Political Rumble: Economic Edition
by HKS Democratic Caucus & HKS Republican Caucus on October 1, 2008 in Political Rumble
From now until the election, we at the Citizen will be bringing you a series of point-counterpoints on the issues of the day, as interpreted by your politically-minded classmates. We’ve asked the members of the HKS Democratic and Republican caucuses to put into words exactly what it is about their candidates and parties that make them the right choice on November 4. First up, the two face off over the economic crisis engulfing the nation. Let’s get ready to ruuuummmmmble!
From the Right…
Melissa Langsam Braunstein, MPP ‘09
Much like those described by Isaac Newton, policy-making in Washington has to adhere to laws of motion, including its own law of inertia: Congress tends towards inaction. There is no better example of this hypothesis than the last few years that have led to the recent housing crisis, which stems from Congress’s penchant for going AWOL - in this case because of obstruction by congressional Democrats.
Everyone agrees that the current economic turmoil has its roots in the housing crisis, but the housing finance system has been off-kilter for some time. Fannie Mae and Freddie Mac ballooned to enormous empires based on cheap borrowing rates, the presumption of U.S. government backing - a presumption that turned out to be true, American taxpayers - and countless subprime loans. As Dr. Kevin Hassett, a senior fellow with the American Enterprise Institute and a McCain adviser, wrote in his Bloomberg column, “Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments as of last June.”
High-risk indeed. Subprime loans exist beyond the realm of the prime lending market specifically because those borrowers are deemed risky by banks. The trouble was, Americans began taking out loans beyond what they could reasonably afford because they assumed house values would continue to rise. Lenders offered creative mortgages without requiring much proof they would be repaid, and then packaged and resold these loans to Wall Street types. Wall Streeters were happy to buy these mortgages as investments because many of them seemingly were operating under the same mistaken assumptions. This was playing with fire.
President Bush has called for reform of Fannie Mae and Freddie Mac since his first year in Washington. It’s a matter of public record that as early as 2002, the president called for transparency and corporate responsibility guidelines that mimicked the private sector. Congress did nothing. Why weren’t the government-sponsored enterprises (GSEs) already transparent? Why was Congress asleep at the switch?
By 2005, Fannie and Freddie’s accounting problems had become public knowledge, and the Senate Banking Committee worked to pass a reform bill. One of the sponsors of this effort to clean up the housing system was the senior senator from Arizona, that champion of bipartisanship and alumnus of the Gang of 14, John S. McCain.
Partisanship got in the way here, though. Democrats opposed it on a party-line vote in the committee. Republicans couldn’t even get a floor vote.
This is Congressional absurdity in a nutshell. The perfect moment to act presented itself and members of Congress couldn’t be bothered to reform companies in turmoil. Instead, Congressional Dems, including Senators Obama, Clinton, Dodd and more, continued to accept campaign contributions from employees of Fannie and Freddie. In any event, the inaction of 2005 and 2006 paved the way for the meltdown in 2008.
At this point, it is perfectly obvious that the GSEs should have been reformed long ago. But Democrats got their way, and now it is too late: the GSEs as we’ve known them are no more. Ditto for Wall Street. So, here ends Congressional inertia? Unfortunately for American taxpayers, the only thing worse may be its likely replacement - Congressional overreaction.
Harry Reid, take it away.
From the Left…
Adam Cooper, MPA ‘09; Dori Glanz MPP ‘09
Are you better off today than you were eight years ago?
OK, OK, how about eight weeks ago?
Eight days ago? No? Hm.
To paraphrase a great Democrat, how many times do the American people have to be hit over the head before they realize who’s hitting them? The current economic crisis is the afterbirth of almost a decade of ill-conceived Republican economic policies. And who’s the midwife? John McCain.
John McCain: the man who says that the “fundamentals of our economy are strong” the day after one of our largest investment banks collapses. But then if we were headed back to our seventh house in our thirteenth car after the press conference ends, we might feel the same way. The reality is that John McCain is blind to the economic problems our country faces. This is a man who has admitted publicly that, “the issue of economics is not something I’ve understood as well as I should.” This is a man who disagreed with himself during the course of one day over the role government intervention should play in helping us navigate this crisis.
Meanwhile, Barack Obama has been lobbying for years to increase regulation on Wall Street - regulation that would protect taxpayers, consumers, and investors alike. And he has advocated for the interests of ordinary Americans as we act to address this crisis: caps on irresponsible corporate pay, help for homeowners, serious oversight on the expenditure of $700 billion in taxpayer dollars - and quick.
On the question of leadership, this crisis draws a strong distinction for voters. Obama has been cautious in his approach. Beating McCain in the race to criticize Treasury Secretary Henry M. Paulson’s package, he reassured us, “this is not a time for fear; it is not a time for panic. It’s a time for resolve and leadership.” McCain, on the other hand, reacted rashly by attempting to cancel the first presidential debate. This is the 3 a.m. phone call, and John McCain reacts by curling up in a fetal position. At least his leadership style - erratic, nervous, impulsive - is consistent. And now he asks us to allow him to solve our country’s economic troubles?
In the words of Barack Obama, it’s not that John McCain doesn’t care; it’s that he just doesn’t get it. He doesn’t get the problems that average Americans face during their daily grind. He doesn’t get that the answer to almost a decade of failed policies is not their indefinite continuation. He doesn’t get that we can’t afford a leader whose solution to our economic problems is to “read Alan Greenspan’s book.”
The economic crisis may be news to John McCain, but it’s not to millions of Americans around this country. That’s why Barack Obama has proposed a $1,000 tax break for middle class Americans to help us get through these trying times. It’s why he understands the importance of job creation and economic stimulus to struggling communities. It’s why he suggests tax cuts for the broad swath of Americans, not the wealthiest of the wealthy.
Obama would cut taxes for 95 percent of working families; 100 million Americans would get no tax cut at all from John McCain. Most important, it’s why he’s working to change the mindset on Wall Street that got us into this mess in the first place. John McCain’s plan? Less regulation. Or more. Or… wait, what was the question again?
It increasingly seems like, to McCain, the question was, “Why fix it if it ain’t broken?”
Memo to McCain: it’s broken.
Comments
One Response to “Political Rumble: Economic Edition”
Got something to say?
Melissa presents facts, and a detailed history of the problem.
In response, Adam & Dori just serve up snarky rhetoric.
I mean, Obama has been “lobbying” for regulation?
Is he a senator or a lobbyist? And I thought he hated lobbyists?
Time to check those talking points again, guys.
Also, Obama has to raise other taxes to fund his tax cut.
Unless you believe in “fuzzy math,” of course.
Two against one, and Melissa wins easily.