Fixing The Economy; Road Ahead For Candidates

E.J. Dionne, of the Brookings Institution and The Washington Post, says the current economic crisis has been bred, in part, by under-regulation. Matt Continetti, associate editor at The Weekly Standard and author of The K Street Gang, says the move for more regulation is coming from the Bush administration.

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MICHELE NORRIS, host:

For more on this week's political news, we're joined by two of our regular political commentators, E.J. Dionne of Georgetown University and the Washington Post, and Matt Continetti of the Weekly Standard.

Welcome to both of you.

Mr. E.J. DIONNE (Political Commentator, Washington Post): Thank you.

Mr. MATTHEW CONTINETTI (Staff Writer, The Weekly Standard): Thank you.

NORRIS: Let's start of course with the economy. We just heard a report on the positions that Barack Obama and John McCain have been staking out. Polls continue to show that this is the number one issue for voters. E.J., you write in your column today that neither candidate has caught up with what you see is a major shift in thinking about the government's role in regulating the economy. Could you quickly explain what you meant by that?

Mr. DIONNE: Right. Well, this is starting to feel like 1980 in reverse. In 1980, people had a sense of crisis from stagflation and the - so they said (unintelligible), economic ideas don't work anymore. Now, there is a crisis that's bred, in part, by under-regulation, and so all the old conservative shibboleths - you know, we're too regulated, we need deregulation - are starting to go out the window, particularly in the banking crisis where it's clear that a lack of proper regulation has fed this mess that we're in.

And, you know, it's interesting, Phil Gramm is in trouble for that statement about whiners - you know, nothing like making people feel better about the economy by insulting them…

NORRIS: Mm-hmm.

Mr. DIONNE: Well, he was one of the architects of this deregulation. And I think that Obama clearly - McCain is doing very much the old conservative economic thing. Obama is partly there, but I think the shift going on in people's thinking is even bigger than is reflected by either of these candidates.

NORRIS: Now Matt, as someone who's staked out conservative territory on the editorial pages, I can imagine that you agree with E.J. in the call for more regulation.

Mr. CONTINETTI: Well, not necessarily as prescription, but I do agree with E.J.'s analysis, which is whereas now the move for more regulation coming -from, from the Bush administration of all places or from the Federal Reserve, I mean, typically, you know, conservative institutions or administrations one would think. And this is a rush to solve a problem that's widespread. It's not just one area, it's a crunch in several. It's - whether it's credit, whether it's the energy supply, whether it's mortgages and real estate.

And so every politician needs to have something to show that they're doing to tackle the problem. McCain's challenge is he's caught in a vice. In the one hand, he's had positions in the past which are, you know, more or less for government intervention in the economy and of course opposed the original Bush tax cuts in '01 and '03. And now, he needs to satisfy the right, on the other hand, and is trying to turn himself into kind of a pro-family supply citer. I don't think he's quite worked out getting into that new guise yet.

NORRIS: Well, the right is - there are divisions within the right on the best approaches to the economy.

Mr. CONTINETTI: Absolutely.

NORRIS: Now, as to Phil Gramm's statements, now we've - we just heard this from Scott Horsley's piece. E.J., you brought this up. You know, there's a lot of talk about the politics of this and how John McCain has reacted. But I'm curious about the substance. Gramm is suggesting that we're a nation of whiners, that we're in this mental recession. Is it possible there's some truth to that, though, that the psychology of the electorate is important here?

Mr. DIONNE: Well, the psychology of the electorate is always important, and if people perceive the economy as worse than it is, then it hurts the incumbent party. A little bit of that happened in 1992, where the economy was starting to get better on Election Day, but people didn't feel it yet. In fact, people didn't really feel it for several years, and so it ended up hurting Clinton in the midterm elections.

But I think in this case, this statement was a particular mistake because this hurt, this pain, this unease, this fear goes from the bottom of the economy right to the top of the economy. Some of the most fearful people I know are people in the investment community who look at this mess and say we're not sure when this ends, we're not sure how many bailouts we're going to need. And of course, people in the middle and in the bottom have been feeling this now for a year or so. So I think in this case, psychology is not the issue. The real economy is the issue.

