The biggest challenge facing the next president will be figuring out how to lead a debt-plagued economy out of its recession, create millions of new jobs and restore America’s shattered confidence in its financial institutions.
With the economy in a steep descent, deepening unemployment, rising home foreclosures, and Wall Street in the grip of a bear market that has crushed worker pension plans by 40 percent or more, the job of nursing the country back to financial health poses a monumental undertaking for whoever wins the White House on Nov. 4.
Both Democratic Sen. Barack Obama and Republican Sen. John McCain have put forward ambitious economic agendas that are not entirely understood by most Americans, and there is deep disagreement in the electorate about whose prescriptions will put the country back on the road to recovery or perhaps make a bad situation worse.
Indeed, some economists are saying the rescue plans the two candidates designed may now be inadequate to deal with what has become a much more critical situation than either of them could have foreseen earlier this year.
“They were written before the financial meltdown of the last six to eight months, and I think it is going to be hard to enact these sets of plans in the form they’ve proposed,” said economist William G. Gale, vice president of the Brookings Institution and director of its Economic Studies Program.
“The financial situation is quite troubling. I’ve never seen an issue change so rapidly, where one day’s unthinkable outcome is the next day’s conventional wisdom. They’ll be facing a dramatically different situation than when they came up with their plans. I think they are going to have to improvise and be very nimble,” Mr. Gale said.
Each proposes to cure the economy’s illness from a starkly different direction.
Mr. Obama thinks that renewed economic growth depends first and foremost on income transfers to low- to middle-income people and a raft of government infrastructure and domestic spending to jump-start the economy. His rival thinks that renewed economic growth, job creation and higher incomes will only be fueled by lower taxes to stimulate business expansion, entrepreneurial risk taking and increased capital investment to grow the economy, not the government.
Mr. McCain and his economic advisers charge that Mr. Obama’s tax increases on higher-income Americans, investors and corporations, and his proposed taxes and mandates on small business and trade will stymie growth and job creation.
“The redistribution of wealth is the last thing America needs right now. The goal is not to redistribute wealth, but to create it,” the Arizona Republican said during a campaign appearance in Manchester, N.H.
Mr. Obama and his supporters counter that his rival’s tax cuts for upper-income earners and big business are part and parcel of “the same failed policies of the past eight years” and will do nothing to help struggling low- to middle-income workers.
“The Bush tax cuts give those who earn over $1 million a tax cut nearly 160 times greater than that received by middle-income Americans” who have seen their average incomes fall, Mr. Obama says in his plan.
Economists on the left and the right agree that the government will likely announce on Oct. 30 - four days before the election - that the economy stopped growing in the third quarter and will shrink further in the past three months of the year as consumer spending stalls and business earnings decline, forcing increased layoffs.