GSU panel discusses politics, the economic crisis

Bobby L. Hickman

October 10, 2008

The current economic turmoil will affect on next month's elections, even though the crisis was not caused by the political process, according to Dr. Jeff Lazarus, assistant professor of political science at Georgia State University.

Lazarus said politicians from both parties are busy trying to place the blame on each other, but "I'm not certain this crisis has political causes." The problem has economic roots, he continued. "It was not caused by a few elite business leaders, not by government or elected leaders," Lazarus said. Instead, he said the meltdown can be traced to "millions of {home mortgage} loans" taken out by individuals across the country.

The comments came at a Wednesday afternoon panel discussion at GSU's Student Center. The topic, "Crisis in the Economy: Multidisciplinary Perspectives," brought together GSU faculty from the history, economics and political science departments to share their viewpoints on the current economic meltdown.

On the political side, Lazarus said, the economic crisis will have a "significant" impact on the general election and the presidential race. Republicans are bearing the brunt of the political fallout, he said, in part because the GOP has always been associated with financial leadership, plus because the party currently controls the White House. "Like the manager on a baseball team," he said, "the president gets too much of the credit when things go right and too much of the blame when things go wrong." He noted some conservative pundits are already conceding that John McCain is likely to lose to Barack Obama, with debate now centering on how many seats Democrats will gain in Congress.

Dr. Bill Downs, chairman of GSU's political science department, who moderated the panel discussion, noted the Dow Jones average fell more than 900 points during the first two days of the week. The $700 billion bailout and rescue plan approved by Congress and President George W. Bush "seem to have done little to shore up" the situation, he said. With "banks teetering and confidence down," he added, even the Federal Reserve Bank's half-point reduction in interest rates has done little to reduce the "uncertainty that has now spread to Europe and Asia." He pointed to a recent survey that only 9% of Americans believe the country is heading in the right direction - "a historic low."

Dr. Carter Doyle, assistant professor of economics, described the current situation as "definitely a crisis of confidence," an assessment agreed upon by the other panelists. He traced the roots of the current economic turmoil to the escalation of housing, easy credit and accelerated real estate activity earlier in the decade which produced a "housing bubble" that collapsed about a year ago. When the bubble burst, the country saw increased foreclosures and loan delinquencies, resulting in more than $500 billion in write-downs by finding services companies.

Dr. Michelle Brattain, associate chair of history, said she sees not one current crisis but multiple ones. While most of the attention has been on Wall Street and the credit markets, she said, there has been little attention on the "effect on ordinary Americans." She said average citizens are concerned over fuel prices, declining home values, health care costs and consumer debt. "There is also a lot of uncertainly simply because most people really don't understand that is going on," she added.

Lazarus said that for most people, "this crisis is theoretical - thus far. Most people still have their jobs, homes and savings." However, he added, the potential for the crisis to spread beyond the financial services "is huge." The current concern is the short-term paper market: if the source for businesses to obtain credit for day-to-day operations dries up, layoffs and a business slowdown could affect more Americans directly. Those concerns helped propel Congress to pass the $700 billion rescue plan despite widespread opposition by most constituents.

Doyle added that with the financial crisis worsening each day, Congress had to act. He said, "The cost of not intervening is probably greater than the actual cost of the intervention."

Related Content:

• State transportation cuts under fire
• Voters also must choose amendments' fate
• Senate hopefuls bring divergent backgrounds

---