McCain on the Economy Today – Interview With Nancy Pfotenhauer
The government’s approach to the current economic concerns seems to change on a daily, if not hourly basis, with proposals coming in from all quarters. In order to get a better handle on this, Cindy and I sat down this week with economist and senior McCain campaign domestic policy adviser Nancy Pfotenhauer. Our goal was to sort out some of the possible confusion over the various proposals on the table and how they would affect the American economy moving forward.
First we pointed out the $700 billion bailout package was initially proposed to purchase weak paper in a series of reverse auctions, but then $250 billion was scheduled to purchase stock in a number of banks. Senator McCain’s recently announced Pension and Family Security Plan would see the government directly purchasing distressed mortgages. We wanted to know if all of this money was going to be on top of the original bailout figure, or if it was simply a different way to allocate the original funds.
It’s a new allocation. It’s not new money. Basically Senator McCain said that if we’re going to allocate 700 billion dollars for this rescue plan, let’s rescue American homeowners. You can approach this a couple of different ways. You can invest in the banks in a “top down” approach, which is Secretary Paulson’s plan, or you can invest that money homeowner up. You can stabilize the markets this way since a lot of the volatility comes from instability in mortgage backed securities by helping the people who are upside down in their mortgages. This carries a primary benefit of keeping people in their homes.
Cindy brought up the point that many people who acted responsibly have had to sell homes at less than their previous value and experienced losses, but have not gone under. There is a sense among many voters that this plan is simply rewarding bad behavior.
I hear that from a lot of people, but one thing I would point out is that the value of everyone’s homes is being dragged down in this. For most people, the biggest asset they own is their home, and it represents the greatest source of wealth for them. Obviously you have to distinguish between people who should never have gotten their loans in the first place and people who were legitimately credit worthy at the time they got their loan. These are people who didn’t misrepresent themselves on paper and put money down. It’s people who should have been able to qualify for a thirty year fixed, but instead got into a loan with a huge balloon payment, and now that the economy is bad, maybe they’ve lost a job, they are unable to make their mortgage payments. So there’s a distinction that Senator McCain has always made. You have to be able to show that you should have been able to qualify for the loan originally. If you weren’t solvent, if it wasn’t for your primary residence, if you weren’t credit worthy to begin with, you wouldn’t qualify.
We next moved to the employment situation. In September we recorded another month of net job losses, and we asked Nancy to give us a brief overview of John McCain’s “Jobs for America” program, as detailed on his web site. Specifically, I asked if this was a program similar to 1930′s era government “make work” programs, or an economic philosophy which would spur job growth in the private sector.
I would say it’s about a 90/10 split. The private sector creates jobs. The public sector puts a burden on that. Senator McCain’s approach is that we need to facilitate job creation. You need to keep taxes low, keep spending under control and you need to aggressively pursue markets for American goods. His Jobs for America program is built around that, but there are other aspects, particularly in energy policy. The Federal government will call for new nuclear power plants sited on already existing facilities so we don’t have to go through that entire process that takes years. Senator McCain has called for 45 new plants by 2030. That type of investment in clean energy infrastructure, along with clean coal technology, will bring us an estimated one to one and a half million new jobs.
We brought up the fact that, in January, the national debt will be at an estimated 11.3 trillion dollars. I asked Nancy flat out, assuming that John McCain is elected president, would that number be higher or lower in January of 2013.
If John McCain is elected president, you will see a significant reduction in the growth rate of federal spending, and that number will be significantly lower. You’ll also see an increase in federal revenues coming in, which will come because of growth, not because of an increase in taxes, which under Barack Obama you will see. Obama is basically looking at increasing spending. We’re going to bring about an end to the ridiculous taxpayer funded party that’s been going on over the last eight years. Over the last two years of a Democratic controlled congress, spending has been at around 8.3 percent. In the prior six years it was at about 6.5 percent. It’s way too high. The last thing you want is one party government, with Harry Reid, Nancy Pelosi and Barack Obama rubber stamping everything that comes out of there. You’ll have higher spending and lower economic growth. John McCain is exactly the medicine that this town needs in terms of fiscal discipline.
