I shall add, as I have said previously, that anyone who thought the election would be handed to Obama on a silver platter was living in a dream world.
More muddled maunderings below . . .
I am also amused/fascinated/some-other-word-that-d
For myself, I know nobody but a handful of us deeply committed policy wonks vote on economic issues (or even care about issues or even believe that who is president actually impacts economic issues). Nevertheless, my nightmares over a McCain/Palin win are purely selfish and personal. I have never lived in a country undergoing a true economic collapse -- but from what I have heard it is really, really unpleasant. And while I look forward to hyper-inflation eliminating my mortgage debt (it being fixed rate), I do not look forward to living in a world that increasingly seems likely to resemble that of Snow Crash.
Either set of candidates would find it difficult to manage the mess they will inherit. McCain/Palin, however, face two additional hurdles: 1) an ideological unwillingness to take needed regulatory steps to stabilize the economy, restore information necessary for efficient economic transactions to national markets, or reinvigorate antitrust to create a genuinely competitive market, and 2) A party loyalty conflict that will make it impossible for them to reconstruct a functioning federal bureaucracy (e.g., fix the Goodlingization of the Justice Department and other Federal agencies). To the contrary, with the exception of obvious areas of lending and energy, I expect a continuation of the this administration's policies of elimination of reporting requirements, accountability mechanisms, and the publication of statistical data. Indeed, I have nightmares about suspending as "cost saving measures" existing reporting and tracking requirements of major economic and safety indicators.
We have managed to hover where we are for the last 2-3 years because it takes an awfully long time to screw up an economy as large and robust as the United States, and still longer for people who matter to understand how screwed up it is, and even longer for them to be willing to look directly at those consequences and take action accordingly. Most sovereign funds saw our financial troubles as a buying opportunity, and expect that our economy will stabilize. I am not nearly so optimistic. Our economy is still essentially structured as a Ponsi scheme with consumers, lending institutions and the federal government trading debt around. I see no new area where we could generate disruptive change and rapid economic growth. Nor are venture capitalists willing to invest. The amount of venture capital and that has fled the market in the last two years is staggering. In telecom, what two years ago were considered surefire deals are falling apart. Equity funds are selling off properties at a song to incumbents as an opportunity to write off debt (VZ-Alltel being the largest, but not atypical).
The McCAin/Palin approach is to cut the corporate tax rate, eliminate the capital gains tax, and provide tax incentives for investment. But the problem is, as the GAO recently reported, most corporations are not actually paying taxes as a result of how the tax code operates. That means that tax incentives are profoundly unlikely to impact the behavior of corporations or financial markets.
Reagan's approach was to push for a tight monetary policy that created massive unemployment (peaking at 10%) but got inflation under control. It cost the Rs the Senate until 1994, but eliminated stagflation. It also set the course of federal policy on its current Chicago School trajectory and nearly led to the meltdown of financial markets after deregulation in the early 1990s. Happily for everyone, the emergence out of (relatively) nowhere of the internet and the "new economy" bounced things back. The Clinton Administration managed to not screw things up by maintaining at least a reasonable commitment to preserving antitrust and maintaining the oversight and information flow necessary to create a competitive and efficient marketplace. The actual increase in the amount of economic activity and productivity gains, however, made possible the other transformation we are experiencing -- the over-reliance on debt. Not just consumer debt. I include the over-reliance on debt instruments for financial complicated transactions and derivatives in commercial sector. We also benefited from the overall rise in global trade. Just as our position as the the only industrial economy standing gave us an enormous boost to economic power in the period immediately after WWII, our position in the 1990s as the most advanced digital economy gave us a significant "first mover advantage" in global markets.
That's all gone now. As the latest assesment by the U.S. intelligence community indicates, we are in a period of declining U.S. dominance unless somebody does something quick.
But the Republican party is unwilling to make such an admission. It would be "defeatist" and would show a lack of love for America to suggest that we have real issues. Worse, any serious assessment would have to acknowledge that the Republican Party has been driving this bus the entire time we've gone down hill, and that corrective action would require major reversals of policy. I see nothing to suggest that McCain/Palin would be willing to make these admissions even after the election. To the contrary, the fact that Palin will undoubtedly bring with her the Bush/Chenny operatives within the party, we can be certain that a McCain/Palin Administration would be utterly unwilling to do the complete repudiation of Bush/Chenny policy or the complete de-Goodlingization of the bureaucracy. To the contrary, given reports that Palin managed Alaska in much the same style as the Bush Administration managed the federal bureaucracy, I expect the return to the 19th Century spoils system to continue unabated.
And none of this even touches on the damage done to our military, and how that impacts our economic policy and security. Russia's frolic in Georgia is only the beginning of upcoming tests and responses to see whether we are still up to maintaining the Pax Americana that has ensured global stability since WWII. Since it is impossible for McCain/Palin to say anything bad about our current military or the Bush/Chenny handling of it, it is impossible to address the mass exodus of our middle officer corp or our senior intelligence analysts or the overall decline in our recruiting standards. Nor will it be possible to hold the parasites and war profiteers that have made logistic conduct of the war such an expensive nightmare accountable.
So I am rather hoping that my estimation of the Obama campaign is correct, and that they have an understanding on how to win the election. Obama would face the same problems, of course. But he would not suffer from the same ideological and political handicaps in addressing them. And there is always the possibility (likelihood even) that I am missing something vital.
If not, and folks once again vote based on whether the candidate is someone like themselves with whom they wish to have a beer, it is definitely time to start hording gold bullion. After the sovereign funds dump their dollar reserves and Europeans start denominating crude oil in other currencies, you'll need gold bullion to buy beer.