The financial crisis and the 2008 elections

John McCain is posing as a populist. In a typical sound bite, he says, ‘We need to put our country first and focus what’s best for Main Street. It’s the excess and greed of Washington and Wall Street that got us in this situation to start with.’ (CNN.com. quoting McCain in a campaign stop in Media, Penn., Sept. 22 or 23).This theme was echoed by the majority of Republicans who voted against the deal in the House on Sept. 29.

As part of his populist message, McCain demanded a cap in compensation for CEOs for companies that participate in the government rescue to no more than $400,000 — the amount the president makes.

The same story continued, ‘We can’t have taxpayers footing the bill for bloated golden parachutes,’ McCain said. ‘The senior executives of any firm that’s bailed out by the Treasury should not be making more money than the highest-paid government office.’

‘Never before in the history of our nation has so much power and money been concentrated in the hands of one person,’ McCain said. ‘This arrangement makes me deeply uncomfortable. And when we’re talking about a trillion dollars of taxpayer money, ‘trust me’ just isn’t good enough.’

Many media stories implied that McCain and Barack Obama have similar approaches. This is not true. Obama called for measures that go far beyond feel-good gimmicks like capping executive compensation. (The cap on executive compensation is likely to be temporary, full of loopholes, and will save relatively little.) The most important parts of Obama’s program would provide direct bottom-up help, as well as steps to rein in the financial industry:

● Help for families facing foreclosure, possibly by having government purchase the mortgages directly (presumably at a discount, and presumably with the intent to modify their terms).
● An economic stimulus package that includes ‘a plan that would help folks cope with rising food and gas prices, save one million jobs by rebuilding our schools and roads, help states and cities avoid painful budget cuts and tax increases, and help homeowners stay in their homes.’ not as part of the rescue legislation but to be moved on rapidly.
● Institute a Financial Stability Fee (apparently a tax of some kind) on the entire financial services industry to repay losses the people have suffered.

These demands might not be broad enough or deep enough, but they are definitely in the right direction.

McCain’s record

McCain has followed Bush as the champion particularly of the military-industrial complex and of the energy industry. Through his family he is a member of the military elite, and through his marriage he is connected to the corporate elite. On economic matters, he relies on economic advisers who not only represent the interests of the financial industry, but personify the open corruption and looting that have come to characterize finance in recent decades.

Foremost amongst these advisers is former Senator Phil Gramm. McCain and Gramm have worked together for years, supporting each other’s presidential bids. Gramm was forced to resign as co-chair of McCain’s campaign after his remarks that US is a “nation of whiners,” but while McCain repudiated Gramm’s remarks, he has never repudiated Gramm or his policies. In any case, McCain’s economic philosophy has been shaped by Gramm.

Gramm pushed through the 1999 bank deregulation bill, which allowed the wave of mergers and speculation in the financial industry. McCain remains a strong supporter of this legislation, and now calls for the same kind of deregulation for health insurance, according to a Communication Workers of America fact sheet.

In December 2000, Gramm pushed through the commodities trading bill that allowed Enron first to fleece Californians of tens of billions of dollars, and then to collapse spectacularly, triggering the first financial scandal of the Bush administration. In the meantime, Gramm’s wife Wendy was paid over $1M to serve on Enron’s Board of directors. The commodities legislation also allowed for “credit default swaps,” an esoteric financial arrangement that made risky investments look safer, and contributed to the recent meltdown, all according to CWA.

It’s not just Gramm

McCain follows the Gramm’s principles of deregulation in every aspect of economic policy.

He says he wants to do for health care “what we have done over the last decade in banking.” He still favors privatizing and undermining social security.

McCain says he is a patriot, but he wants to continue to allow the fate of our economy, our health care system, our retirement, to be in the hands of a small band of super-rich, elite, corrupt, egotistical vultures whose only goal is to maximize profit.