She had a lot more to say, and if you’d care to listen to the entire interview, you may do so here. (The interview begins at around the 30 minute mark.)
This was a good opportunity to touch base on the economy. When I previously did a contrast and compare between the candidates, I felt that McCain’s economic policies were stronger than Obama’s, but the situation has changed quite a bit since then. Having had a chance to evaluate the specifics offered by both campaigns, I have to say that my opinion remains unchanged. McCain has offered more specifics as to what he would cut from proposed plans to account for the slumping economy, and I can not see anything which leads me to believe that Obama would make any serious effort to reduce the federal debt or curb Washington’s appetite for taxpayer dollars. The only piece missing from McCain’s plans which I would like to see is a commitment to ending tax benefits for companies who outsource American jobs. This is one element of Obama’s plan which McCain’s program could benefit from.
I would also like to take this opportunity to thank the RNC for their continued efforts in reaching out to new media sources over the course of the campaign. We also invited the Obama campaign to schedule a similar interview to address these economic questions, but to date we’ve never gotten a response from them.
21 Responses to “McCain on the Economy Today – Interview With Nancy Pfotenhauer”
“You can stabilize the markets this way since a lot of the volatility comes from instability in mortgage backed securities by helping the people who are upside down in their mortgages. This carries a primary benefit of keeping people in their homes”.~Nancy
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Ok, I proposed that at the very get-go of all this and Obama has agreed to make it happen long before Team McCain latched onto the idea to get votes…
And that is what it is always about with the GOP…to get votes. Then the second they're in power, they pull the rug out from under all their lofty promises and it's business as usual…cigars and yachts for their fat friends; apple cores and crusts of bread for the working classes. They'll only prop up the middle class just barely enough to keep us from complaining and to keep us working like slaves to keep them rolling in so much money.
The McCain campaign is shifty, lying, evasive, petty, mean-spirited, rash, erratic, false and patronizing. That's how they are. Nancy Needs-to-eat-a-sandwich-hauer may think she's working for the right team and her heart may be in the right place, then how heartbreaking all her efforts will be for her when she finds out exactly what a McCain administration won't do with them.
Fool us twenty times, shame on you GOP. Fool us 21, shame on us.
The entire discussion of the financial crisis suffers from a fallacy of aggregation. There are some areas of the country in which housing prices have gone beyond the bounds of reason. These need to shrink. Propping them up will prolong the pain rather than curing the disease.
The problem isn't that 15,000 sq. ft. houses all over the country that were selling for $2 million have seen their prices fall. The problem is that 1,500 sq. ft. houses in California that were selling for $2 million have seen their prices fall.
It seems to me that the very regionalized nature of the problem requires that it be addressed by the states rather than the federal government. Further, prudent policy would be trying to find and support the floor rather than trying to maintain the height of the ceiling.
All right, lets talk about finding the floor and strengthening it…
The floor is the citizen's ability to pay their bills…whatever mortgage or market they choose to buy in.
Solution:
1. Become a more self-sufficient nation and expand our product diversity to cover all the major fields of goods that we currently import way too many of. Why do we need to only buy precision-sharpened german steel for instance? Why not find a way to produce that at home?
2. Tax the hell out of american companies who outsource jobs and impose huge import tariffs on those that do. Find a way to pat industries on the back who choose to stay stateside. Make it worth their while. One way is…
3. Universal health care that relieves the burden of providing for workers or the unbelievably high premiums with workman's comp, (the medical cost end). Workers will make more (and infinitely cheaper) preventative trips to the doctor and will not have the stress of health care hanging over their heads every day like walking under a piano held up by dental floss everywhere you go. (that is how I've heard that anxiety described)
With jobs at home, people employed, goods exported instead of imported, the GNP goes up. More prosperity will handle home prices.
Oh and
4. Eliminate lobbying. Democracy is the Will of the majority. Lobbying is therefore Unconstitutional because it promotes the Will of the minority over the People's interests. If that lesson hasn't hit home, it never will.
