Parties Differ on Whom Economic Aid Should Help
“Bottom line is people need to be responsible for their actions and government should not intervene, as Clinton and Obama suggest.”
- Senator Barack Obama and Senator Hillary Rodham Clinton, the Democratic candidates for president, claim to have proposed a more activist role for government than either President Bush or the likely Republican presidential nominee, Senator John McCain, and the Democratic rhetoric makes the contrast appear even sharper.
But while their philosophies might seem starkly different, in reality both parties have come to the conclusion that major government involvement is needed to rescue the financial and housing markets.
The ideological clashes are less about whether the government should intervene in the economy, and more about whom it should try to rescue.
“Democrats are more likely to propose protecting individuals, and Republicans are more likely to propose protecting markets,” said William A. Niskanen, chairman of the Cato Institute, a libertarian research group in Washington that champions smaller government.
Despite differing approaches, Democrats and Republicans may end up in a similar place because it will be difficult to protect individuals without protecting the markets, and the markets will remain fragile if individuals suffer huge declines in their personal wealth.
For now, the parties seem to be worlds apart. This week, the two Democratic presidential contenders seized on the deepening economic crisis and proposed broad government rescue plans for homeowners that would each cost about $30 billion.
The Bush administration dismissed such ideas as bailouts and vowed to veto even modest Democratic bills to help homeowners. Mr. McCain asserted this week that “it is not the duty of government to bail out and reward those who act irresponsibly.”
In practice, the Democrats have not really had to confront the full fury and magnitude of the crisis. Measured in dollars, their biggest proposals are small compared with the hundreds of billions of dollars that the Federal Reserve has decided to lend to struggling institutions, and compared with the magnitude of losses in home values and defaulted mortgages.
Mr. McCain and the Bush administration, meanwhile, have staunchly supported one of the biggest government interventions in the last century: the Federal Reserve’s decision to lend as much as $400 billion at rock-bottom rates to banks and Wall Street firms.
The Fed’s rescue operation involves a sum many times more than Democrats proposed spending on homeowners, and it comes on top of a host of other injections of government money into the economy. First came the bipartisan economic stimulus package, which this year alone will provide about $152 billion in tax rebates and temporary tax cuts to help spur consumption.
Then came a series of moves to greatly expand the roles of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage finance companies.
And this week, the Federal Home Loan Bank Board decided to lend an extra $100 billion to member banks for mortgage financing.
In a speech this week, Mrs. Clinton compared Mr. McCain’s approach to that of Herbert Hoover, and said, “I don’t think we can afford four more years of that kind of inaction.” Mr. Obama, laying down his own marker on Thursday, declared that “the free market was never meant to be a free license to take whatever you can get.”
But the two Democrats have also proposed a number of changes — such as the expanded role for Fannie and Freddie — that President Bush has recently adopted as well.
An area where the parties do seem to have sharp disagreements is regulation, particularly of investment banks.
Democrats in Congress and on the campaign trail are pushing for tougher restrictions on deceptive or risky mortgage lending, stricter rules for credit-card issuers and new rules that would allow bankruptcy judges to reduce the size of mortgages. Democrats have also called for tighter supervision of Wall Street firms.
Republicans have resisted a swing back toward greater regulation. Though the Bush administration is expected to unveil next week a sweeping blueprint for overhauling the financial regulation, administration officials have made it clear their main goal is to streamline regulatory agencies.
The most radical idea that Mr. Obama and Mrs. Clinton have endorsed is for the government to step in and refinance mortgages for as many as two million homeowners who are at risk of defaulting.
Lee ADDS: Hillary claims that Bush is doing nothing but how does she explain that ENERYTHING Bush has done to CORRECT THE CLINTON DEPRESSION worked and his plans are continuing to work! Obama tries to mouth words that sound logical but are the equlivant to ‘DUUUH’ in professional language!
