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Friday, March 28, 2008

Paul Krugman: Loans and Leadership

What do the presidential candidate's responses to the mortgage crisis tell us about the kind of president each is likely to be?:

Loans and Leadership, by Paul Krugman, Commentary, NY Times:

When George W. Bush first ran for the White House, political reporters assured us that he came across as a reasonable, moderate guy.

Yet those of us who looked at his policy proposals — big tax cuts for the rich and Social Security privatization — had a very different impression. And we were right.

The moral is that it’s important to take a hard look at what candidates say about policy. ...[P]olicy proposals offer a window into candidates’ political souls... Which brings me to the latest big debate: how should we respond to the mortgage crisis?...

Mr. McCain is often referred to as a “maverick” and a “moderate”... But his speech on the economy was that of an orthodox, hard-line right-winger. It... was more about what Mr. McCain wouldn’t do than about what he would. His main action proposal, as far as I can tell, was a call for a national summit of accountants...

Mr. McCain more or less came out against aid for troubled homeowners: government assistance “should be based solely on preventing systemic risk,” which means that big investment banks qualify but ordinary citizens don’t.

But I was even more struck by Mr. McCain’s declaration that “our financial market approach should include ... removing regulatory, accounting and tax impediments to raising capital.” ... Mr. McCain is selling the same old snake oil, claiming that deregulation and tax cuts cure all ills.

Hillary Clinton’s speech could not have been more different.

True, Mrs. Clinton ...[has] echoes of the excessively comfortable relationship her husband’s administration developed with the investment industry. But the substance of her policy proposals..., like that of her health care plan, suggests a strong progressive sensibility.

Maybe the most notable contrast between Mr. McCain and Mrs. Clinton involves ... restructuring mortgages. Mr. McCain called for voluntary action on the part of lenders — that is, he proposed doing nothing. Mrs. Clinton wants a modern version of the Home Owners’ Loan Corporation, the New Deal institution that acquired ... mortgages..., then reduced payments to a level ... homeowners could afford.

Finally, Barack Obama’s speech ... followed the cautious pattern of his earlier statements on economic issues.

I was pleased that Mr. Obama came out strongly for broader financial regulation... But his proposals for aid..., though significant, are less sweeping than Mrs. Clinton’s: he wants to nudge private lenders into restructuring mortgages rather than having the government simply step in and get the job done.

Mr. Obama also continues to make permanent tax cuts ... a centerpiece of his economic plan. It’s not clear how he would pay both for these tax cuts and for initiatives like health care reform, so his tax-cut promises raise questions about how determined he really is to pursue a strongly progressive agenda.

All in all, the candidates’ positions on the mortgage crisis tell the same tale as their positions on health care: a tale that is seriously at odds with the way they’re often portrayed.

Mr. McCain, we’re told, is a straight-talking maverick. But on domestic policy, he offers neither straight talk nor originality; instead, he panders shamelessly to right-wing ideologues.

Mrs. Clinton, we’re assured by sources right and left, tortures puppies and eats babies. But her policy proposals continue to be surprisingly bold and progressive.

Finally, Mr. Obama is widely portrayed, not least by himself, as a transformational figure who will usher in a new era. But his actual policy proposals, though liberal, tend to be cautious and relatively orthodox.

Do these policy comparisons really tell us what each candidate would be like as president? Not necessarily — but they’re the best guide we have.

    Posted by on Friday, March 28, 2008 at 01:11 AM in Economics, Housing, Policy, Politics | Permalink  TrackBack (0)  Comments (119)

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