NORRIS: I want to ask you about the economy of the campaigns. Barack Obama appeared for the first time at a fund raiser with his former rival, Hillary Clinton, this week. He almost forgot to ask people that very important question - to open up their wallets to help her draw down her debt. But is that - how much of a problem is this for Obama, trying to encourage people to support Hillary Clinton while at the same time trying to reach this massive fundraising goal that he set for himself, Matt?

Mr. CONTINETTI: Well, it may distract - shift funds to Hillary, it may not. I mean, Obama actually has, as Bob Novak reported this week, has some problems reaching out to the Clintonites in the South. You know, people who are Clinton donors who would have no problem paying down that debt, they have trouble now donating for Obama.

We see - I think we're beginning to see certain things that may be interpreted as hubris on the part of the Obama campaign. Removing himself from the system of public financing is one of them. Of course, we all recall his presidential seal which was quickly shrouded after one day. He's now going to give his convention address in the Bronco stadium, this huge outdoor stadium. It could go very well, it could go wrong. You don't know what the weather will be like or how people will interpret a rally of that size. So with Obama, you have bold moves, but whether they're going to pay off I think is still unclear.

Mr. DIONNE: Well, you know, first of all, in terms of the bold moves, I think the Bronco stadium is a risk. However, the last candidate to do that was John F. Kennedy. And I think anything that gets Barack Obama's name in a sentence with John F. Kennedy is probably more a plus than a minus.

Mr. CONTINETTI: Well, again, the Brandenburg Gate speech, right? That's another example…

NORRIS: Which was…

Mr. CONTINETTI: …of a Kennedy example, but also could be interpreted as hubris.

NORRIS: …on his upcoming trip (unintelligible). But I'm curious about this question about Hillary Clinton's debt and to what extent he works hard to try to help her reduce that debt or draw it down to zero.

Mr. DIONNE: I think it's going to be hard for some of Barack Obama's supporters to write those checks or send in those Internet donations. Somebody was quoted in the papers as saying, why should I pay the debt she ran up for ads attacking Barack Obama? Why should I pay Mark Penn, her well-known consultant…

NORRIS: Who's - who still owed quite a bit of money.

Mr. DIONNE: …what he did on the campaign, who still owed money? And so, you know, I think it's not an easy thing to transfer loyalty like that after a very bitter primary. It'll probably be the same the other way around if it were Clinton supporters. But some of them, a bunch of the fundraisers, know this is important to Obama. So I think it'll be easier among high-end people than among grassroots Obama people.

NORRIS: You know, John McCain's campaign this week has been working hard trying to convince party officials and voters that he is going to be competitive financially with Barack Obama in the general election. Matt, will he raise that much money?

Mr. CONTINETTI: Well, it looks like he's has a good month this time. We're still waiting…

NORRIS: But his good month compared to a mediocre month…

Mr. CONTINETTI: Obama's funds in the…

NORRIS: …for Barack Obama.

Mr. CONTINETTI: Yeah, exactly. So you - we don't know how this fundraising for Obama is going to change now that we're moving into the general election. The Obama campaign hasn't released the latest numbers. And we're wondering - I'm wondering anyway - that, you know, all that small donor money, where's that going to go now that the race - the real race I think for many Democrats, which was between Obama and Clinton - now that that's over, are they going to have so much more enthusiasm in terms of sending checks? I know they have enthusiasm to go out and vote, but in terms of sending those small checks now that he's won the nomination, it's unclear.

NORRIS: Very quick reaction to both of you from news reports on Sports Illustrated's Web site today that Barack Obama's campaign is in talks to sponsor a stock car in an upcoming NASCAR race - interesting way to reach out to blue-collar voters.

Mr. DIONNE: You know, somebody else did this. His name is Mark Warner. He got elected governor of Virginia. It worked for Warner, and I bet you that Obama got the idea from him or some of his consultants.

Mr. CONTINETTI: A lot of these voters just want to be known - recognized, and I think it was probably a good move in that sense.

NORRIS: Matt, E.J., thank you very much.

Mr. DIONNE: Thank you.

Mr. CONTINETTI: Thank you.

NORRIS: That's E.J. Dionne of Georgetown University and the Brookings Institution and also the Washington Post, and Matt Continetti of the Weekly Standard.

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