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On Friday, presidential hopefuls Barack Obama and John McCain squared off in Oxford, Mississippi for the first of three presidential debates. Following the debate, Real News Network’s Senior Editor Paul Jay spoke with Ellen Frank about how the debate failed to address the most significant economic questions of the day.

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PAUL JAY, SENIOR EDITOR: Thank you for joining us for our series of interviews responding to the debate between Barack Obama and John McCain. The debate began with a clash—should we say a “clash”? I don’t know if it was a clash, because the candidates seemed to agree with each other on a large part, but somewhat of a clash on the question of what to do about the financial crisis, even though the host of the debate tried over and over again to say just what they think of the package and what they would do, and I didn’t get too clear an answer from either of them. At any rate, to help us parse and understand this, we’re joined now to discuss this with Ellen Frank, who’s a professor of economics at the University of Massachusetts in Boston and author of The Raw Deal: How Myths and Misinformation about the Deficit, Inflation, and Wealth Impoverish America. Hi, Ellen, thanks for joining us.


JAY: So let me start with the obvious question: who won the debate here, particularly on the financial section, which is your expertise?

FRANK: Well, I would say on that section Obama won hands-down, just because McCain barely seemed to know what he was talking about.

JAY: Well, dig into it a bit. I mean, McCain’s message was the way to respond to this crisis is to cut spending. Obama says let’s more regulation [sic]. So what do you make of how they responded to the whole issue?

FRANK: Jim Lehrer asked both candidates what they thought of the bailout package and what their opinion was, and neither of them really responded to his question. Obama sort of responded, you know, and I think in fairness to Obama, the package is not yet complete. There is a lot of questions about what the final package is going to be. There’s still, even on Thursday, before things blew apart, there were questions about what the final package was going to look like. You know, there are questions about how big is this going to be, if the government is going to buy up these assets, are they going to get an equity stake in the firms that come to the government for help. You know, there are very, very significant questions about how this is going to work. You know, are there going to be caps on CEO pay? And if there are, what are they going to be? Are there going to be regulations? Or are there going to be some kind of forbearance on, you know, people whose homes are being foreclosed upon? You know, all of these questions still remain unanswered.

JAY: And there’s even a question—from some of the people that are hoping to advise Obama, there’s even some questions of whether this whole package itself is conceptualized properly in terms of its fundamentals. There are people saying that there isn’t such an urgency for this package as everyone’s making out.

FRANK: I think there are serious questions about whether there is an urgency with this package, about whether there’s an urgency for a package of this size, about whether this could wait until after the election, with, you know, a smaller package being passed. You know, I mean, right now the urgency is to avert a panic on Wall Street, to provide liquidity to the system. Do we really need to be buying up these frozen assets at this time? Or do we just need to provide liquidity through normal Federal Reserve channels? I mean, there are many legitimate questions. I mean, you know, with the way Henry Paulson, as a Wall Street, you know, deal-maker, sees it and the way what might be in the best public interest [sic], I think there are legitimate questions about that. There are questions about whether the best way to do this is to bail out Wall Street or whether the best way to deal with this is to bail out people who are losing their homes and to try to prop up home values and avert the foreclosures and increase the value of these mortgage-backed securities in that manner. You know, these are very serious and legitimate questions, and I think that Congress has not dealt with that. And neither Obama nor McCain addressed those questions. Both said that they were in favor of some kind of bailout package; both said that they were in favor of whatever bailout package seemed to be in the process of passing, of some sort of bipartisan package that might get support of both the Democrats and the Republicans over the coming days or weeks. And that was sort of how it was left in the debate. And then both went on to talk about their economic agenda in general. And Jim Lehrer asked them, you know, what they would do as president to deal with the economic crisis, and also how their economic agendas as laid forth before this crisis dominated the economic news, how their agendas would shift, you know, in the wake of this crisis and in the wake of possibly taking office with a $700 billion, you know, expenditure, you know, facing them. And that, I think, was really the interesting part of the debate and the part where, you know, clearly the candidates were ill-matched. And I think, you know, in my opinion, Obama clearly outclassed John McCain and seemed to have some idea of what he was talking about, whereas John McCain seemed to stumble very badly. You know, Obama, you know, talked about, you know, his energy plan and his health care plan and his, you know, tax-cut plan. And McCain, you know, faced with the question of what to do about, you know, probably the most severe economic crisis facing the United States since the Great Depression in the financial markets, said, you know, when asked what needed to be done about this, said that we have to control federal spending.

