What went right

John McCain proposed a $52 billion plan that included new tax cuts on capital gains, tax breaks for seniors and write-offs for stock losses.

Barack Obama proposed $60 billion in tax cuts for middle-income and lower-income Americans, more tax breaks to create jobs and new spending for public works projects to create jobs.

These were two plans the candidates proposed to deal with the current financial crisis. However, they sound more like the candidates’ old talking points, and these proposals don’t address the root cause of this crisis.

Both candidates have moved toward regulation. McCain did so after a little maneuvering. Obama jumped to regulation immediately, talking about the need for 21st-century regulation but saying little about what the 21st-century regulation would look like.

Understanding the specifics of what happened, instead of using the financial crisis to force through a wish list of economics proposals, is important. The line between the state and private sectors could be moving. If we are going to redraw it we need to understand that some things went wrong, but a lot of things didn’t.

An international summit on the financial crisis will take place on Nov. 15 in Washington. President Bush said that any solution coming out of the summit will involve “a commitment to free markets, free enterprise and free trade,” though French President Nicolas Sarkozy, one of the original voices favoring the summit, said “laissez-faire is finished.” Keep in mind – he’s a member of France’s dominant conservative party. When it comes to free-market capitalism, people are clearly out for blood.

Capitalism tends to create abundant amounts of opportunity and wealth, but in the modern world it has also created a great deal of anxiety and tension.

Going into this election it is important to be wary of economic populism, of which both candidates have offered plenty. McCain offered up a gas tax holiday when gas prices were the major crisis, and for the financial crisis he has offered up a poorly thought-out plan to buy up bad mortgages.

Left-leaning commentators use the crisis to argue that many free-market policies must be reversed. Yet, if Obama makes good on his claims to renegotiate NAFTA, redraw the tax code against business done abroad and step up regulations on oil companies and speculators, it’s unlikely anyone will be made much better off. 

The financial crisis involves a truly bipartisan failure of leadership. Changes in mortgage underwriting standards took place under the Clinton administration via the Community Reinvestment Act without diligent investigation into their consequences. Expansion of those loose standards to prime mortgages took place under the Bush administration. Both parties had plenty of chances to set things right.

The financial crisis should inspire people to demand accountability. It’s frustrating to see politicians use this crisis to further their own agendas and inspire distrust of markets in general.   

Demanding that politicians explain exactly what went wrong is a sure way to make sure we leave what went right alone.