Dream No Small Dreams

The presumptive candidates of the Democratic and Republican Parties, Sen. Barack Obama and Sen. John McCain, have both explored their proposed plans for the U. S. economy in campaign speeches and policy papers and, honestly, I’ve been amazed at how mild and incremental both are. Given the rhetoric that’s been flying around over the last six months (not to mention the last seven years), I might have expected a bit more.

Let’s play a game. Harnessing the combined intellectual power of the OTB commentariat, let’s think about the candidates’ economic plans. Let’s pretend that it’s 2012 and all of the economic proposals of whichever candidate has been elected to the presidency have been enacted into law. What changes have they effected in the U. S. economy? You can pick either of the candidates, analyze their proposals either negatively or positively, or contrast the two candidates’ views. You can pick a single economic plank and discuss its implications if enacted into law. Please limit the discussion to the candidates and the campaigns rather than some of their more extreme supporters or fellow partisans. Also, please give evidence for your views.

I’ve already examined the economic proposals of both candidates at some length over at my own blog. If I were to venture my own opinion of what would happen if either candidate were to get his way, my guess is that the best way to describe the effects would be “Not much”. In particular neither candidate is proposing anything that will alter the course that the economy has been on for the last 30 years or so, which has resulted in enormous growth and much of the increased income going to the highest income-earning Americans.

Neither candidate is proposing exciting, bold new initiatives. Neither candidate is proposing a complete transformation in the U. S. economy. Both are proposing wonkish, fine-tuning approaches, within the Beltway approaches. Judging by how minor their proposals are I think the most appropriate conclusion is that both candidates are pretty happy with the way things are.

Just for the record I think that trying to fine-tune the U. S. economy from the Oval Office is a fool’s errand.

So, have at it. I look forward to your contributions.

I’d also like to encourage my fellow OTB contributors to update this post with their own views. Tell me how Sen. Obama is proposing revolutionary change. Explain how Sen. McCain’s proposals will transform the economy.

FILED UNDER: Campaign 2008, Economics and Business, , ,
Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.

Comments

  1. Bithead says:

    Hmmm.

    Several comments, though none to the level you’re asking for Dave. I’m afraid even my omnipotence doesn’t extend quite so far as your request.

    I suspect and suppose that the proposals by the candidates nigh on are meaningless, in the end, in terms of what they say being actually implemented, particularly in the areas of economics. As you suggest, the ability of anyone in the oval office to directly manipulate by edict, is limited at its strongest…(I look at this as one might an administration’s proposed budget. Nice, but in the end, meaningless) I wonder if in the case of these two, perhaps in this case it’s better so.

    That said, however, and as Reagan showed us, the attitudes shown by the White House, tend to influence our economy far more than does the White House’s ability to influence it with law and policy. Similarly, Jimmy Carter had an astonishingly negative effect by the same method. On the basis of this, it seems reasonable to assume that the attitudes about economics of each candidate will be more an issue than the actual policy proposals, in terms of determining the direction government will take during their term(s)

    It seems to me that the best way to read such matters is their response to actual stimuli, and of those, none are more revealing, I think, than our situation with oil. One candidate apparently understands and trusts market forces enough to suggest drilling more domestic oil is the biggest change we can make right now in terms of removing our dependency on foreign oil. Whereas the other thinks a better idea is to increase dramatically the price Joe Average pays for everything by putting ‘windfall profits taxes’ on oil companies, directing those funds not to oil investors, and thus to oil exploration, which would add to the usable stockpile of oil, but to government instead, and by maintaining a stranglehold on domestic oil reserves under the guise of ‘the environment’.

    Since the latter is the path we’ve been on for the last 30 years, and that path has seen prices going up, supply shrinking (And government growing) the end of the path being suggested by the latter candidate is totally predictable; Disaster, whereas the path being suggested by the former, can only lead in the opposite direction. (though how far in that direction, I’ll happily entertain arguments on)

    If the solutions being offered to this problem by each candidate are emblematic of how they will deal with other situations as they come up, (And I think they are that) then I suggest the choice before us is fairly clear.

    It should perhaps be said that while I don’t by any means consider McCain to be Reagan, I do think the similarities between Obama and Jimmy Carter, and their respective attitudes toward the role of government are too dire to ignore.

