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Thought experiment

What would the unemployment rate be right now if John McCain had won the presidency? Why?

I'm much more interested in why it plausible arguments and mechanisms for why it would be lower than why it would be higher. And don't feel too limited here: If there's another politician or candidate who you want to base this counterfactual around, go for it.

By Ezra Klein  |  August 5, 2010; 4:46 PM ET
 
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Comments

It would be lower under McCain because he'd do all the standard Keynesian stuff Obama should be doing, but he would get lots of republican support. Under republican presidents, deficits don't matter.

Posted by: fuse | August 5, 2010 5:04 PM | Report abuse

It would be lower under McCain because a universe where McCain is elected president is a universe where the economy didn't collapse in 2007-09.

Posted by: cinephile | August 5, 2010 5:07 PM | Report abuse

It would be the same because presidents can not control the global economy. The global economy of some 6 billion plus people is far too much to be controled by one man, even if he sits in the oval office.

Posted by: lancediverson | August 5, 2010 5:13 PM | Report abuse

It would be lower under McCain because we'd all have jobs either protecting the Georgia border against Russia or occupying Iran.

Posted by: mschol17 | August 5, 2010 5:15 PM | Report abuse

I gotta agree with fuse- if McCain were president we wouldn't have this mindless Republican opposition. But I'd disagree on the Keynesianism. McCain doesn't know jack about ecomonics, so he'd enact whatever Graham wanted, which would def not be Keynesian.

Posted by: Quant | August 5, 2010 5:24 PM | Report abuse

I agree with fuse:
It would be lower under McCain because he'd do all the standard Keynesian stuff Obama should be doing, but he would get lots of republican support. Under republican presidents, deficits don't matter.

But would also like to add our long term deficit would be much worse, because we'd also have lots of tax cuts on top of it.

Posted by: will12 | August 5, 2010 5:24 PM | Report abuse

will- we already did have tax cuts under Obama, remember? No one does, because Democrats never get credit for cutting taxes.

McCain's tax cuts for the rich would have more psychological impact than Obama's for the middle class.

And yes, after 4 years there would be an even bigger mess for President Warner to clean up.

Posted by: Quant | August 5, 2010 5:28 PM | Report abuse

"Unemployment would have been lower because McCain would have cut taxes, stimulating growth and investment rather than funneling money to wasteful government spending. He also would have removed restrictive regulations that prevent the market from functioning efficiently, and increased confidence on the part of business that the government would stay out of their way."

In quotes because I don't believe any of it, but I think that is close to the rationale of people who do believe it.

Posted by: seanmcarroll | August 5, 2010 5:33 PM | Report abuse

Unemployment would be about 53% and we'd all be living in caves and reverting to barter. McCain would be dead of a heart attack already and President Grizzly would be organizing a massive nationwide book-burning.

Posted by: mdg1111 | August 5, 2010 5:36 PM | Report abuse

Thanks quant, I always forget about the tax cuts to me. Why are democrats so bad at heralding their own tax cuts?

Posted by: will12 | August 5, 2010 5:42 PM | Report abuse

Probably the same, given that it is likely his advisors would have recommended Keynesian stimulus programs as well.

Posted by: justin84 | August 5, 2010 6:02 PM | Report abuse

Unemployment would be unmeasurable, because many cities in the US and around the world would still be too radioactive to enter.

On the other hand, the capital gains tax rate would be 5%.

Posted by: stevie314 | August 5, 2010 6:10 PM | Report abuse

we woud not know the unemployment rate because VP Palin is in charge of these data and she had Fred Malik purge the entire BLS staff.

Posted by: docstu1 | August 5, 2010 6:25 PM | Report abuse

Higher. The Recovery Act would have been smaller and more tipped toward relatively-less-stimulative tax cuts.

But McCain would be far more popular because Congress's major legislation would have had much more Republican support.

Posted by: Porchland | August 5, 2010 6:26 PM | Report abuse

January 20, 2010- John McCain is sworn in and it is from this point onward that events would be different (i.e. original TARP would already have been passed).

-Faced with the need for further liquidity, the second $350 billion would likely be authorized, and as the original TARP bill was bi-partisan and requested by a Republican administration, no substantive changes would likely be put into place (i.e. capital requirements on banks, etc.).

-1/3 of the stimulus would be passed, at least, as the tax cut portion would likely make it through the Senate. Perhaps a bigger portion of tax cuts would be authorized, but if the Senate remained 59-40 (with Minnesota outstanding), both sides may end up giving up more to compromise. Any increases then would likely come in the form of TAX CUTS, and the final bill could be larger. While tax cuts may be relatively inefficient as stimulus, it could represent a larger stimulus.

