What You're Really Voting For

It's not what the candidates say they'll do if you put them in the White House. It's what they will do for your money once they get there.

The American financial system is in a state of complete, hair-on-fire chaos. Keep that in mind when you evaluate John McCain and Barack Obama's economic plans.

The success or failure of the $700 billion mega-bailout of Wall Street will shape every economic decision the next President will make. That, in turn, means that the campaign promises of both men should be taken with a box of salt. No one knows with any certainty what the financial future holds and how the country's priorities will change as a result.

One thing you can know for sure: The new administration, whether it's Democratic or Republican, will face some harsh new realities come Inauguration Day in January. And reality can often make conflicting demands.

With the bailout, the U.S. government is taking on very large financial commitments to rescue the financial sector, which will make new spending plans or tax cuts that much more difficult to push through.

On the other hand, if we're heading into a recession, it's probably the wrong time for the government to be adopting austerity measures. The tough calls are just getting tougher.

So if either of these guys is remotely qualified for the job, he'll have to be a lot more flexible once in the Oval Office than he's been on the stump. (It's also easy to forget this every four years, but there's a whole other branch of government called Congress - you know, the one that actually crafts legislation.)

Still, you'd better listen to what Obama and McCain are saying they'll do. The candidates' 20-point plans add up to very different visions of how the economy works and even of how America's economic success ought to be measured.

If a President McCain or a President Obama lives up to even part of his agenda, it will make a difference not only to your tax bill next year but also to your family's long-term financial security.

Think of this election as a choice between the Party of the Pie and the Party of the Slices. Most of McCain's policies are focused on making the overall economic pie bigger, the traditional Republican approach. If there's more good stuff to go around, the thinking goes, everybody should ultimately be better off, even if a few people gobble enormous pieces.

By contrast, Obama and the Democrats are far more interested in whether the pie is sliced up fairly. Obama points to years of weak wages at the median (literally, for the people in the middle) even as overall GDP kept on rising.

Of course, both McCain and Obama say that they have the best plan to grow the whole economy, not just their favorite parts of it. And both candidates are generally market-friendly and tax-averse - we're still living in the post-Reagan era, after all.

But at almost every level, whether you're talking about financial market regulation, income taxes, retirement savings or paying for healthcare coverage, Obama is much more likely to have the federal government intervene in the name of "American families," to use his favored locution. McCain, on the other hand, puts more faith in the marketplace and both individual and corporate enterprise.

That's the big picture. Read on and you'll learn the details of what each man has planned for you and your money. You'll also get a reality check about a challenge that neither candidate seems to be facing squarely: a long-term budget deficit that threatens to take a big bite out of everybody's pie.

Job One: Getting Back on Track

Even under the best-case scenario, the next President will inherit a battered and bruised economy when he takes office in January. So he'll have two very big items on his to-do list the morning after the Inaugural Ball.

First, he'll need to set up regulations that restore consumer and investor faith in the country's financial system. And second, he'll have to harness the government's power to spend and tax (or more to the point, to not tax) and pump growth back into the economy.

Let's start with financial regulation. Both Obama and McCain supported the big bailout in broad terms, and each is doing his best to show you that he's super, steamin' mad at Wall Street. Where the candidates really differ is in how they diagnose the problem.

McCain's rage seems focused on the way bankers have held up taxpayers. Obama, by contrast, talks a lot about what the financial industry has been doing to borrowers. Financial reform for the Democrat is largely a matter of consumer protection.

For example, since last autumn Obama has called for a "HOME score" for mortgages, to make it easier for you to compare the costs and features of a loan. He also wants rules to stop what he calls predatory credit-card practices, such as charging interest on top of transaction fees.

Fair or not, the new conventional wisdom in favor of regulation doesn't play to McCain's strengths. Last spring he told the Wall Street Journal, "I am fundamentally a deregulator." On the stump, he's talked about going after criminals who've defrauded borrowers but not about writing new laws to regulate the mortgage business.

When the Republican has talked about new rules, he has focused on fixing the capital markets, not the retail lending market. He wants better financial disclosure from Wall Street firms and says he'd streamline the gaggle of regulators, from the SEC to the OCC to the Fed, that oversee the fractured system.

What about helping more families in danger of foreclosure? Obama wants to change bankruptcy laws so that judges can modify mortgages. He also said recently that the Treasury should "study the option" of buying individual mortgages to help people stay in their homes.

McCain until recently supported more modest interventions in the housing market, but in the second debate shifted course dramatically. He said he would order Treasury to buy up bad loans and renegotiate them. A key feature of the McCain plan is that the government would purchase the loans at full value, instead of requiring the lender to take a hit.

When it comes to stoking the economy, the Obama prescription is simple: Send cash. Now. In a short-term stimulus plan Obama outlined this past summer, he calls for sending a $1,000 tax-rebate check to every family, to be financed by a "windfall" profit tax extracted from energy companies. He'd use a few billion more to finance construction projects to avoid cutbacks in social services and to extend unemployment insurance.

This is a fairly traditional Keynesian approach to managing a slump, designed to keep consumers and businesses spending until the storm passes. A similar logic was behind the two emergency tax rebates George W. Bush approved.

McCain seems to be leaning in the opposite direction. He said recently that the last major stimulus package probably didn't work. Although he hasn't ruled the idea out, he also suggested in the first debate that he might try to get an across-the-board freeze on discretionary spending his first year in office.

His basic plan for growth is pure Reagan-era supply-side economics: Keep top tax rates low, including taxes on business, to provide incentives for enterprise and investment.

This brings us to what you really want to know...

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