  2. yetanotherjohn says:

    One of the caveats that I hear from Obama supporters is “he doesn’t really mean that”. A good example was NAFTA which Obama now says in the passive voice had heated rhetoric during the primary. But the willful ignoring of what is proposed by a political leader doesn’t have the best of track records (e.g. see lebensraum).

    So in 2012, I see a tanking economy as we deal with over $1.4 trillion in new spending and the taxes to pay for it.

    We would also be seeing increased taxes on the middle class or an unprecedented wealth flight as those who can afford most to leave, leave.

    If Obama wanted to raise taxes on only the top 1% (earning over $365,000) to fund his plans, those citizens’ tax bills would have to rise by over $40,000 annually, an increase of 57%. Given the impossibility of that scenario, even under complete Democratic control of government, the tax hikes would have to trickle down to the American middle class.

    “So if Congress decides to widen the pool of taxpayers footing the bill, it would have to raise taxes on the top 5% by 38%; or the top 10% by 32%; or the top 25% by 26%; or the top 50% of taxpayers by 23%. The top 50% of American taxpayers, who already pay 96.9% of all federal income taxes, are those who earn $31,000 (AGI) or more.

  3. Steve Plunk says:

    The problem I see is both the White House and Congress being under control of the Democrats.

    Dave S. is right that the President can’t fine tune the economy but with the Congress working with a certain President there can be powerful legislation passed. Environmental regulations will increase restrictions, taxes will go up, labor unions will gain power, government programs will expand, and business will be vilified.

    While plan specifics show not a lot happening I think Obama and a Democratic Congress working together will soon experience a rush of power leading to more radical policies.

    If McCain is elected President then I expect the outcome predicted by Dave S., not much change.

  4. Rick DeMent says:

    One candidate apparently understands and trusts market forces enough to suggest drilling more domestic oil is the biggest change we can make right now in terms of removing our dependency on foreign oil.

    Sadly, this statement is so mind bogglingly wrong that it renders any of the further analysis from this commenter useless due to the complete lack of understanding of the world energy markets in general and oil in particular work. What is even sadder is how many people think it’s correct.

    Given the fact that OPEC oil ministers can twirl back the taps on a barrel per barrel basis far easier then they can open them utterly negates any effort we could ever muster to try and bring the prices down through expanded drilling. Combine this with the fact that demand is going in only one direction and it is impossible for any semi sentient being to come to any other conclusion other then we simply cannot drill our way out of the problem. The idea that we can extract enough oil to put on the market to wrestle pricing power from them is, in a word, delusional. Oil is not a free market; it is controlled by a cartel, so if you want to understand energy markets the first thing you have to get is that there are no free market solutions when it comes to oil.

    If you really were serious about bringing down the price of oil anytime soon, there is only one way to do it and that is to strengthen the dollar though debt reduction (read higher interest rates and higher taxes on the people who actually have money and getting out of useless wars). However, that would take the kind of political vision that neither party can deliver due to the inherent flaws in our political system namely that the people who stand to gain form not making the hard choices fund campaigns.

  5. Michael says:

    Dave S. is right that the President can’t fine tune the economy but with the Congress working with a certain President there can be powerful legislation passed. Environmental regulations will increase restrictions, taxes will go up, labor unions will gain power, government programs will expand, and business will be vilified.

    I think that’s more likely to happen with a McCain Presidency than an Obama one. With Obama the Republicans in congress will be able to either fight or water down most of the partisan proposals. Restrictions on trade, new EPA regulations or car efficiency standards will either not be passed, or will set the bar so low that no real change would be necessary. However, McCain is already proposing similar measures, which his party will largely support as-is, and the Democrats will try to raise the bar for, either way what gets passed will have more of an impact in this situation. For similar reasons I would expect a McCain presidency to increase the size and power of the federal government more than an Obama presidency.

    I can see McCain lowering taxes for the wealthy, upper-middle class and at least somewhat for middle class, while raising slightly for lower-middle and lower class. Obama would likely be the exact opposite. Either way, I don’t think the change would be significant enough to make a difference.

    Probably the biggest difference will be in foreign policy, where I’d expect Obama to take more of a peer-level approach to allies and non-allies alike, while McCain will continue our current parental approach to both. Ultimately I think Obama’s approach will get more done by accepting only 80% of what we want, while McCain is likely to take an all or nothing stance, effectively getting nothing all the time.