-From there, the narrative may not turn towards health care, and if more time was spent on the economy, more money could be as well. A financial reform bill could be passed earlier, with perhaps more concessions to Wall Street, and this might lessen uncertainty over the future, or at least push up the process by a year. Effect on unemployment: unknown.

-An increased emphasis on tax cuts could take the form of hiring credits which could catalyze further hiring from businesses.

-Higher troop levels in Iraq, as well as Afghanistan, could stimulate higher military spending.

---In summary, while no overwhelmingly large new stimulative policies would be likely, a combination of increased spending agreed upon by both parties in this reality could lead to gradual increases across the board, primarily by adding futher tax cuts to the "actual" stimulus. In this reality, it is hard to imagine unemployment being more than 1 percentage point lower, and even that seems unlikely (not to mention the massively larger increase in the deficit under than scenario, if anyone continued to call themselves a "deficit hawk".)

On the other hand, it is not hard to imagine a future where little stimulus is passed and GM and Chrystler collapse, with unemployment 1-2-3% higher, or where the second half of TARP is not authorized (lets remember how McCain responded to pressure from within the Republican Party, both before 2008 and 2010) and the economy collapses even futher, pushing unemployment to Nevada-esque 15%+ rates.

***Next question- Imagine a future where Congressional Republicans get all of the policies that they have currently requested.

Posted by: NickM2 | August 5, 2010 6:32 PM | Report abuse

It is hard to say, but McCain's economic message after the election in 2009 during the stimulus debate was that in order to get out of the economic mess we had to cut wasteful spending. Cut pork. That was also his message in the election, while the financial crisis was happening.

That is of course absurd. The truth is, for someone who wanted to be president, McCain was an ignoramus on economic issues. So you would have to think it would be worse, simply because he would be shooting from the hip.

Further, in 2008 McCain showed that he had a tendency to hire less than the brightest advisers, and to also to go with the right wing line to please his base.

Bottom line: We probably would have had a smaller stimulus package with more business tax cuts, rebate checks, and less "pork". And McCain probably wouldn't have bailed out the auto companies, which probably would have been a disaster.

So you would have to say worse, perhaps much worse.

Posted by: StevenDS | August 5, 2010 8:02 PM | Report abuse

What would unemployment be if McCain had won? Considering who was his economic team (they thought us whiners if you recall), and that the Republicans in Congress told him to get lost when he suspended his campaign to try to find a solution when the economy collapsed:

1. The Republicans would have canceled TARP; ergo the banking system would have collapsed;

2. There would have been no stimulus; ergo GM & Chrysler would be out of business; thousands of additional projects would not exist (even those that Pence likes to smile at although he voted against the stimulus);

With no banking system and a major sector in bankruptcy, I expect we would have 2-4 million more unemployed; with many more millions partly employed. In essence a depression.

But at least there would be no estate taxes next year.

We would also be stuck in an unfunded war against Iran, with Congress threatening to reinstate the draft given the manpower shortage in the military (between Iraq, Afghanistan, Iran, protecting Georgia).

Between the additional military commitments and the economic depression, the deficit would be around $1.5 trillions, with no hope in sight.

Posted by: AMviennaVA | August 5, 2010 9:40 PM | Report abuse

It would be the same. It might even be temporarily worse. But the long term prognosis would be better because he'd be fighting a Democratic Congress and we'd have some blessed gridlock and wouldn't be spending so g****d*mn much.

Posted by: bgmma50 | August 5, 2010 10:04 PM | Report abuse

Recall that when Pres. Bush faced slowing growth, he simply mailed out checks to everyone. They weren't very big, but I do think that it proves that "deficits don't matter" nor does gov't spending when the Republicans are in the White House. Debt has exploded under every GOP president for decades, but balanced budgets seem not to matter until a Dem gets in office.

For that reason, I think that McCain would have been able to pass various "job creation" bills, larger tax cuts, and possibly something like a payroll tax holiday. I don't have much faith that the actual stimulative power of such acts would be better than what we have now, but I am fairly certain that we would not have a media (and populace) obsessed with debt (even if the debt numbers were actually worse) and there would not be any talk of "bond vigilantes" nor would the Federal Reserve be threatening to raise interest rates. Such an environment might have a positive effect on consumer confidence as well as business confidence.

We also likely would not have gotten health care reform, or financial reform, both of which arguably do add uncertainty for business planning.

Overall, I think that the actual fundamentals of the economy would like be worse, the debt higher, and much needed reform, financial and health care would not have happened, leading to a higher chance of an even worse future fiscal situation. BUT, in the short run that would be mitigate out by confidence as we would no longer have FOX, CNBC, and even the more liberal media outlets spending every day harping about socialism and gov't spending, and debt.

