Why It’s Worse Than You Think
Yale economist Ray Fair has developed a formula in which particular economic factors can foreshadow election outcomes. Crude summary: when there's lots of good news on growth and inflation in a presidential term, it favors the incumbent party. With growth low and inflation high, John McCain comes out with 44 percent in November. (Before Obama-ites go making reservations for the Inaugural, consider that the formula misfired in 1992.)
All things being equal, the limping economy should favor Obama. While McCain has taken pains to distance himself from the Bush administration, he has heartily embraced the most significant component of Bush's economic legacy: the tax cuts. But in presidential elections, all things are never equal. Obama and McCain have staked out different economic turf. For Obama, it's middle-class tax cuts, and creating new jobs in environmental and tech fields; for McCain it is repealing the Alternative Minimum Tax, expanding free trade (a winner in an age of rising exports) and a summer gas holiday. But if the economy worsens significantly, if oil spikes to $150 per barrel and unemployment becomes more widespread, the campaign will likely take on a different tenor. The typical dialogues about taxes and spending, health care and pensions will assume a greater prominence. But a crisis atmosphere would require both candidates to come up with big-picture narratives about America's role in the world economy, and how the nation can reassume financial leadership—something neither has yet done comprehensively.
It's not all doom and gloom. Businesses that thrive on a weak dollar are holding up nicely. "In fact many sectors are benefiting from strong growth overseas, including high-tech, capital goods, chemical and other raw materials, aircraft," says Nariman Behravesh, chief economist at Global Insight. Bob Toney, president of Ft. Lauderdale, Fla.-based National Liquidators, which auctions repossessed boats and yachts, has doubled his staff to 78 employees to pick up around 120 boats a month. "Two years ago, we had 200 cases in our inventory and now we have 610," he says.
But it's the mainstream indicators—not countercyclical businesses—that will point to a recovery. For signs that tomorrow really is a day away, look to the thing that got us into this mess: housing. "Housing doesn't have to return to the bubble era. It's just that the rate of decline has to stop," says Lakshman Achuthan, managing director at the Economic Cycle Research Institute. Reductions in the level of housing inventories for sale will be a hopeful sign. Other tea leaves are the weekly reports on jobless claims, retail chain stores, and mortgage application activity. "This will give you an early read on potential trend shifts in consumption," says Ian Morris, chief U.S. economist at HSBC.
Just as sharp spikes in the price of oil and commodities have dented confidence, precipitous falls in the commodity markets could bolster consumer confidence. But that doesn't seem likely any time soon: on Friday, the price of a barrel of oil rose $10.75 to a record $138.54.
With Catharine Skipp in Florida, Jamie Reno in San Diego, Karen Springen in Chicago, Temma Ehrenfeld in New York and Daniel Stone in Washington
© 2008
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Member Comments
Posted By: LLiving10 @ 10/08/2008 5:19:25 PM
Comment: why so many jobs listed? 3.7 million right now.. www.CareerSitesCompany.com
Posted By: cani77 @ 10/03/2008 10:10:25 PM
Comment: The Bush Depression
In a few weeks we will make a choice that will decide our future.
I follow an economist named Bob Proctor. He has called the top and bottom of every market crash since the 70s correctly.
Also, he perfectly predicted the current real estate market meltdown and the picture he paints about what will happen in the next couple years
is terrifying.He thinks it will be worse then the great depression.
The banks in the U.S. are going under one after the other. Countrywide the largest morgage bank in the world,Bear Stearns, Lehman Brothers and Merrill Lynch which are 3 out of the top 5 wall street firms. Also, Fanny and Freddy Mae which hold 50 percent of the home loans in the United States.
The government took them over because they are essentially bankrupt.If they didn't the entire financially system would virtually shut down, the stock market would crash and we would suffer beyond what any of us have seen before.
McCain just like Bush " doesn't understand the economy".
That not just my opinion its his own words. Not only does he not understand how to fix it but he does not understand exactly what is broken.
It is no surprise that he doesn't. The people that make up these securities use complex mathematical models very few people understand.
Bush and McCain both can take the credit for this mess since they helped deregulate the laws that were protecting us.
Bush's economic advisor Phil Graham wrote the deregulation bill that allowed banks to take huge risks with all of our future.
Now, Phil Graham is the head of McCain's economic policy.He is also McCain's choice for the next secretary of the treasury.
No one in this country can afford for that to happen. The last time Bush met with his economic advisors was in March. He either didn't care or didn't realize that anything was wrong. Phil Graham had the guts to say that we are in a mental recession after he helped create the worst economy meltdown in our lifetime.
It will take the best and brightest minds in the world to get us out of this nightmare. As bad as Bush has done, McCain would be
even more destructive because things are in much worse shape. The next president will not inherit a surplus like Bush did but a tanking economy and a 11,600,000,000,000 (trillion) dollars deficit.Bush created a national debt larger then the first 42 presidents combined
If you do what you have always done then you will get what you have always got.
When it comes to policy Bush and McCain are the same 90 percent of the time.
So why isnt obama 25 points ahead
The chairman of McCains campaign recently said that people don't vote on issues they vote on a personality composite. Which means he is trying to sell you personality instead of results.
Let's teach him we are smarter than that .
31 states are voting now, dont wait
Elect Obama Biden 2008
Check out this video of sarah palins interview before you vote
http://www.youtube.com/watch?v=r36Xc0GG4i
Posted By: Nins @ 10/03/2008 4:15:16 PM
Comment:
Let's not forget that Warren Buffet, who is doing so much to bolster America's economy right now, is planning to vote for Barack Obama. Mr. Buffet says that Obama's economic plan is good for all Americans and has also said that John McCain's economic policies would further bankrupt our country.
If you vote for McCain, you are voting for more of the same pandering to corporations that ship jobs overseas, wreak havoc on the economy.
Vote for a strong economy that is regulated by fair principals. Vote for Obama.