Bush Failures May Force McCain, Obama to Make Like FDR in 2009
By Matthew Benjamin and Heidi Przybyla
July 21 (Bloomberg) -- When George W. Bush became president in 2001, his main goals included restoring ``honor and dignity to the White House'' after the Monica Lewinsky scandal, raising school-test scores and figuring out how to spend a record budget surplus.
The next White House occupant will inherit the deepest housing recession in a generation, growing fears of bank failures, a sinking dollar, $4 gasoline and an economy bleeding jobs. He'll confront wars in Iraq and Afghanistan, mounting tensions with Iran and the U.S.'s flagging international reputation.
Historians say the economic and foreign policy crises in Bush's wake will present either Democrat Barack Obama or Republican John McCain with the biggest challenges to a new president since Herbert Hoover left office during the Great Depression.
``What a burden the next president is going to confront,'' says Robert Dallek, a presidential historian and biographer of Presidents John F. Kennedy and Lyndon Johnson. ``It'll be like Franklin Roosevelt coming in, in 1933.''
The list of problems facing the nation means that campaign promises -- Obama's universal health care, middle-class tax cut and immigration overhaul, or McCain's corporate and individual tax reductions and energy-independence plan -- will likely be put on hold while the president focuses on more immediate concerns, especially the economy.
Waking Up Quickly
The next president is ``going to wake up very quickly to the fact that the economy so overwhelms everything else,'' says Stephen Hess, a presidential scholar at the Brookings Institution in Washington.
In 2000, the last time no incumbent was running, consumer confidence was at record levels and the economy had created 1.3 million jobs in the year's first six months. In August 2000, 89 percent of Americans said the economy was doing well, according to a Los Angeles Times poll.
With the expansion then in its 10th year, the contest between Bush and Vice President Al Gore centered on topics like education, prescription-drug coverage for the elderly and --with President Bill Clinton's affair with a White House intern fresh in voters' minds -- morality in the Oval Office.
The Times survey showed that, after education, the issues that concerned Americans most were Social Security and health care, as the nation debated how to use a $5.6 trillion surplus the Congressional Budget Office projected the government would generate over the next decade. During the campaign, Bush promised to return the surplus to taxpayers through broad-based tax cuts; when the nation entered a recession in 2001, he shifted gears and said the reductions would stimulate the economy.
Wiped-Out Surplus
After that recession, some $2 trillion in tax cuts and military spending in Iraq and Afghanistan, the government has produced only deficits since 2002. Bush's budgets have added $1.7 trillion to the national debt. The CBO, which estimates this year's shortfall will reach $396 billion, projects the red ink will flow through at least 2011.
Today, 82 percent of Americans say the economy is doing badly, and voters consider it the most important issue, followed by the Iraq War, health care, terrorism and illegal immigration. Education ranks sixth.
``People tend to ignore the economy when it's doing well and pay a lot of attention to it when it's not,'' says Arthur Miller, a political science professor at the University of Iowa and author of a research paper on issues in the 2000 election.
Job Losses
In June, employers cut jobs for a sixth straight month and the unemployment rate stood at 5.5 percent, a four-year high. Home prices in 20 cities dropped 15.3 percent in April from a year earlier, according to the S&P/Case-Shiller index.
Oil prices have set records due to global demand and tensions in the Middle East. That's pushed gasoline prices up 92 percent since January 2007 and increased the cost of filling the tank of a Chevrolet Suburban by $62, to $131.
Consumer confidence has fallen to its lowest level since 1992. Many economists expect a recession to begin later this year and continue into the first quarter of 2009, when the next president takes office.
The top economists on both presidential campaigns agree the economy is the priority, and each seek to affix their domestic agendas to that goal.
McCain's top economic adviser, Douglas Holtz-Eakin, touts the Republican candidate's energy-independence plan, the ``Lexington Project,'' as one key to jumpstarting growth. Obama adviser Jason Furman says his candidate's energy, health and tax plans represent a pro-growth blueprint: ``If you can bring down the cost of health care, that can help the economy. If you bring fairness back to the tax system, that can be expansionary.''
Fannie and Freddie
An early issue facing the next president will be what to do about Fannie Mae and Freddie Mac, the government-created mortgage-financing companies that together buy or back half the U.S.'s $12 trillion in home loans. While Treasury Secretary Henry Paulson has floated a plan to shore up the two, fundamental change isn't likely under Bush, says Chris Mayer, director of the Paul Milstein Center for Real Estate at Columbia University in New York.
``Democrats in Congress are worried about giving Bush a blank check to fix this,'' he says.
The next administration will also have to deal with a host of foreign-policy issues that were largely absent in 2000.
Eight years ago, after a decade in which the country enjoyed the benefits of a ``peace dividend'' -- U.S. military cutbacks after the collapse of the Soviet Union -- the biggest concerns were forging peace between Israel and the Palestinians, the emergence of China as a strategic rival and whether the U.S. should engage in ``nation-building,'' as it was doing in places such as Bosnia and Haiti. Bush entered office pledging to pursue a ``humble'' foreign policy.
Wars and Weapons
Come January, the new president will face the wars in Iraq and Afghanistan, Iran's efforts to obtain nuclear power, and the dismantling of North Korea's nuclear program.
U.S. casualties in Iraq have declined this year, taking some of the edge off public opposition to the war. Still, Bush has yet to set a timeline for withdrawing the 150,000 American troops, leaving it to his successor to decide whether to pull out and how fast.
Violence has risen in Afghanistan, and more troops may be needed. Attacks by extremists made June the deadliest month for the U.S. and its allies since the conflict began in 2001. In Iran, the U.S. is trying to convince the country to suspend uranium enrichment, and impose penalties if it doesn't. Even so, tension has increased, with Iran test-firing long-range missiles and Israel conducting a drill of its warplanes in what some military analysts saw as a rehearsal for a strike on Iran.
Road Map
And in North Korea, the U.S., China and three other nations are trying to establish a ``road map'' to outline how the Stalinist regime will abandon its nuclear weapons programs.
Obama, 46, an Illinois senator, or McCain, 71, of Arizona certainly won't be the first president to be sworn in amid simultaneous financial and foreign-policy turbulence. Kennedy began his term in 1961 nine months into a recession and with an invasion of Cuba already being planned; Ronald Reagan took office six months after the end of an economic slump and a little over a year after Soviet forces invaded Afghanistan.
The current problems may pose an even bigger challenge as anger at income inequality and ``greedy'' corporations threatens to undermine Americans' confidence in the system, says Dartmouth College political science professor Linda Fowler.
``The country is facing a crisis in capitalism,'' she says. |
