As the stock market continued to seesaw, economic advisers to the Clinton, Edwards, McCain, and Obama campaigns gathered at a breakfast forum this morning at the New America Foundation in Washington.
Not surprisingly, the grimmest analysis came from the Edwards camp. Leo Hindery Jr., a senior economic adviser to the Edwards campaign and an “executive in residence” at Columbia Business School, warned that the full extent of the credit crisis has not yet been revealed. “There’s a minimum of $800-billion of high-risk, at-risk debt that has to be addressed, of which a little over $100-billion has been recognized within the system to date,” he said.
This week’s severe slides in Asian stock markets, Mr. Hindery said, are a sign that foreign investors understand the crisis better than Wall Street does. He suggested that the reforms proposed by the Clinton and Obama campaigns, which center on greater transparency in capital markets, are inadequate to the task at hand.
Austan Goolsbee, a professor of economics at the University of Chicago and a senior economic adviser to the campaign of Sen. Barack Obama, said that stagnant incomes and low personal savings rates have helped to amplify the housing market’s troubles into a threat to the entire economy. “When there’s no margin for error,” he said, “you know what’s going to happen when there’s something like a housing-price downturn. There’s going to be a huge problem in consumer debt.”
At other moments, though, Mr. Goolsbee struck a sunnier tone than Mr. Hindery. “There are few people who are bigger bulls, if you want to think of it that way, about America and about the American economy” than Mr. Obama, he said. “If we make the investments we need to in our educational system, in energy policy, in technology, things of that nature, we can maintain our place as the richest, most productive country in the world.”
Mr. Goolsbee found only a few disagreements with Sen. Hillary Rodham Clinton’s adviser, Gary Gensler, a former Undersecretary of the Treasury Department during her spouse’s administration. The two men sparred briefly over which candidate’s economic-stimulus package would be more efficient. Mr. Goolsbee also tacitly criticized the many small-scale targeted tax deductions and tax credits in Ms. Clinton’s proposals, saying that Mr. Obama prefers a simpler “iPod model” of social and fiscal policy. (Mr. Obama has proposed a number of new tax credits of his own, however.)
The sole Republican on the panel was Kevin A. Hassett, a senior adviser to Senator McCain’s campaign and the director of economic policy studies at the American Enterprise Institute. Mr. Hassett repeatedly warned that the country is on an “unsustainable fiscal path,” but he also said that a permanent reduction in corporate tax rates is the best answer to the stock-market swoon. He suggested that high corporate tax rates are a primary reason for stagnant middle-class incomes.
Criticizing the Democrats’ stimulus plans, which emphasize short-term tax relief for individuals, Mr. Hassett said that “it’s much more prudent to take a step to make firms more competitive in the world marketplace.”
