Obama’s Treasury-Ready Men
There’s a huge multi-thousand word article in this mornings Wall Street Journal on Paul Volcker, the former Fed chairman who conquered inflation during the Reagan years and has become a key financial advisor to Sen. Obama. Articles like this fan the flames of speculation that Volcker could be Obama’s secretary of the Treasury, despite his 81-year-old senior citizen status. But Volcker is a vigorous 81 and I think he could handle the job.
Of course, Volcker has a great reputation as a deficit-cutter and a strong-dollar man. What’s more, as a long time financial advisor who was president of the New York Fed, undersecretary of the Treasury, and of course Fed chairman, Volcker’s money knowledge would gain bipartisan support to solve the financial crisis, which will surely spill over into next year. Volcker would attract bipartisan support because of his superb reputation. He is not a supply-sider, nor did he agree with the Reagan tax cuts in the 1980s while he was Fed chairman. But he did work well with the Gipper. Reagan’s supply-side tax cuts along with Volcker’s tight money to slay inflation produced a strong economic recovery and proved all naysayers wrong.
Volcker will unfortunately agree with Obama that the top tax rate can be raised. Not good. But he’s very good on tighter spending and King Dollar. And he does have vast knowledge of the intricacies of world credit markets.
I’m sure the Obama campaign is encouraging the Volcker speculation, since Mr. Volcker brings gravitas and experience to Obama.
The other likely candidate for Treasury under an Obama administration is Lawrence Summers, the proven protégé who was Treasury secretary during Clinton’s last year and before that undersecretary. Summers also would be a strong player, with wide knowledge of our financial problems. He’s also for a stable dollar. And noteworthy is his long-held criticism of Fannie and Freddie. Like Volcker, Summers would agree to lifting the top tax rate; he is no supply-sider. But also like Volcker, he is a moderate-to-conservative Democrat who would be well received by Wall Street and investors.
Are Stocks Ready to Blast Off?
For those like myself who believe the stock market is on the rebound, please go to “Calafia Beach Pundit”, a blog site run by the very smart freemarket supply-sider Scott Grannis. He has a blockbuster chart suggesting a huge rally in stocks.
It’s based on the fact that the two-year swaps spread in the bond market has fallen significantly and is closely related to stocks. His chart suggests the S&P 500 could rebound to 1,200. That would be roughly 20 percent above today’s level.
If Big Mac Wants to Distance Himself from Bush …
The Washington Post reports today that Sen. John McCain is out there on the campaign trail criticizing President Bush in order to deal with the Obama media attack linking Big Mac to W. Apparently McCain is criticizing Bush and Paulson as bailing out the banks rather than buying up underwater mortgages to help homeowners avoid foreclosure.
Okay, fine. I think Paulson’s three-cornered plan to recapitalize banks, buy up toxic assets, and guarantee short-term inter-bank loans in London and New York is the right policy. And since surfacing two weeks ago, the rescue plan is actually helping boost the stock market. But if McCain wants to go there on mortgages, then go there.
However, the senator could distance himself from President Bush in other ways that might resonate with the investor class — the important voting bloc that McCain needs to win by 10 points but is now running even. For example, until very recently the Bush dollar kept sinking. So why doesn’t McCain distance himself from Bush by supporting a King Dollar
that will attract global investment for job creation, hold down inflation, and improve America’s standing around the world? Sen. McCain also could tout across-the-board pro-growth tax reform, such as Paul Ryan’s idea of 10 percent and 25 percent marginal tax rates.
Economic emergencies require strong medicine, and tax reform along with currency reform is consistent with McCain’s message that he will be a real Washington reformer. There’s also McCain’s plan to reform the corporate tax. In this case, McCain’s rate-slashing idea can be sold as a jobs and wages booster and as a tax-cut for ordinary consumers who pay most of
the higher corporate tax that is passed along to them.
These would be very strong economic-recovery ideas that are separate and apart from the Bush policies and have a strong reform message.