Oh for God's sake… this shows that the Bush tax plan will be continued by McCain:
“If John McCain is elected president, you will see a significant reduction in the growth rate of federal spending, and that number will be significantly lower. You’ll also see an increase in federal revenues coming in, which will come because of growth, not because of an increase in taxes…”
This is exactly what Bush said eight years ago and which many leading economists scoffed at. Bush's policies did not encourage job growth, economic growth and only more than doubled the size of the federal deficit. We have had eight years to figure out that BUSH'S POLICIES DO NOT WORK, as predicted by many economists eight years ago.
Further, Bush pushed through his plan when we were actually running budget surpluses. If McCain takes office then we're lokoing at about $500 bn to $750 bn (or over $1 trillion since McCain's mortage plan adds $300 bn right there) to the national debt in one year…. During the debate McCain was given several chances to detail what he would cut from his proposals, but he offered no answer.
It's really unf***ing believable that we are now headed into a deep recession and McCain is planning on doing the same thing that Bush did to get us out of a shallow recession… and it didn't work well for Bush and in fact the Dow is 1,500 point less than it was when Bush took office eight years ago. Under Clinton the Dow increased from roughly 3,400 to 10,500 when he left office… And Bush's policies have only created roughly 1/5 the number of jobs that Clinton's did. And the ultimate number will be lower since the economy is shedding jobs….
If McCain believes that his philosophy of lower taxes will spur economic growth and so we can lower taxes now (hoping that economic growth will pick up sometime in the future) he can live in his fantasy world, just don't let him be president. This philosophy hasn't worked for the past eight years and in fact has proved to be a disaster.
As far as a spending increase of 1.8% under the last two years of a Dem congress… I thought it was the president who proposed the budget… and how much of that additional increase is to pay the interest on the additional $5 trillion or so that the Bush administration has added to the national debt?
Silhouette, every country that has tried your program has pauperized itself.
Oh and Paul Krugman, who just won the Nobel Prize was one of the critics on Bush's economic policies. Guess what, Krugman made a strong case in today's NY Times that the government should increase spending to help pull us out of the economic slump…
Given that the GOP's philosophy, plans and policies have wreaked havoc on our economy, an economic stimulus in the form of government spending, while anathema to libertarians, may be what is required. Even though we may want to strive toward some libertarian and true conservative goals of smaller government and less taxes, we need to address the economic crisis with the structure we have right now.
To continue to do what Bush has done the past eight years would only lead us into a depression…. And then we might welcome China coming to our rescue by forgiving some or all of the trillions of dollars in debt they will be holding….
http://www.nytimes.com/2008/10/17/opinion/17kru…
Congrats on all the interesting people you've been getting for your radio show!
Good comments Silhouette and StockBoy. McCain and his supporters are ideologues, who still believe the same failed trickle-down economic policies that have caused our problems can solve them. To Silhouette's point about corporate taxes, it was sheer pandering to the wealthy corporate funders of political campaigns that led us to give special deals for practices that are destructive to our national interest. Whether a company is selling Americans goods from China, Detroit or the Caymans, they deserve no special tax treatment. In fact, instead incentivizing companies that keep jobs here at home, as Obama has suggested, makes good sense for us. After all, the countries against whom we compete economically are helping their companies in this way already. The idea that we would also help them out-compete us has always been preposterous.
Dave, another very real way of looking at this is that the assets owned by struggling mortgage holders will have to be repossessed. The banks incur substantial costs in the process, forgo mortgage payments until they can sell the properties, and there is no chance currently that they will sell these assets to someone else for the value of their current mortgages. Repossession and resale doesn't make sense for either the current owner or the bank.
