Let the Next Games Begin

The Democratic Convention has started and with it, the next major event after the Olympics will fill our media outlets. Although we are still months away from the election, now is as good a time as any to highlight the differences between the candidates in terms of their view of the economy.

Rarely in my voting life have the differences between the two presidential candidates’ visions on the economy been so stark. Let me boil down the difference between the candidates with one sentence: Barack Obama wants to introduce redistributive tax policies into the economy (increase taxes for the rich—defined as income more than $118,000 or more than $250,000, depending on how you slice and dice the plan—and cut taxes for everyone else) and John McCain intends to grow the economy through supply-side tax cuts (cut taxes for everyone, but give the richest taxpayers the biggest benefits.)

Essentially, Obama believes that as the world’s greatest power, it is the government’s responsibility to address the deepening economic disparity among the citizenry. He is tapping into a multi-decade trend, which has accelerated in the past eight years under President Bush. New York Times economics columnist David Leonhardt noted that “for the first time on record, an economic expansion seems to have ended without family income having risen substantially. Most families are still making less, after accounting for inflation, than they were in 2000. For these workers, roughly the bottom 60 percent of the income ladder, economic growth has become a theoretical concept rather than the wellspring of better medical care, a new car, a nicer house — a better life than their parents had.”(NYT Magazine, August 24, 2008). Obama is hoping by helping those who have been “left behind” by the economic expansion, he will garner votes—enough to exceed the wealthier voters who will be hurt by his plan and may vote for McCain instead.

John McCain has embraced Ronald Regan’s supply-side economics which focuses on providing tax cuts to stimulate the nation's prosperity. Indeed, McCain sounded positively Regan-esque when he said “Wealth creates wealth,” during a primary debate in Michigan last year. This is a significant shift from the Senator who considered himself a deficit hawk and was a critic of the massive tax cuts launched in 2001 by the Bush administration. Supply-siders believe that when tax rates are high, as they were when President Reagan entered office in 1980, there is little incentive for wealthy people to put capital to work because so much of it goes to the government. Supply-siders contended that cutting taxes encourages investment and stimulates the economy, which benefits all taxpayers, regardless of wealth.

That’s about as stark a contrast as you can imagine. In the coming weeks and months, I will spend some time on the details of each candidate’s economic platform and under which administration you might find yourself in better financial shape.