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.
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