So far there have been many surprises in the contest for the 2008 presidential nomination. Six months ago, it appeared the probable candidates would be Rudy Giuliani and Hillary Clinton; now it seems they will be John McCain and Barack Obama. Last year it appeared the leading issue would be the war in Iraq; now it’s likely the great debate will be about the economy.
In 1928 there were no debates between the incumbent Republican president, Herbert Hoover, and the Democratic challenger, Franklin Delano Roosevelt. Nonetheless, by the time of the election, most Americans were aware of fundamental differences in their approach to solving the Great Depression. This fall, when Senator McCain debates Senator Obama, Americans will recognize a stark reality: Republicans have learned nothing in 80 years.
The Great Depression was fueled by a combination of irrational market exuberance, unfettered greed, and lack of governmental oversight. The current recession has been powered by the same factors. In 1928 we saw irrational exuberance in the form of a speculative investment in stocks. In recent times we’ve seen the same unwarranted enthusiasm; this time for housing.
In both eras there was unfettered greed; the dominant morality was “what’s in it for me.” The Great Depression saw a few unscrupulous individuals get rich by peddling penny stocks and other shaky financial vehicles. The current recession saw consumers taken in by pernicious credit-card practices or by sub-prime loans with rates that unexpectedly accelerated.
In both periods there was a woeful lack of federal oversight. The 1928 stock market abuses led to the formation of the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and other regulatory agencies. Unfortunately, the current recession was fueled by Bush administration policies that both fueled America’s appetite for debt and weakened financial oversight.
In the fall there will be a series of presidential debates likely featuring Senators McCain and Obama. The dominant subject will be the recession. While Republicans have had plenty of time to learn from the mistakes that produced the Great Depression, Senator McCain is likely to reprise the rhetoric of former President Hoover; he’ll assert that, if left alone, the market will make the necessary adjustments.
Over the past eight decades, the Republican Party has been remarkably consistent in their wrongheaded economic rhetoric: greed is good because it represents the will of the market and monopolies are even better. GOP candidates have promised to cut taxes, minimize the role of the federal government, and, more recently, reduce entitlements.
It’s not difficult to see why Republicans favor cutting the taxes of the rich and powerful; this is a quid pro quo for the GOP’s wealthiest donors. Therefore Senator McCain follows the Bush leads and advocates tax reduction as the only way to ease the current recession. Nonetheless, based on America’s experience in the Great Depression, cutting taxes won’t pull us out of an economic downturn. Nor will the meager economic stimulus package recently passed by Congress.
Similarly, it’s not difficult to understand why Republicans seek to minimize the role of the federal government: the rich and powerful want to have their way with the market without restrictions. But what finally pulled America out of the Great Depression was more government, not less. Republicans ignore the reality that agencies such as the FDIC have helped stabilize the economy.
When we study the lessons of American history, it is obvious that what is needed to remedy the current recession is massive government intervention, investment on a scale that hasn’t been seen since Roosevelt’s New Deal initiatives. But Senator McCain doesn’t favor this strategy; he advocates the same hands-off policies that George Bush and other Republican dinosaurs have espoused for the last 80 years. In contrast, Senator Obama understands the necessity for government intervention.
In the coming 2008 economic debate, there will be two major points of disagreement. The first will be what to do: McCain will advocate passivity; he will take the classic Republican approach, which is to pray that the market will provide the remedy. In contrast, Obama will prescribe action; he will suggest his own version of the New Deal.
The second point of disagreement will be how to pay for the necessary fiscal stimulus. As is the case with George Bush, McCain’s number one priority will be “winning” the war in Iraq, no matter how much time and money is involved. Senator Obama’s number one priority will be to fix the economy. He will suggest America cannot afford to continue to spend $2 billion per week in Iraq and make the common-sense argument we should shift the focus of the war to Afghanistan—a move that will reduce military expenditures and free funds for domestic programs. In addition, Obama will link “homeland security” to our domestic well-being and assert we must strengthen the average American family as an integral part of our “war” on terror.
John McCain was born in 1936 and experienced the Great Depression. Nonetheless, he has chosen to rely upon Republican ideology rather than the hard lessons learned by his and other American families. McCain’s behavior proves the old adage: “You can’t teach an old [war] horse new tricks.”
Bob Burnett is a Berkeley writer. He can be reached at email@example.com.