As Obama suggested, we should let bankruptcy judges reassess the realistic values of these properties, and offer the current mortgage holder the same kind of deal that the bank will need to offer to a new purchaser. This helps keep families in their homes, and the net effect on banks will not even be a negative, unless people who are not in trouble decide to declare bankruptcy anyway. Considering the many disruptions of personal bankruptcy, I don't see that happening on a large scale. Would you declare bankruptcy to get a reduction of your mortgage? I do agree that the concept of trying to support the inflated value of some properties is foolish and futile.
As far as the mortgage mess… I think banks should renegotiate the terms (instead of bankruptcy judges, but using the same approach GreenDreams suggested) with the people who need it. Then the government can give banks a tax break on the losses they (the banks) incur. The government needs to give banks an incentive to renegotiate these things.
I give McCain credit for trying to come up with a new approach, but his plan is impractical. These people need relief NOW. If McCain's plan were passed today, to set-up a new agency, train the staff and start buying the mortgages then renegotiate. That would take at least a year to have any effect and how many of those people will have lost their homes and how much more damage will have happened to our economy as a result of waiting?
Banks should renegotiate these mortgages because they already know the customers and this will allow the hard-hit financial services industry to keep more people employed (to renegotiate these mortgages) instead of laying off people…
Good point, Dave Schuler. That's true not only for home prices, but for the varying economies (at least until what seems to be a coming nation-wide slump, and after it ends), where you have Dem Dinosaur Destruction Rust Belt areas overburdened to this day with government and you have economic, job, and even population shrinkage (and accelerated aging as the young go elsewhere to find jobs and more or better natural amenities), whereas in the Sun Belt you have areas long burdened with the problems of growth ane excessive crowding and activity (this, prior to the mass retirement and relocation south and west of so many for Baby Boom retirement).
These are regional and state and metro-area problems, and if these places were grown up (and faithful to federalism), they'd take the initiative and even be jealous of maintaining control rather than ceding any to Washington over these issues. But you see the opposite, including California leading states rushing now to Washington for bailouts and handouts, aping self-destructive New York City's behavior decades ago. (Will we ever learn? No, it seems. Or the lesson “learned” from the welfare state and entitlement mentality isn't the lesson we should learn.)
“As Obama suggested, we should let bankruptcy judges reassess the realistic values of these properties”
Extra-constitutional, judicially arrogant, low-life theft if not compensating the lenders, obvious, blatant moral hazard and defect. How can anyone want, or advocate, this?
There _is_ a revision program being offered through HUD (it should be private or state-run, not federal), but at least it is a _voluntary_ program, not incorporating theft by the courts and judges.
The only recourse to a judge should be if debtors file for bankruptcy, and often if this is done, the home should be forefeited or the owner converted to a renter.
Relief? Converting mortgages to fixed-rate* might help if the payments were lowered, but of course the total for the lenders can't arbitrarily be changed, and if the payments are to be lowered, in practice that means much more total interest paid, for the duration would have to be extended to 40-50 years, possibly transferable to future generations, same as Japan during its real-estate bubble. (Inherit the home, inherit the rest of the payments.)
Now,
You are right, Stockster. Not that the banks _should_ renegotiate in the sense that they are _obliged_ to do so; obviously, they are not, and forcing them to do this is tyrannical. But if they voluntarily do so, if they _choose_ to do so, it is their right, and why would they do this? They're trading off the partial loss of principal and interest with a renegotiated loan against larger losses from foreclosure (or bankruptcy of the debtor, default on the loan) and the costs to resell the homes (as well as often, in the real world, to repair the damage and remodel many of these homes).
It remains to be seen how much interest the lenders will express in the HUD program.
* We all know that fixed-rate payments are like defined-benefit pensions or annuities, namely, that they are predictable as well as consistent. Yes, we bemoan the demise of defined benefit pensions (although we have a substitute for this in the form of Social Security) even though they are obsolete in the business world.
“I do agree that the concept of trying to support the inflated value of some properties is foolish and futile.”
Brace yourself, Green Dreams.
For not only has the Economist come out in support of bailouts. (One letter writer this week said the only thing left to do is to change its name to “The Communist.”)
