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The comments came during a two-hour debate between Obama’s senior economic adviser Austan Goolsbee and senior McCain policy adviser Ike Brannon at the University of Wisconsin-Madison business school.
The advisers laid out their competing visions on taxes, health care, free trade and stimulating the nation’s deteriorating economy. Moderator Michael Knetter, dean of the business school, said the candidate elected president next month will be in a position to make wide-ranging changes to the economy.
Brannon said the plan McCain unveiled this week to have taxpayers buy mortgages homeowners can no longer afford — paying up to $70,000 per mortgage — is the best immediate solution. The loans would be restructured into more affordable, 30-year fixed-rate mortgages, he said.
“We think this is far and away the best plan to address the crisis that’s out there right now,” Brannon said. “The people who made a bad decision — we need to help those people. It’s not entirely fair, but we need to solve this problem as quickly as possible.”
The plan has come under attack from Obama’s campaign as well as some conservatives. The editors of The National Review, an influential conservative publication, blasted the plan as “a gift to lenders who abandoned any sense of prudence during the boom years.”
Goolsbee, a University of Chicago economist on the other side of the spectrum, echoed that criticism. He said the plan would force taxpayers to pay far more than what the mortgages are worth.
“It’s going to give subsidies to these very lenders, some of whom engaged in outright appraisal fraud,” he said. “They are going to get an extra payment out of this.”
Brannon countered that it would be superior to Obama’s plan that would allow bankruptcy judges to lower some struggling homeowners’ mortgage payments. That would force banks to take additional losses, he said, which would “trigger more bank collapses.”
“It’s exactly what caused the problem in the first place,” said Brannon, a former University of Wisconsin-Oshkosh professor who most recently worked as a tax adviser for the U.S. Treasury.
Goolsbee said Obama would push for another economic stimulus package if he’s elected. Obama has said that would include federal aid for local governments, road and bridge projects and additional unemployment benefits.
Beyond that, he said investments in health care, alternative energy and middle-class tax relief were needed to avoid “another crisis three or four years down the road.”
Brannon said McCain would keep income taxes steady — unlike Obama’s proposed increases on those who make more than $250,000 — and seek to cut corporate tax rates. That approach, he said, would “create a stable environment for economic growth.”
