You'll understand why I'm conflicted about the election because most of these things didn't get much attention in the campaign, and because I'm still in the dark about what the two real contenders (Obama/Romney) would actually do about a few of these issues. Here are my priorities:
1. Safeguard against future financial crises
2. Cut the corrupting influence of money in politics
3. Emphasize the tenth amendment (this one's vague, but whatever)
4. Cut war spending
5. Eventually balance healthcare/social security budgets
Priority 1: Safeguard against future financial crisesFour years ago, the US experienced a crisis so brutal in its scope that Hank Paulson and Ben Bernanke reportedly told President Bush that "if we don't act boldly, we could be in a depression greater than the Great Depression."
Thankfully, it wasn't that bad. But we still got hit hard, and we haven't recovered. The chart below shows what happened to revenue, spending, deficits, and debts as a percentage of GDP, 1972-2011.
(Source for the charts, which are fantastic. Also, see the definition of public debt on Wikipedia if you're curious.)
The main section I'm interested in is the little blip from 2007-2009 where public debt began to spike:
There were a lot of factors at play during this time, including increased spending on war and welfare, but the central cause for this dramatic shift in public debt had to do with the financial crisis and the resulting recession, which, for the purpose of this post, I'm lumping together.
Tax revenues went down (shown in red in the chart above) as unemployment went from about 6% to nearly 10%, and spending went up (shown in green) as government implemented bailouts, tax rebates, and stimulus packages.
So what about now, in 2012? Well, the banks that were considered "too big to fail" in late 2008 are even bigger, and the derivatives market (one of the main drivers behind the housing crisis) is still tumultuous, as evidenced by the $6-billion dollar "London Whale" loss earlier this year at JPMorgan Chase.
The 2010 Dodd-Frank Act tries to paper over some of these problems, but it's mostly just a 2300-page mess of loopholes and minutia with large sections being picked apart by the very banks the act should be restraining (see this skewering from The Economist). We just need a few simple rules in place to break up the banks, make derivatives more transparent, raise capital requirements, etc.
This is not to say that reforming these few things would be a silver bullet for preventing financial crises. There was much more at play in late 2008 than just TBTF, derivatives, and capital requirements. Still, there's good reason to think that these few safeguards may at least soften future crises and may prevent future bailouts.
Who am I closest to on this issue? Probably Jill Stein.
- Stein, who adopts the Green Party platform, goes so far as to say we need to break up the banks and require full transparency for derivatives. Bingo. See the details here. (Thanks to Makayla for pointing me to that link.)
- Johnson didn't talk about the financial industry in a speech of his I attended. When I asked him about it in the Q and A, he said he wouldn't have bailed out the banks at all—a hugely iffy move with consequences that may have been enormous. [Edit: This is not to say that I like TARP; it's complicated, and the bailout deserves another post to itself.] To Johnson's credit, he doesn't seem interested at all in kowtowing to Wall Street's whims, and so there's good reason to believe that at least he hasn't been bought.
- Obama wants to keep Dodd-Frank, and he talks about restructuring incentives on Wall Street (which would probably be a good thing, depending on the specifics). That said, we've seen what he's done so far with Wall Street and it's not pretty. He's spent his first term bowing to Timothy Geithner on these issues (who absolutely deserves the tag given to him by a top Wall Street banker: "our man in Washington").
- Romney says he wants to repeal and replace Dodd-Frank, but he's vague about what he wants to replace it with. He says he doesn't like "too big to fail," but he won't commit to breaking up the banks. Still, he has spoken out about capital requirements, and he has said that banks should maintain at least a portion of loans they originate. So that's good.
Top donors to Romney, 2012:
|Bank of America||$921,839|
|JPMorgan Chase & Co||$792,147|
|Credit Suisse Group||$618,941|
All 6 of the top donors to Romney are megabanks who obviously believe that investing in Romney would be good for their bottom line. When it comes to this issue, I have a hard time supporting Romney.
Here is a list of people (a few of many) who agree that the banks should be broken up, from SwitchYourBank.org.
(This post is patterned after something I wrote earlier on that site.)