Wednesday, July 9, 2008

Election Pet Peeves

OK - I have two election pet peeves I want to put out there:

1. Our obsession with "flip-flopping": Ever since the 2004 election and the rise of YouTube, we have been obsessed with catching candidates who switch positions on an issue. Now, I know the root reason for why we do this. In a lot of cases, chameleon candidates suspiciously shift positions depending on who they're talking to - just to get elected. Candidates who were initially idealists (I think Obama and McCain both fall into this category) may cave to vested interests as they spend more time in Washington, etc. Of course this isn't great and we should call them on it when it happens. But what we've created is an environment in which politicians are afraid to re-evaluate their positions, compromise, and remain open-minded. The most infuriating recent example has been Obama - who has been savaged for suggesting that he would actually listen to advisers when setting a time-table for withdrawal from Iraq!!! First, I think Obama is intelligent enough that even when he supported a swift withdrawal he always would have done it in consultation with the experts. But lets hypothetically say that's not true, and that he was initially naive and would have pursued withdrawal with or without the advice of experts. Isn't it a GOOD thing that he changed that position? Shouldn't that re-evaluation be encouraged? I personally see his supposed "flip-flop" as a clarification of a position he's held all along. McCain is a victim of this as well - his positions have most notably changed on Iraq and taxes. What's going on! We want to encourage flexibility in our politicians, not discourage it!

At least they don't call it "waffling" any more... what a stupid term...

2. "The #1 Issue": OK, so this may be counterintuitive that an economist is frustrated that the economy is supposedly now the #1 issue in the campaign - but I'll tell you why I am. Yes, we're going into a recession, and yes it looks like it will be a fairly painful one. But the economy is cyclical, people - it goes up and down. Plus, recessions perform very important tasks. As people are laid off and investments are withdrawn from certain sectors, they are freed up to be reallocated to growing sectors (health care, "green jobs", IT, etc.). The U.S. is blessed to have such flexible labor and capital markets because it makes our economy more nimble than most European or Asian economies. It's painful - and we need to support the losers - but recessions have come and gone for centuries. It's not the end of the world.

That's not to say that there aren't important economic issues to consider. The problem is that none of the candidates are talking about them! The important economic issues are the long-term problems that we need to start working on now - problems that existed before the recession and are still going to be their once we get back into an upswing. Problems like energy independence; budget deficits; spiraling health care costs; international competitiveness; energy independence decaying infrastructure; the aging of the workforce; have I said energy independence? These are the problems that we need to worry about - not the recession. We do have to act on the recession, but we know how to address it, and we know we'll eventually pull out of it.

One thing that is worth talking about that is related to the current recession is the re-emergence of "stagflation" - the coexistence of inflation and recession. We haven't seen that since the 1970s, and (pardon my French), stagflation can be a real bitch. For those who don't know, economic theory predicts that inflation and recession should NOT occur together. In fact, one usually solves the other! The solution to inflation is to slow down economic growth, and the solution to an economic slowdown is to pump cash into the economy, which has the downside of inflating the currency. So, needless to say it scares economists when the two come together. Well folks, it's happening again. We haven't hit double-digit inflation or double-digit unemployment yet (both of which occured in the 1970s and early 1980s), but who knows - we're not out of the woods yet. This is a serious concern, and you do hear the candidates talking about higher prices - but you don't really hear them talking about the paradox of stagflation and what they're going to do about it. And maybe they shouldn't - maybe this is a job for the Fed and the Treasury Secretary, and economists to look into for the time being.

My number 1 issue(s): Terrorism, the Iraq War, infrastructure, health care costs, the budget deficit, and energy. Nobody shines on all of them, but Obama has a strong lead.

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