Sour economy top issue in US presidential race
Monday, 18 August 2008
WASHINGTON, Aug 17 (AFP): The US economy has become the number-one issue of November's fast-approaching presidential election, and whoever ends up controlling the White House will face pressing budget and fiscal challenges.
Some analysts say a flailing economy can benefit a challenger from the party that does not control the White House as voters can assign blame for an economic downturn to a president's party, as occurred in the 1992 failed reelection bid by then-president George Bush, President George W Bush's father.
"When it comes to voting, unemployment doesn't matter. Inequality doesn't matter (in the United States). Growth of real after-tax income does matter. The stock market does matter," said Alan Reynolds, a senior fellow at the Cato Institute, a free-market think tank.
Reynolds said a rising stock market can boost the reputation of the party in power, but he said the perceived weakenss of the US economy at present could benefit the Democratic presidential hopeful, Senator Barack Obama.
In such a climate, it is not surprising that Obama and his Republican rival, Senator John McCain, have sparred hotly over economic matters, taxes and high gasoline prices.
Obama has called for a second economic stimulus package while McCain says he favours fresh tax cuts. Each candidate insists his plans would help fire up rocky economic growth.
Americans are very troubled about their economic well-being, according to the results of a Pew poll published in late July which showed that 54 per cent of respondents think the US is in recession while 18 per cent view it as a depression.
A persistent housing downturn, a credit crunch in the banking industry, rising unemployment and high energy costs have all taken a toll on consumer sentiment.
That leaves the Federal Reserve walking a policy tightrope. The central bank is trying to engineer an economic rebound, but it does not want to be accused of bending its policies to favour either Obama or McCain.
Although Fed chairman Ben Bernanke is a moderate Republican appointed to office by President Bush, he has gone out of his way to underline the central bank's independence and held a meeting with Obama last month.
"People that think that the Fed is some kind of political creature are mistaken. They do a disservice to assume that and it's very unfortunate that some people assume that," said Michael Swanson, an economist at Wells Fargo.
Luckily for the Fed, the economic climate does not favor interest rate changes. Boxed in by sluggish growth and roiling inflationary pressures, the central banking has adopted a wait- and-see approach and left its main rate unchanged at 2.0 per cent for it last two meetings.
Some analysts say a flailing economy can benefit a challenger from the party that does not control the White House as voters can assign blame for an economic downturn to a president's party, as occurred in the 1992 failed reelection bid by then-president George Bush, President George W Bush's father.
"When it comes to voting, unemployment doesn't matter. Inequality doesn't matter (in the United States). Growth of real after-tax income does matter. The stock market does matter," said Alan Reynolds, a senior fellow at the Cato Institute, a free-market think tank.
Reynolds said a rising stock market can boost the reputation of the party in power, but he said the perceived weakenss of the US economy at present could benefit the Democratic presidential hopeful, Senator Barack Obama.
In such a climate, it is not surprising that Obama and his Republican rival, Senator John McCain, have sparred hotly over economic matters, taxes and high gasoline prices.
Obama has called for a second economic stimulus package while McCain says he favours fresh tax cuts. Each candidate insists his plans would help fire up rocky economic growth.
Americans are very troubled about their economic well-being, according to the results of a Pew poll published in late July which showed that 54 per cent of respondents think the US is in recession while 18 per cent view it as a depression.
A persistent housing downturn, a credit crunch in the banking industry, rising unemployment and high energy costs have all taken a toll on consumer sentiment.
That leaves the Federal Reserve walking a policy tightrope. The central bank is trying to engineer an economic rebound, but it does not want to be accused of bending its policies to favour either Obama or McCain.
Although Fed chairman Ben Bernanke is a moderate Republican appointed to office by President Bush, he has gone out of his way to underline the central bank's independence and held a meeting with Obama last month.
"People that think that the Fed is some kind of political creature are mistaken. They do a disservice to assume that and it's very unfortunate that some people assume that," said Michael Swanson, an economist at Wells Fargo.
Luckily for the Fed, the economic climate does not favor interest rate changes. Boxed in by sluggish growth and roiling inflationary pressures, the central banking has adopted a wait- and-see approach and left its main rate unchanged at 2.0 per cent for it last two meetings.