Just Tell Me Who To Vote For

As the American financial system teetered ominously this week, outrage has been easy to find on the presidential campaign trail.

In a statement issued by his campaign, Sen. John McCain fumed:

"We should never again allow the United States to be in this position. We need strong and effective regulation, a return to job-creating growth and a restoration of ethics and the social contract between businesses and America."

His Democratic opponent, Sen. Barack Obama, added his own resentment — saying that taxpayers are bearing the brunt of years of Wall Street excess:

"This crisis serves as a stark reminder of the failures of crony capitalism and an economic philosophy that sees any regulation at all as unwise and unnecessary. It's a philosophy that lets Washington lobbyists shred consumer protections and distort our economy so it works for the special interests instead of working people."

But neither candidate has offered up much meat on how he will fix the current mess if he's fortunate enough to become No. 44.

We took a quick look at each of the campaign's economic policy shops to gather some clues about just how McCain or Obama might fix Wall Street's growing mess. (As your mother always said: Tell me who your friends are and I'll tell you who you are...)

 

First, Team McCain. It includes a mix of business people and academics, from Douglas Holtz-Eakin, an adviser and the former head of the Congressional Budget Office, to Phil Gramm, a former Texas senator and sworn enemy of regulation. Gramm is back from political Siberia after making a Herbert Hoover-like blunder early this year when he said, "You've heard of mental depression; this is a mental recession."

Holtz-Eakin, a fully credentialed supply-side economist and deficit hawk, would likely be front in line to be a President McCain's national economic adviser or director of the National Economic Council.

Gramm, who has decades of experience and is respected by many on both sides of the political aisle, is expected to be the Treasury secretary in waiting should Election Day go the Republicans' way.

Translation: Even if McCain's idea of having a 9-11-style commission for Wall Street gets off the ground, it's hard to see either gentleman pushing hard for more federal restrictions.

One strike against Gramm's cabinet chances: he serves as vice chairman of UBS, the Swiss banking giant that announced this week it has been forced to write down another $5 billion on top of the $42.5 billion in subprime mortgage-related assets already.

"McCain may have started off as a populist on this campaign — rallying against tax cuts and the like — but he's a changed man. He's more supply-side now than President Bush was when he ran. I suspect that has a lot to do with Holtz and the others," said Chris Edwards, an economist at the Cato Institute, a libertarian think tank.

Two other business powerhouses, Carly Fiorina, the former chief of Hewlett Packard, and Meg Whitman, the campaign finance co-chair and former top exec at eBay, are dark horses for key White House economic spots although their lack of experience on Capitol Hill could be drawbacks.

As for the Obamanites? It's pretty much all about two people: Austan Goolsbee, a University of Chicago economist, and Jason Furman, former Clinton administration official who worked for former Democratic presidential candidate and Mass. Sen. John Kerry.

It's harder to guess what they might whisper in President Obama's ear. As a University of Chicago vet, Goolsbee hails from the epicenter of supply-side thinking — though he's generally less conservative than some of his academic peers. In a bit of demand-side thinking, Obama has already come out in favor of increasing investment in national infrastructure like highways and railroads.

Both Goolsbee and Furman are moderates who have advocated more regulation in some cases. Goolsbee and Furman want to raise taxes on capital gains and dividends but cut taxes for low and middle-income Americans. Since their proposals are relatively modest, neither policymaker is likely to cause nightsweats at Ritz-Carltons nationwide.

In fact, Furman clashed with critics of Wal-Mart by defending the company as a boon to poor Americans. Goolsbee was recently caught posing for a picture with conservative New York Times columnist David Brooks.

Steven Kyle, an economics professor at Cornell University and a Democrat, predicted that an Obama administration would move to add regulation — but not much. Kyle says Obama would likely take some hard measures to force Wall Street to tighten its accounting standards and open up transparency.

"Many of the financial innovations of the last few decades have been very good, and we wouldn't want to throw the baby out with the bath water with too much reform," he said. "I think Obama understands that."

For now, economists like Kyle are much like ordinary voters — having to guess what might happen next and how the candidates would react.