  6. Bithead says:

    Given the fact that OPEC oil ministers can twirl back the taps on a barrel per barrel basis far easier then they can open them utterly negates any effort we could ever muster to try and bring the prices down through expanded drilling.

    Incorrect on two counts.

    1: Historically, the reaction of OPEC to new, non-OPEC fields coming online is to increase their output to try and stop development of such competiton… hoping to make such new fields unprofitable.
    2: If they have that much control doesn’t it make sense to develop our own oil sources?

    If you really were serious about bringing down the price of oil anytime soon, there is only one way to do it and that is to strengthen the dollar though debt reduction

    Interestingly, that was another effect of Prudhoe Bay that most anti-oil types chose not to remember, or discuss. It tended to reduce trade imbalances. Does anyone thnk that raising the mount of oil we output to the world makrt is not going to affect the value of the dollar?

    The answer remains: Drill, refine, repeat.

  7. Michael says:

    1: Historically, the reaction of OPEC to new, non-OPEC fields coming online is to increase their output to try and stop development of such competiton… hoping to make such new fields unprofitable.

    It’s not enough to know that they did this, you have to know why they did this, and if that same situation exists today. If the scenarios are different, you shouldn’t expect the same reactions.

    2: If they have that much control doesn’t it make sense to develop our own oil sources?

    Only if you plan on socializing our own sources. If not, then they’re not really “our” sources, their sources on the global market, and it wouldn’t matter* if they’re on US soil or Venezuelan soil, as long as the same increase it hitting the market.

    (*) It wouldn’t matter in terms of oil prices, though it would cause a decrease in our trade deficit, which would be good for our economy.

  8. Michael says:

    The answer remains: Drill, refine, repeat.

    That treats the symptom, but not the disease. The problem isn’t that we aren’t pumping enough oil, the problem is that there isn’t enough oil. As Rick said, we can’t drill our way out of this problem.

  9. Bithead says:

    I don’t accept that answer for lack of proof.

  10. Michael says:

    I don’t accept that answer for lack of proof.

    Which, the fact that there isn’t enough oil?

  11. PJens says:

    I think that if we have a President Obama, it will mean much higher taxes. Higher taxes that people and companies will go out of their way to avoid paying. I also believe that a Pres. Obama will try and reduce government spending by reducing the military budget, especially missile defense.

    I think that if we have a President McCain, he will be unable to get any of his initiatives passed through Congress. I do think that a Pres. McCain will sign almost every bill Congress sends him in false hope of getting some of his ideas looked at.

    The next President I believe is going to drastically increase the size of the federal government.

  12. Bithead says:

    Which, the fact that there isn’t enough oil?

    Correct. Particularly, since we’re not allowed to look for it, even.

  13. Michael says:

    Correct. Particularly, since we’re not allowed to look for it, even.

    It’s a logical proof. There is a limited quantity of oil in the earth. We have an unlimited ability to consume it. Therefore, there is not enough oil.

  14. Ed says:

    Obama equals Carter. Carter completely tanked the economy and Obama will as well. He will drastically increase taxes on business thereby slowing capital investment and seed funds and on the average American thereby slowing spending for everyday goods and services and slowing the growth engine. If Mac does nothing but keep the status quo we will be better off.

  15. Steve Plunk says:

    We’re veering off topic here but to answer Rick DeMent’s statement that there can be no free market with a cartel I would counter that cartels can be countered with excess supply of the commodity being controlled. OPEC didn’t arise because they had all the oil but because they had all the cheap oil. Now that oil prices have skyrocketed there is plenty of other oil out there that can compete. It can only compete as long as prices are high.

    OPEC can reduce supply but with oil closing over $136 a barrel the incentives to cut back are not there. At $50 it will still be hard not to get as much cash as possible. They all cheat on quotas anyway.

    So as mind boggling as it may seem to Mr. DeMent there are very reasonable and logical arguments contrary to his. This semi sentient human being sees things differently and without discounting others as less intelligent. If a person has to insult the opposition while making a point then I usually think less of the arguments merits.

    Michael should recall that each and every year there are more oil reserves proven. It is more costly to recover but it is there. As oil shale and coal to liquid fuel technologies improve we will see OPEC diminish in power. What we need now is a gap filling program of drilling our own oil to add to the world supply. More importantly to add to the world supply not subject to rebel bombings, embargo, dictators with unreasonable demands, and religious extremists looking to end the world. Pumping our own oil takes off the premium those factors add.