All those things are perfectly alright when the GOP does it as at least 30 years of US history has empirically shown. The only two times there has been a push for balanced budgets is right after a Democrat takes office, for, as Cheney said, "Reagan proved that deficits don't matter" if you're a republican).

Posted by: nylund | August 5, 2010 11:42 PM | Report abuse

Would unemployment be lower if we:

A) Allow a polarizing partisan like Nancy Pelosi pick specific winners of billions of tax payer cash hoping for some sort of ripple effect into the private sector that is lasting.....


OR

B) Give money to the enterprises in the economy that are currently the most profitable through tax cuts including tax cuts for the most profitable with the thought being that the most profitable sectors of the economy are where good permanent jobs get created. Unlike government spending, the tax cuts would deliver the money where it needs to go the second the President signs it into law and their accountants double-check the fine print.


The unemployment rate would be much much lower under a President John McCain.

Posted by: FastEddieO007 | August 5, 2010 11:59 PM | Report abuse

If the government lowers the cost and risk of running a profitable business there will be more and more profitable businesses.

This is a simple indisputable fact.

The only idiots who don't understand this is idiots living in the ivory towers of academia who never actually had a responsible adult job.

Posted by: FastEddieO007 | August 6, 2010 12:03 AM | Report abuse

The unemployment rate would be 11.5% and inflation would be -0.5%. GDP growth would be at it's current level at this moment, but the forecasts would be towards a double dip recession.

To divine this all we have to do is apply simple back of the envelope Keynesian understanding of aggregate demand. The validity of these theories was never questioned until it was politically expedient for one party to deny them and no honest alternative theory has been explained for current unemployment situation. Politically I'm assuming that a McCain election would have lead to a smaller stimulus directed towards tax cuts. The result would be that instead of having the federal expansion offset the state contraction as we experienced, instead there would have been a net government contraction leading to another 2% decrease in GDP and a 2% increase in unemployment. The future would be a double dip recession because with the stimulus ending, the government would be going into austerity as welfare measures dried up and additional federal stimulus does not offset the cuts. Basically, we get Herbert Hoover 2.0 but at least this time the Federal Reserve would be helping matters instead of bleeding the patient.

Looking into the long term, the countries fiscal future would be bleak. Taxation would be widely out of line with spending and reform of neither health care nor social security would have appreciably improved the long term outlook. Things would get even worse when the second american civil war broke out in 2012, but would improve markedly in 2014 when neither side can afford ammo and peace falls on the broken and irrevocably split remains of a nation.

Okay, that third paragraph was a teensy little bit more then back of the envelope aggregate demand thinking. But we were all thinking it ;)

Posted by: theamazingjex | August 6, 2010 2:53 AM | Report abuse

The problem these days is that the market reacts to the accumulation of debt that is not derived from tax cuts.

Private investment expects that government spending will ultimately result in a bigger tax burden that will have to be paid for by the private sector.

When tax cuts cause debt, its okay because the private sector is seeing an immediate relief today for a burden to be paid later. But Pelosi's stimulus----which by the way happens to be written by LABOR + TRIAL LAWYERS + ENVIRONMENTALISTS----is expected to slow slow slow down the economy. The market is smart and understands how Democrat politicians see private business.

Unemployment would be much lower if we didn't have a government run by radical ideologues willing to allow LABOR + TRIAL LAWYERS + ENVIRONMENTALISTS throw 6000+ pages of complex new regulations drive business and the private economy into a horrible horrible negative death spiral.


The real scary things for you open minded liberals to consider is whether or now Obama might be enacting Bill Ayers and his buddies radical Cloward-Piven plan to drive our nation toward a Marxist Dictatorship.

I believe Barack Obama is a good human being, a wonderful dad, and a nice husband. But there are radical connections to him that concern me. He worked side by side with Bill Ayers when Bill Ayers told the NY Times that "I do not regret bombing. I wished I had bombed more".

Did you ever work with someone like that?

Posted by: FastEddieO007 | August 6, 2010 8:55 AM | Report abuse

A number of CEO's (such as that of Verizon) have been saying that the onslaught of legislation has created great uncertainty and made them reluctant to hire. But let's just dismiss that as racist talk, per Journolist. On tv yesterday Axelrod has given the cause of unemployment as "um, uh, um, the uh crisis in Greece and uh Europe has uh uh caused some uh retrenchment..." So that would have been the case under McCain as well, so there would be no difference.

Posted by: truck1 | August 6, 2010 9:35 AM | Report abuse

It would be about 20% because McCain would have let the automakers go bankrupt and the ripple effects of that would have led us to a full blown Great Depression.

Posted by: redwards95 | August 6, 2010 9:43 AM | Report abuse

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