Kudos to debate moderator Jim Lehrer for questioning the presidential candidates – four times – about how the proposed $700 billion financial bailout will affect their choices and priorities. And modest applause to the candidates for their response. But voters need to hear much more from them on this subject.
This megarescue shifts the ground under both men. Even if the US Treasury spends just half of the expected bailout in fiscal year 2009, that will come on top of a forecast record federal deficit of $438 billion. Combined with funds pledged for other mortgage-related rescues, the deficit could approach $1 trillion. When considered as a percentage of the economy, that shortfall would rival the historic deficits of the Reagan era.
Yet last week, both campaigns said they were sticking by their campaign proposals (tax cuts, healthcare, etc.) – plans forged back when they were seeking their parties' nominations. Their unwillingness to adjust looked shortsighted, but was perhaps understandable as Washington itself was unsure of what to do and needed all of last week to work out a solution. As John McCain and Barack Obama stood at debate lecterns Sept. 26, they showed more flexibility.
Under Mr. Lehrer's persistent questioning, Democratic candidate Senator Obama admitted that "a range of things" are "probably going to have to be delayed" and that "we're not going to be able to do everything that I think needs to be done."
He listed four priorities (energy independence, healthcare, education, and rebuilding America's infrastructure), but also said that he may not be able to do "individual components" of them. Obama talked about places to save, but they did not amount to the radical belt-tightening that will be necessary, nor did he spell out what proposals he might postpone.
For his part, Senator McCain suggested a spending freeze on all but defense, veterans, and entitlement programs (those categories, though, make up most of the budget). He reiterated his intention to eliminate pork-barrel spending (also a small part of the overall budget) and other government waste. He left the centerpiece of his campaign, tax cuts, unaltered.
A spending freeze and/or cuts, as well as delays to programs – these ideas show the candidates doing some necessary rethinking. But the rethinking, so far, is small, perhaps because both campaigns are treating the financial crisis as a short-term problem. Indeed, the government may well make money in the longer term if it resells its mortgage securities after the housing market recovers.
The crisis on Wall Street, however, is part of a greater general challenge. America is hooked on debt, from consumers to companies to Washington. If present trends continue, by 2040 the federal government will be spending more than twice what it raises in revenue and then who will rescue Uncle Sam?
The financial bailout provides the perfect opportunity to address this bigger picture and lay out the sacrifices and prioritizing that will be necessary for America to get its own house in order – including reforming Medicaid and Medicare.
At the next debate, let's again ask the candidates about the bailout's effect on their priorities. And let's hope they will have more detailed answers by then.