the White House. All of the status lights turned red right when the sub-prime bubble popped a year ago. Hit by the falling market prices, the increasing price of oil and food, families get depressed and consumption stalls.

Unemployment, at 5.7% of the active population, reached its highest level since 4 years ago. The decreasing growth, which hardly reached 1.9% during the second quarter, smells of depression.

Both candidates emphasized their view on the economy, even though they differ greatly. John McCain focuses on lowering taxes to trigger more spending. He then trusts the richest people and corporations, who will benefit the most from his program, to take the economy forward.

He also bets on bilateral commercial agreements to lower barriers to commerce and help with exports. “His program his clearly liberal and follows Bush’s,” analyzes Benjamin Carton from the Center for Prospective Studies and International Data. The Republicans’ man also plans to renew the 10-year period lowering taxes on trading surplus and dividends voted in 2001.

“Barack Obama focuses much more on an equitable growth,” explains Benjamin Carton. The democrat wishes to set a direct $1,000 relief rebate before next Fall in order to help families face the increasing cost of living. He also plans to increase the minimum wage and set a universal social plan for children.

In order to revive growth, Obama prefers Keynes Theory, as tested for the first time by Franklin D. Roosevelt during the 30s. He then hopes to encourage more infrastructure works by injecting 50 billions public dollars into the economy.

How do they plan to finance their programs ?

To finance his program, Obama bets on canceling the tax cuts voted under Bush. McCain plans on cutting public spending even more and aims at cutting public help funds, including unemployment insurance and social security.

“Both candidates remain very secretive,” observes Mr. Carton. “McCain just throws random figures while Obama, though with expert help, still hasn’t made any comment about the budget deficit.”

He however should study it quickly as it keeps increasing, and may reach 482 billions dollars in 2009 (3.3% of the GDP vs. 2,7% now).

“Both the budget and the balance deficits cause an unprecedented stand-off which doesn’t allow for much movement. This question disturbingly seems to be ignored by both of the candidates,” claims Jacques Mistral, economics studies director at the French Institute for International Studies and author of the recent book, “The Third American Revolution.”

Based on these conclusions, the future president will have to choose between respecting his engagements, should it make the deficits even worse, or stick to orthodox budgeting, which should truly displease voters.