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By Jason Simpkins
Now that presidential hopeful Barack Obama has returned from a tour of the Middle East and Europe, he and his Republican rival, John McCain, are squaring off on the status of the U.S. economy, which has become the most pervasive domestic issue in the 2008 campaign.
Obama met with a panel of advisers yesterday (Monday) to discuss possible remedies for the sputtering U.S. economy. That panel included such eminent figures as billionaire Warren Buffett, Paul Volcker, and former Clinton advisor Robert Rubin.
“People are understandably concerned about the economy, and that’s what we will be talking about for the duration,” Obama said Sunday at an appearance in Chicago.
Obama will use the meeting as an opportunity to fine-tune his economic policies which could include a second stimulus plan that would offer another $50 billion of tax rebates and a $10 billion foreclosure-prevention fund. Obama also supports free-trade agreements and said he would reopen the North American Free Trade Agreement (NAFTA).
NAFTA was established in 1994 under the Clinton administration as a means of disarming major trade barriers between the United States, Mexico, and Canada. Free trade was a major issue for then-Treasury Secretary Robert Rubin, whose policies were centered on reducing the federal budget deficit. However, the principles of “Rubinomics” (which were continued by Lawrence Summers, Rubin’s successor and a fellow panelist) were criticized by U.S. labor unions as Wall Street favoritism that exported American jobs overseas.
Senator McCain, the Republican candidate who has traveled to Colombia, Mexico, and Canada to defend free trade deals himself, will hold a series of town hall meetings in Nevada and Wisconsin in an attempt to drum up support for his economic policies.
“I think that Wall Street is the villain in the things that happened in the subprime lending crisis and other areas where investigations and possible prosecution is going on,” McCain told ABC. The statement echoes President George W. Bush’s assertion last week that Wall Street “got drunk.”
McCain also pointed his finger at Congress for a mounting U.S. deficit brought about by “out of control” spending. He has also sought to portray Democratic opposition as unwilling or unable to combat high-energy prices by playing up his support of a “gas tax holiday” and more offshore drilling. A spokesman for McCain told Bloomberg News that his meetings would focus on the economy and the need for independence from foreign oil.
It’s entirely possible that whomever is elected president will inherit a flagging economy if not an outright recession and a ballooning deficit. The U.S. budget deficit will widen to a record of about $490 billion next year, an administration official said yesterday.
The next president will also be faced with the question of what to do with Fannie Mae (FNM) and Freddie Mac (FRE) – the insolvent government sponsored enterprises that insure roughly half of the $12 trillion of U.S. home loans.
Both Obama and McCain voiced their support for housing legislation that passed the Senate last week, though both missed the vote.
News and Related Story Links:
Election 2008: The Achilles’ Heel of Obamanomics
McCain, Obama Put Economy's Strains at Center Stage
The Financial Times:
Obama turns focus to economic policies