Words like "hope" and "change" drove the 2008 U.S. presidential campaign while the two major candidates deposited promises of tax cuts and new programs at nearly every stop. But just as Americans began casting early votes for their next president, a major meltdown on Wall Street gripped the nation. Now, anxious voters wonder what might become of the high-sounding campaign promises.
Initially, at least, Democrat Barack Obama and Republican John McCain appeared as stunned as everyone else as the true gravity of economic conditions, rooted in the collapse of the real estate market, became known.
"The whole financial structure has been reduced to quicksand," said Phil Dow, director of equity strategy at RBC Wealth Management, one of the nation's largest brokerage firms.
An Economic 9-11
He said the intervention by the Bush White House and Congress, including the controversial $700 billion bailout, might not begin to produce lasting improvements until mid-2009. "It could take a couple of years before the quicksand is (completely) gone," Mr. Dow said from Minneapolis.
Further darkening prospects for political campaign promises were separate reports from the White House and the Congressional Budget Office that painted a distressed financial picture even without considering new burdens from what could be a $1-trillion recovery package for Wall Street.
Called by some an "economic 9-11," the situation that rocked Wall Street drove people of diverse professional backgrounds to worry about how far the crisis might spread. "It has the potential to develop into a world crisis," said Antonio Jorge, professor emeritus of political science at Florida International University, Miami. "I think this crisis will pose a tremendous challenge to the next U.S. president. It's a very serious problem that will take a long time to resolve."
Gary Horvath, at the University of Colorado at Boulder, said the volatility means steps proposed by the new president as a candidate might not track with what must be done once he enters the White House. "The economic world is likely to be very different a few months from now. With this type of volatility, what the two men said as candidates might be very different from what can be implemented in February," said Mr. Horvath, managing director of the business research division within the university's Leeds School of Business.
Tax Cut Promises Realistic?
He said senators Obama and McCain had to struggle to formulate workable proposals for the nation while also expressing what voters wanted to hear about their personal financial futures. "I'm not sure that some of what the candidates talked about during the campaign would necessarily work," Mr. Horvath explained. "Lower taxes and more spending resonates with the public but is it realistic? I don't know."
Mr. Jorge said key campaign promises might have to be at least delayed. "In light of the present situation, it is difficult to see how tax cuts could take place. The magnitude of the bailouts and the total costs of these rescue programs of financial institutions may be so huge, I don't see any possibility of tax cuts in the near future."
Still, both major presidential candidates continued to promise large tax cuts even while U.S. Treasury Secretary Henry Paulson and congressional leaders worked on an aid package that will cost the federal government multiple times what Washington spent in the 1980s and '90s to rescue the nation's savings and loan industry. That intervention by government contributed to the large federal budget deficits of the early 1990s. When it came to campaign promises, senators Obama and McCain rarely got off message despite the volatility and uncertainty as Election Day approached.
Each promised billions of dollars in new initiatives, waves of new jobs for retrained workers across the country, stronger public schools, energy independence, sharp reductions in the $10 trillion federal debt, and a balanced budget.
Courting Hispanic Support
Yet, reality would not fade away. "Everywhere you look the economic news is troubling," Sen. Obama said, acknowledging the unfolding crisis as Secretary Paulson and congressional leaders charted courses for recovery. "This isn't a time for panic. ... This is a time for resolve and it is a time for leadership," Sen. Obama added that day, courting Hispanic support along the Rio Grande in Española, New Mexico.
New Mexico Gov. Bill Richardson, whose mother is Mexican and still lives in Mexico City, accompanied the Illinois senator to fortify Hispanic interest. "Barack Obama is one of us," Gov. Richardson said in Spanish to a mostly Hispanic crowd of 10,000 in Española, only a few miles from where Spain established the first European capital in what would become the United States.
Sen. McCain conceded nothing late in the campaign even as he fought against new information painting a grim economic landscape beyond the Wall Street crisis, information stemming from policies of the Bush administration, which Democrats continually tried to associate with him.
Focus On Hockey Mom Collapses
As the campaign turned increasingly on the economy and away from lipstick, hockey moms, and birth certificates, the White House raised its 2009 budget deficit forecast from $407 billion to $482 billion, easily a record high. A report from the Congressional Budget Office (CBO) said this year's budget deficit would more than double from last year and projected it would remain near $400 billion into 2010.
Those numbers are said to grow from a sluggish national economy and do not account for the enormous Wall Street recovery package or about $80 billion in war costs incurred in Iraq and Afghanistan. The new president will likely inherit a total budget deficit that exceeds half a trillion dollars, according to the Associated Press. Prior to 2002, the country had seen four consecutive years of budget surpluses that helped anchor a 10-year period of uninterrupted economic growth.
Budget deficits, said the non-partisan CBO, threaten the viability of Social Security after the program had been stabilized in the 1990s.
The CBO said the U.S. economy likely would grow only 1.5 percent this year and 1.1 percent next year. Three percent growth is widely considered necessary for a healthy economy. The CBO said the federal budget today "is on an unsustainable path."
Healthcare, Unemployment Issues Loom
Unemployment, meanwhile, grew to 6.1 percent, or 9.7 million Americans out of work, according to the CBO report issued in September.
Many among the unemployed accounted for the soaring number of Americans without health insurance, made unaffordable by the rising costs of healthcare. Even many with full-time jobs cannot afford their share of costs when insurance is offered by employers, according to the U.S. Chamber of Commerce. Costs are so high, says the chamber, that even people earning more than $50,000 often find that they cannot afford to join their employers' healthcare plans. In New Mexico, Sen. Obama said it is unacceptable for one-third of the nation's Hispanics to be without medical coverage.
Heading into November, both senators Obama and McCain continued campaigning on pledges to expand healthcare coverage, each charting courses likely to cost $100 billion, but still falling well short of universal coverage, according to The Washington Post. Both candidates said they would lean on new "green" initiatives to create millions of jobs and bolster the nation's economy while moving toward energy independence.
Sen. McCain called for protecting Social Security by promoting personal accounts to supplement the program. Sen. Obama proposed increasing what the wealthy contribute through payroll taxes. Sen. McCain called for extending at least some of the 10-year, $1.3 trillion tax cut package secured by President Bush in 2001. Sen. Obama said those cuts favor the rich and promised, instead, to cut taxes for 95 percent of the middle class.
Rising Debt A Threat To Future Generations
Both men said they would reduce the federal debt and balance the domestic budget. Sen. McCain pledged a balanced budget by the end of his first term. Sen. Obama said he does not believe in saddling future generations with debt as the Bush administration has. "I believe in paying your own way," he said.
Can we really have it all plus a balanced budget in these hard times? At least one analyst says it's unlikely. "We don't really know how the economy will be affected by the financial crisis yet ... but I believe the proposals of both candidates may lead to an increase in the (budget) deficit if they were to be implemented in the face of the present crisis," Mr. Jorge said.
David Roybal is a journalist, author and public relations consultant in New Mexico. He can be reached at firstname.lastname@example.org .
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