Marketplace Scratch Pad

What if McCain had won?

Scott Jagow Jun 3, 2009

The New York Times Economix blog asks an intriguing question: How would the economy be different if John McCain had won the election? Their conclusion — not much different at all. Here’s why:

Economix argues that the “independent” Federal Reserve has really done most of the leg work so far, by pouring money into banks and lowering interest rates to zero.

On the other hand, to date, only a small percentage of the president’s $787 billion stimulus package has been spent:

Monetary policy is by and large set by the Fed, which is set up to be an independent organization. Many economists I’ve spoken with in recent weeks have referred to Ben S. Bernanke, the Fed chairman, as an “unsung hero” of the recession, and credited the Fed with doing most of the heavy-lifting in stabilizing the economy.

So if, compared to stimulus spending, the Fed’s programs are A) more aggressive, B) more effective and C) likely to have remained the same under a different administration, then the implication is that we’d probably be in the economic place we are now even if Mr. McCain was president.

Economist/blogger Tyler Cowen draws the same conclusion, although…

The one surviving counterargument, he said, was that President Obama has done more to bolster confidence than John McCain might have, whether because of President Obama’s looks, smooth-talking or what have you.

I’m not sure McCain would’ve gone down the same road with GM, and the stimulus package surely would’ve been smaller and more tax cutty (assuming he could get it through Congress), but I agree the economy would be in similar shape to this point. The real test is long-term, and it’s possible the outcome might be very different in that respect.

But one commenter to the blog said a more fascinating argument is this: “What would the country look like if Ron Paul had been elected president?” His answer: “I can imagine life would be much happier as I rode to the local blacksmith atop my horse, paying for his goods in gold dubloons.”

Fun with hypotheticals!

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