George Bush did not come into office talking about fighting a war on terrorism. Nor did he plan to take over large segments of the US financial sector. Don Rumsfeld went to the Pentagon to downsize and retool our fighting forces away from those suited to a large ground war towards a lighter, more agile force concerned with containing small outbreaks at a moment's notice.
Similarly, Franklin Roosevelt was elected to fight the Depression and wound up fighting World War II. The ability to change with conditions was what historian Doris Kearns Godwin labeled as the 4th trait of great Presidents.
Neither Senator Obama nor Senator McCain are particularly well equipped to handle the situation Wall Street finds itself in, nor the threat it poses to the economy.
Let's admit that up front.
Obama's strong point is social policy, e.g. health care and McCain's is foreign policy and defense. McCain once famously admitted to not knowing much about economics, and Obama was simply politically saavy enough not to admit the same.
In today's Wall Street Journal, political veteran David Seib notes that the new reality will impose serious limits on the politcal agendas of both candidates:
The domestic agenda of the next president is shrinking. Nobody, anywhere, knows how much of a financial burden the federal government has taken on in the past few weeks, but the cost of bailing out Fannie Mae, Freddie Mac and American International Group Inc. -- to say nothing of the potential cost of riding to the rescue of American auto makers, which looks increasingly likely -- could conceivably run into the hundreds of billions...
Tax increases will be harder to sell. Sen. McCain is right: A period of a shaky economy is a bad time to talk about increasing taxes. And the economy as well as the markets figure to still be shaking in January from the shocks delivered. That's a problem for Sen. Obama's proposal to increase the capital gains tax.
But tax cuts get problematic as well in this environment. Though tax cuts to juice up a lagging economy make a lot of sense, the amount of tax revenue the feds bring in also will be a bigger issue -- especially if the Chinese and world financial institutions grow leery of continuing to loan money to finance American spending. Can the government afford to both bail out financial giants and take the big hit to its own revenues that would come from, say, eliminating the alternative minimum tax, as Sen. McCain proposes? Or are the government's needs for money now just too great? Either way, the next president's path on taxes is getting more complicated.
Instead of spending billions on a national health care system or anything else, we'll need to have a debate on the role of government in the economy:
The mega question -- what is the role of the U.S. government in the nation's economy? -- isn't just on the table, but at the center of the table. The next administration will have to decide not just what financial firms the government ought to own and run, but how heavy the government's hand should be. These are questions the country faced in the Great Depression, and to a lesser extent during the savings-and-loan crisis of the 1980s, but they are back with exclamation points, and will be dumped in the lap of the new president.
Whoever the next President is must accept that much of his agenda will need to be set aside to deal with these questions, as unprepared as they are to deal with them.