JAY: What I didn’t understand is that just almost word for word—and I think Jon Stewart on his show did this last week or a couple of weeks ago—McCain is saying word for word what Bush said in 2000 when he ran for the election. It’s the exact same economic speech about cutting spending, cutting spending, and that’s the end of the message. But Obama didn’t say any of that. While I agree he had something to say about it in terms of what to do, I could not understand how he could not lay a glove on McCain on these issues.

FRANK: I was actually surprised also that Obama didn’t just lay into that, like, “What are you talking about? We have a problem with income distribution in this country, we have a problem of people losing their homes in this country, we have a problem of lax regulation in this country.” I mean, just today, Christopher Cox, the head of the Securities and Exchange Commission, admitted, acknowledged, that one of the biggest problems and one of the biggest causes of the current crisis in the financial markets was lax regulation of the investment banks by his agency, the Securities and Exchange Commission. Now, this is not necessarily his fault entirely; it’s because of a law that was passed in 2004 by the Bush administration that made regulation of the investment banks voluntary, so that they would voluntarily submit themselves to oversight by the Securities and Exchange Commission, and if they chose not to be regulated, then they wouldn’t be regulated and they wouldn’t, you know, submit their trading and brokerage activities to oversight, and that that was a big cause of the lack of oversight and the lack of any kind of supervision on what was going on in these firms. You know. And instead of laying into McCain and saying, “I hardly think that the federal spending and the federal budget is responsible for the kinds of problems we’re facing today,” he sort of let McCain wander on. And, you know, what was really surprising was that not only did McCain, you know, follow this argument that federal spending was the problem, but then went on to say that not only, when asked for specifics of federal programs that were the problem, didn’t even mention the big federal programs, like Medicare or Medicaid or social security or military spending, but started to talk about these earmarks, these, you know, pork-barrel projects that amount at the most to, you know, $18 billion that he had identified in earmarks, pork-barrel, you know, spending projects. In a budget of about $2 trillion a year, you know, this is small change. And these are things that, sure, you know, there’s waste and fraud and—.

JAY: Hopefully Barack Obama will call you in the next few days and ask you for advice for the next debate, ’cause—

FRANK: For the next debate.

JAY: —’cause in my mind, he’s got to do some more homework here.

FRANK: Yeah, he’s got to be a little more aggressive, I think, in taking on John McCain. But the truth is that—I mean, my feeling was that John McCain, he just kept returning over and over again to this earmark issue, and it became almost sad that that was the only sort of issue he could come up with when thinking about the economy, this—.

JAY: Well, they win elections with this kind of rhetoric, so I guess that it’s tried and true, and they just keep repeating it until somebody really cuts through it. Anyway, we’re going to talk to you again, hopefully, after the next debate, and of course, as the real world unfolds, the real world of probably the most serious financial crisis since the Great Depression—and you wouldn’t know it, really, by watching this debate. But thanks so much for joining us, Ellen.

FRANK: Okay. Thanks, Paul.

JAY: And thank you for joining us. And if you like these series of interviews, please click on the “donate,” ’cause we have our own financial crisis going here. Good night.


Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.

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Ellen Frank is Associate Professor of Economics at the University of Massachusetts, Boston, a member of the Dollars & Sense collective. Author of The Raw Deal: How Myths and Misinformation about Deficits, Inflation, and Wealth Impoverish America , was published in 2004.