The candidates are not the same

Some of the press coverage has implied that McCain and Obama have similar positions. It is possible that the Obama campaign has contributed to this by emphasizing the emergency nature of the crisis and expressing willingness to work in a bipartisan manner. The media has contributed by focusing on feel-good side issues like executive pay, which McCain and other right-wing Republicans can easily wax indignant about, while advancing so-called solutions that will have almost no effect.

The key difference is this. Obama, and/or congressional Democratic leaders, call for measures that actually help the working class:

● Help for families facing foreclosure
● An economic stimulus package that including jobs, infrastructure, aid to cities and states.
● A Financial Stability Fee (apparently a tax of some kind) on the entire financial services industry to repay losses the people have suffered.
● Improvements in unemployment compensation
● Repeal tax cuts for the rich; cut taxes for the working class.
● Protect social security
● Improve health coverage
● Pass the EFCA

These are important not only in themselves. If pursued correctly (a big if) they provide the only solid basis for easing the financial crisis. As long as tens of millions of Americans are crushed by unpayable levels mortgage and credit card debt, there can be no real stability in financial markets. As long as families are being foreclosed and evicted, there can be no stability in the housing market.

The Sept. 27 PWW editorial expresses this very well: “The crisis in the real economy on Main Street is the true underlying crisis. Any bailout plan must address this crisis. Failure to do so would make the Wall Street fix short-lived and set the stage for an even bigger future squeeze on the hard-pressed American people.”

The real difference was seen in the first debate between McCain and Obama. The moderator, Jim Lehrer, repeatedly stated, as if it were a fact, that the proposed bailout will force cutbacks in other priorities, and asked each candidate what they would drop from their program. Obama, while failing to challenge Lehrer’s assumption, insisted the he would proceed with his main priorities on health care, energy security, and infrastructure rebuilding.

McCain repeatedly stated that his top priority is to cut government spending. He played the favorite theme of right-wing populists – cutting waste, particularly earmarks. But earmarks and waste are a relatively small part of government spending, and the deregulated environment McCain supports makes it controlling waste even harder. More fundamental is the fact that the country is already in recession, and it will be a lot worse by the time the new President takes office. In a recession, the need and demand for government spending and services increases. Many programs are constructed to automatically increase spending in hard times — unemployment compensation, Medicaid, food stamps. And sound public policy for the past 70 years has included increased spending on public works and other needs to help counteract the downturn. An attempt to cut government spending during a serious recession would have a far worse impact on the overall economy, and on the lives of working class families, than allowing Wall Street banks to fail!

After the election

We should be very clear. On Nov. 5, the real offensive against the working class will begin. The Republicans who attack the bailout plan from the right, and the Republican pragmatists who support the bailout plan, will agree that the country cannot afford Social Security, Medicare or any other program that benefits working people, or even basic measures to maintain the physical and social infrastructure.

No matter what plan is passed or not passed, the position of US imperialism will continue to decline. The dollar will decline, tending to raise interest rates and prices. The US overseas empire will cost more and more to maintain, a cost born by the American people; the benefits of empire, which accrue entirely to the biggest capitalists, will decline.

The contradiction between ruling class interests and the interests of ordinary people will become sharper. At some point, Wall Street will pose the question to the new administration – which is more important, maintaining the confidence of investors, or maintaining Social Security benefits? Which is more important, the stability of the financial markets or providing health care? Always with the threat – if you don’t do things our way, the Wall Street way, the economy will collapse and you will be even worse off.

When those questions are asked, who do you want in the White House? Obama, of course, has his share of Wall Street advisers, and so far has seemed, to me, to be trying to please both Wall Street and Main Street. But an Obama administration will be open to mass pressure, and has strong pro-labor and pro-people influences as well as Wall Street influences.

Despite superficial populist rhetoric, McCain has one message: end all government regulation; turn everything over to the insurance and finance industries and the military-industrial complex. If you don’t like it, tough! Suck it up, join the army, and help liberate Iran/Georgia/Venezuela/Russia for Exxon.

Art Perlo (econ4ppl@cpusa.org) is chair of the Communist Party’s economic commission.