Obama has the edge on the economy

Obama Has Edge on Economy - September 9, 2008;


CAPITAL JOURNAL By GERALD F. SEIB

From the Wall Street Journal
http://online.wsj.com/article/SB122089986785911131.html?mod=googlenews_wsj

We learned a lot about the U.S. presidential campaign at the two parties' national conventions -- that Barack Obama can fill a stadium, that Sarah Palin can give a better speech than her new boss, that it is possible to say "change" a hundred times a night -- but above all we learned this: Both campaigns think the most important issue in the next 56 days is middle-class economic anxiety.

And that means John McCain has a problem. His pitch to the middle class -- my policies will produce a better economy, which in turn will produce lasting jobs, which in turn will help you -- is a lot harder to sell than the pitch of Sen. Obama. The Obama message to the middle class is, simply: I'll give you a tax cut and a health plan.

With middle-class economic anxieties a main topic of the presidential election, both McCain and Obama are pitching policies for a better economy. But WSJ's Jerry Seib says McCain has a problem -- his plan is harder to sell. (Sept. 9)

It's possible Sen. McCain has the sounder plan, but who's got the better bumper sticker?
Republicans recognize the difficulty. In a conversation near the end of the Republican convention in St. Paul, Minn., one senior McCain adviser agreed that the campaign's economic message hasn't "punched through." Similarly, President George W. Bush's political maestro, Karl Rove, said the campaign's top need was to put forth "a domestic reform agenda on kitchen-table issues."

Intriguingly, the economic message conundrum is in many ways the reverse of the two candidates' positions on rising gas prices during the summer. Then it was Sen. McCain who found the simple formula: I'll suspend the federal tax on gas and allow drilling offshore for more oil.
It was Sen. Obama who tried to sell the nuanced, long-term plan, arguing against going after easy and gimmicky short-term fixes, contending that there isn't all that much more oil to be found offshore, urging a focus on conservation and alternative energy, and so forth. He may well have had the better policy position, but Sen. McCain got the better of the politics.

On middle-class economics, the McCain position is, essentially, that his policy of preserving the existing Bush tax cuts for all taxpayers while keeping capital-gains rates low, cutting corporate taxes and keeping government spending down will produce an economy that creates lasting jobs for the middle class. He offers one bit of help specifically for middle-income families: a doubling of the personal exemption for dependents to $7,000. He also promises to give individuals help in buying their own health-insurance policies, so they can carry them from job to job.

By contrast, the McCain camp argues, the Obama formula of raising taxes on upper-income households and businesses, while also increasing capital-gains taxes and adding health-care mandates for small businesses, will produce a job-killing machine.

But the difficulty in transmitting that Republican message was encapsulated by the acceptance speeches at the two conventions.

Sen. McCain said this: "My tax cuts will create jobs. His tax increases will eliminate them. My health-care plan will make it easier for more Americans to find and keep good health-care insurance. His plan will force small businesses to cut jobs, reduce wages, and force families into a government-run health-care system where a bureaucrat stands between you and your doctor....Keeping taxes low helps small businesses grow and create new jobs."

Among other things, that sounds on the surface like more of the same policies that voters have gotten in two Bush terms, not necessarily a good thing in a year of "change."

By contrast, Sen. Obama said in his speech: "I will cut taxes -- cut taxes -- for 95% of all working families. Because in an economy like this, the last thing we should do is raise taxes on the middle class."

Never mind that nobody actually is proposing to raise taxes on the middle class; it's hard to beat that message for simplicity and punch.

For both candidates, the fine print of their economic plans presents some messiness they'd prefer to avoid talking about. Sen. Obama's middle-class tax cut would take the form of a tax credit of as much as $1,000 per family, which his campaign says would eliminate income taxes for 10 million Americans. He'd also launch a potentially expensive new government health-insurance plan, continuing to rely on employer-provided insurance but providing a big government safety net.

To pay for what amounts to a tax cut on top of the existing Bush tax cut for middle-income families, Sen. Obama would raise taxes on households earning more than $250,000, eliminate some corporate tax breaks and raise capital-gains taxes. He'd also keep the alternative minimum tax in place for many taxpayers.

Sen. McCain, meanwhile, wants to make all the Bush tax cuts permanent, while cutting the corporate tax rate and phasing out the alternative minimum tax -- the latter an expensive proposition indeed. In substantive terms, the question is how to pay for what amounts to a very aggressive low-tax plan.

In political terms, the question is much different. It is how Sen. McCain -- not exceptionally adept at talking kitchen-table economics -- can persuade middle-income Americans of his basic argument that a sound economy is more important than specific government help aimed directly at them.

One Republican hope is that Gov. Palin, who exudes middle-class sensibilities, can help make the case. One possibility is to tinker with the formula to add benefits specifically for the middle class, maybe through a new stimulus plan.

But in a year in which anxiety about the effects of a global economy, the job-killing potential of new technology and the pain of high energy prices are combining to produce exceptionally deep-seated economic fears, the Republican imperative to resonate with the middle class is high.