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.