Obama and the Economy

By Justin Fox

When Barack Obama says a John McCain Administration would amount to a third term of George W. Bush, he's not just blowing smoke, especially when it comes to economic policy. Yes, McCain is a very different kind of man, with a different history, who will face a set of challenges and opportunities that are different from those confronting Bush. But look through the Republican candidate's campaign pledges on the economy, and you'll see that they really do add up to a continuation of Bush's focus on cutting taxes (especially taxes on corporate and capital income) and moving economic decisions (and burdens) into the hands of individuals.

The McCain camp has responded to Obama's digs by trying to link Obama to Bush (because both are supposedly big spenders) and to Jimmy Carter (because both are supposedly big taxers). It's hard to see either parallel sticking, though--the first is too ridiculous, and the second is too dated. If this election becomes a referendum on the economy and Bush's handling of it, Obama wins and McCain loses. It's as simple as that.

The question, then, is whether Obama can turn the election into such a referendum. The economy appears to be doing what it can to help, with the minirevival of April and May giving way to less encouraging data. But Obama's campaign has never really been about people's pocketbooks. That was more Hillary Clinton's thing. Now, with Clinton finally out of the picture, the presumptive Democratic candidate is trying to make up for lost time with a two-week campaign swing through battleground states like North Carolina, Missouri and Ohio, talking about the economy at every stop. That's smart. But if Obama's early speeches are any indication, his reinvention of himself as the economy candidate is not going to be a slam dunk.

There are a number of paths Obama could take in trying to make the economy his issue. He could go on a populist tear, blaming all of today's economic problems on plutocrats and multinational corporations. He could distinguish himself as a speaker of unpleasant truths--like the fact that today's high gasoline prices are as much the fault of American drivers as of anybody else. He could offer a compelling vision of how he'd steer the U.S. toward a better future. He could show that he cares about today's economic troubles by throwing out proposal after wonky proposal to fix what ails us.

Or he could do a bit of each. Obama is clearly uncomfortable with populist fire-breathing--he does say he wants to hit oil companies with a windfall-profits tax (which might discourage investment in new energy resources and would definitely not do much to help motorists), but that's arguably less pandering than McCain's proposal for a gas-tax holiday, which Obama has outspokenly opposed. And while Obama says he wants to renegotiate the North American Free Trade Agreement and other such pacts, he usually makes a point of defending free trade and globalization in the same breath. This can probably be chalked up to a natural penchant for truth-telling--which McCain has at times seemed to possess as well. But however much it appeals to magazine columnists, straight talk on the economy has never been much of a vote getter, so Obama has been keeping that penchant reined in (as has McCain).

Which leaves us with Obama the visionary and Obama the problem solver. When Obama pledges to make higher education more affordable or rebuild the country's battered and neglected infrastructure, he can sound almost as poetic and inspiring as when he talks about, you know, "change for America."

But those kinds of things don't directly address today's pressing economic problems. So Obama has had to come up with three short-term fixes: a $50 billion fiscal-stimulus program, much of it devoted to extending unemployment insurance beyond the current 26-week limit and helping struggling state governments; an aggressive foreclosure-prevention effort, with $10 billion in funding; and a tax cut for Americans making less than $150,000 a year, to be financed with tax increases on those making more than $200,000 a year. These add up to what you could call the stock Democratic response to tough times. They're not necessarily bad ideas, but they're not the kind of thing that is going to get 20,000 people on their feet and shouting at a campaign rally.

What these proposals definitely are, though, is different from what Bush has been doing. Which helps explain why Obama's most compelling economic argument remains the fact that on the economy, McCain sounds an awful lot like Bush.

More Money? To read Justin Fox's daily take on business and the economy, go to time.com/curiouscapitalist