WASHINGTON — As the scale of government intervention transforms the nation’s fiscal landscape, presidential candidates on Monday offered their own proposals to make more palatable to voters the changing reality that could push the federal budget deficit next year toward $1 trillion.
Sens. Barack Obama and John McCain indicated they will not stand in the way of the Bush administration’s $700 billion rescue of U.S. financial markets. Democrat Obama laid out a plan to overhaul federal contracting and save an estimated $40 billion a year, while Republican McCain proposed an oversight board to monitor the bailout.
But advisers in both campaigns said they are not about to shelve their own plans to get the economy back on track — or embrace more aggressive budget-cutting measures — in the face of a short-term surge in the federal deficit.
“This is a major fiscal problem in the short run, but it doesn’t alter the long-run fiscal picture,” said Jason Furman, Obama’s economic policy coordinator. “The biggest challenge we face in our economy over the next year is getting it moving again, creating jobs and relieving the squeeze on families. That’s our overriding priority for the next year.”
Said Douglas Holtz-Eakin, McCain’s chief economic policy adviser and a former director of the Congressional Budget Office: “In terms of the numbers, obviously the landscape has changed. In terms of the (underlying) challenge, no, I don’t think there is much change.”
Obama vowed Monday to slash federal spending on contractors by 10 percent, saving $40 billion. Urging members of his own party to be just as fiscally tough as the most conservative Republicans, Obama said the bailout plan is forcing a renewed look at federal spending.
Obama also would create a government agency “charged with identifying recipients of corporate subsidies and evaluating the effectiveness of these subsidies in promoting growth and opportunity.” All corporate tax breaks would be easily searchable on a government Web site, and if the new entity deemed a provision to be a dud, it would be targeted for elimination.
McCain called Monday for greater oversight of the bailout, saying the $700 billion plan needed broader supervision.
He called for a bipartisan oversight board to supervise the proposed bailout, to be led by Warren Buffett or another widely respected business leader.
McCain suggested his one-time rival for the GOP nomination, former Massachusetts Gov. Mitt Romney, and New York Mayor Michael Bloomberg be part of the effort as well. Both men made multimillion-dollar fortunes in business before entering politics.
However, economists said that the sheer size of the bailout could give the next president political cover to address long-festering fiscal problems, yet neither of the men vying for the job has shown an interest in taking advantage of it.
“The U.S. fiscal situation is dramatically deteriorated from what it was,” said Martin Baily, a former chairman of President Clinton’s Council of Economic Advisers. “There is a debate which we need to have that is becoming more urgent: Our fiscal picture does not add up.”
Bruce Bartlett, a Treasury official in the Reagan administration, said: “This is just a terrific opportunity for both of these guys to do a do-over. Most of these proposals were formulated when they were running to get their party’s nominations. It looks ridiculous to keep peddling ideas that are no longer viable, as if nothing has changed. Then whoever is elected is at least elected on a plan that makes sense.”
And while Obama and McCain have pledged that they would live within some fiscal constraints, neither has offered enough details about how they are going to pay for promised tax cuts, health-care plans and energy spending, said Leonard Burman, director of the nonpartisan Tax Policy Center.
“Both of them would dig the hole way deeper,” he said.
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