  16. Michael says:

    Michael should recall that each and every year there are more oil reserves proven. It is more costly to recover but it is there.

    It doesn’t matter how much is there, because any finite amount will necessarily be less than our need to consume, because new oil is not being created.

  17. Bithead says:

    Correct, Steve.

  18. Aaron says:

    “It’s a logical proof. There is a limited quantity of oil in the earth. We have an unlimited ability to consume it. Therefore, there is not enough oil.”

    Sorry, but we do not have an “unlimited ability to consume it.” There are physical limits to our consumption – even if everyone in the world had a car, they can’t drive it for unlimited miles.

    There is also the issue of innovation to reduce use, to come up with substitutes, etc. If we have nuclear power making electricity which charges up our battery in our car, then we may end up with lots of extra oil.

  19. Bithead says:

    Aaron;

    Correct. Seems to me that there is an awful lot of questionable logic in Micheal’s argument. For one thing, the misbegotten idea that no innovation can come without governmental involvement. Which of course flies in the face of our own history… where the greatest innovations occurred all without any governmental involvement at all.

  20. Michael says:

    Sorry, but we do not have an “unlimited ability to consume it.” There are physical limits to our consumption – even if everyone in the world had a car, they can’t drive it for unlimited miles.

    Sure we could, with good maintenance and an unlimited amount of time.

    It’s simple math: T = O/C

    Where O is the total amount of oil that exists on earth (in barrels, for convenience). C is the average consumption rate (in barrels/year), and T is the amount of time that oil will last (in years). For any amount O 0, T will be finite.

    Now I suppose you could argue that with a sufficiently small rate C, then T would be greater than the estimated time until the heat-death of the universe, but at that point we wouldn’t really be consuming any oil at all.

    There is also the issue of innovation to reduce use, to come up with substitutes, etc. If we have nuclear power making electricity which charges up our battery in our car, then we may end up with lots of extra oil.

    Great, now you’ve reduced it to T = O/C. Guess what? As long as C > 0, it still runs out.

  21. Michael says:

    Seems to me that there is an awful lot of questionable logic in Micheal’s argument. For one thing, the misbegotten idea that no innovation can come without governmental involvement.

    Um, when exactly did I argue that? It doesn’t matter where the involvement comes from, personally I don’t care where the involvement comes from, as long as it comes. What I am against is the government making it less desirable from anybody to get involved.

  22. Michael says:

    Dang, my previous post screwed up, WordPress doesn’t like math I think.

    For any amount O 0, T will be finite.

    Should read:

    For any amount O < infinity, and C > 0, T will be finite.

  23. Bithead says:

    Great, now you’ve reduced it to T = O/C. Guess what? As long as C > 0, it still runs out

    .

    Hundreds of years down the road, possibly.
    Not tommorow, or the next day.

    Um, when exactly did I argue that? It doesn’t matter where the involvement comes from, personally I don’t care where the involvement comes from, as long as it comes. What I am against is the government making it less desirable from anybody to get involved.

    So, let me understand this; You’re now against higher taxes on oil trying to get people off it?

  24. Michael says:

    Hundreds of years down the road, possibly.
    Not tommorow, or the next day.

    So, what, that means we shouldn’t do anything about it?

    So, let me understand this; You’re now against higher taxes on oil trying to get people off it?

    How did you get that from my comment? If anything it implies that I’m _for_ higher taxes to make oil less favorable over it’s alternatives.

  25. Bithead says:

    Uh huh. And that doesn’t to your mind constitute governmental involvement in trying to artificially spur ‘innovation’?

  26. Michael says:

    Uh huh. And that doesn’t to your mind constitute governmental involvement in trying to artificially spur ‘innovation’?

    I never said I didn’t want government involvement, I said I didn’t care if it came from the government or someone else.

  27. Bithead says:

    I said I didn’t care if it came from the government or someone else.

    I do.
    Our own history tells the tale well; Government involvement is about as good a gurantee as anything you could think of to stifle innovation.

  28. Michael says:

    Government involvement is about as good a gurantee as anything you could think of to stifle innovation.

    DarpaNet worked out pretty well.

  29. Bithead says:

    Well, first of all, not as such.
    And it didn’t get going until private investment got going.