But when you talk about a floor, do you recall the Oil Patch bust several years ago? Donald Hodel wrote a book about it, and wrote about what he saw as a solution to the problems of low oil prices at the time:
************** federal subsidies to support minimum oil prices ******************
************** oil industry subsidies *****************************
Sweet Green Dreams!
“Krugman made a strong case in today's NY Times that the government should increase spending to help pull us out of the economic slump.”
Odds are it was a strong _political_ case. In any event, the orthodox approach to pre-emptive war against deflation (consider it a worse threat than just a slump) is classically Keynesian (I don't like it, but on its face it's logical enough), which not only involves spending increases but also tax reductions. It's a two-pronged kind of stimulative approach, in other words, financed by borrowing. (Tax increases are not stimulative; they are the reverse, as are spending reductions in theory.) Note that all the “stimulative” spending by the Japanese didn't reverse the deflation, any more than spending and other grand programs in the USA did; the New Deal never cured the Great Depression — World War II did. (Note that World War II in the USA featured inflation as well as increased deprivation of the population at home as well as abroad. Of course things were set to jump back to liveliness when the war ended.)
No, it does not follow that to cure our current slump threat we need a nice stout war against Iran.
Dave Schuler — the book I've been rereading lately, by Roger Bootle (the second of his two books, both of which I've owned and read), includes a thorough defense of free trade, and regarding trade and autarky, he holds up North Korea (and in another way, also, Cuba) as an example of a nation following Sil's policy recommendations wholeheartedly.
It's sufficient to say here that related to this (also in Bootle's book but also in many others, too) that one thing triggering the Great Depression was trade wars that were sparked by protectionism here in the USA after the stock crash. Protectionism and trade wars and contraction of trade will only make any world-wide economic slump worse.
And here's another example where McCain failed to act on behalf of his campaign, and reach out to many Obama voters. Wouldn't she look great on new currency?
DLS, the big blue coastal states are the engine that allows your Sunbelt states to use more federal resources than they contribute. I think Republicans are disingenuous in their drive to reduce such federal spending. The blue states would do far better than the red states should they ever succeed.
By the way, I only suggested bankruptcy judges as the ones who could renegotiate principle as well as interest because there is a strong disincentive to declare bankruptcy. If we're going to help out everyone whose home values have declined, even the ones who are perfectly solvent, then I'll be happy to get in line too.
DLS, thanks for your comments. I agree that banks should not be forced to renegotiate the mortgages… they should be given incentives (i.e. tax incentives) to do so. Most banks are having a difficult time, and if they are going to write off losses anyway, then I think it is to everyone's benefit that banks do so in a way which keeps people in their homes. Of course some people probably overextended themselves to begin with and the goal of the banks should NOT be to renegotiate mortgages in a way which would lower the value of the house so far down that everyone can keep their homes. The banks should use common sense. Some people probably stretched the truth on their original applications just so they could get that snazzy house….
BTW, listen to GW Bush pushing the idea that “low income Americans” “with bad credit” “can have as nice a house as anyone.” Bush himself destroys the meme that Dems were the ones pushing minorities and cash-strapped people to over-reach.
http://www.youtube.com/watch?v=eW9viaJatpo
Geez oh pete, how do I get a cool picture appear by my name?
ANYWAY, Nancy Pfotenhauer's recent comments disappoint me. The comments attributed to her about the difference between the “Real Virginia” and it's assumed counterpart “Unreal Virginia” commutes a death sentence upon the Republicans who reside in NOVA. Just because they are no longer in the majority disregards the impact of their votes since they live in NOVA? I believe John McCain could be a very effective president and Virginia could be a swing state that falls in his favor. Why alienate a quarter of it with a flippant remark? There are voters of the Republican Party who are being ticked off by resorting to such geographic divisions to develop a “who's with us and against us” mentality. Will this further strengthen the GOP resolve or scare independent voters into the arms of the Democrats? I'm weighing for the latter the way the media. good or bad, is portraying this.
-Barring a major f-up, voting Obama, but also thinks McCain could be a darn good President,
Apparently, Jesus_Hitler