June 27 (Bloomberg) -- An era of active government may be approaching -- no matter who wins the presidency.
In a variety of areas -- from oil-futures trading and investment banking to climate change and home mortgages -- Republican John McCain and Democrat Barack Obama both see a bigger government role in the economy. So, too, do many Democrats in Congress, whose numbers are likely to grow after November's elections. Put it all together and a shift away from President George W. Bush's anti-regulation ideology is in store.
``We're going to see more regulation and more government intervention in the economy,'' said William Niskanen, chairman of the Cato Institute, a libertarian research group in Washington that supports limited government.
Behind the shift: Americans' growing disenchantment with where the country is headed. Almost 8 out of 10 people questioned in the latest Bloomberg/Los Angeles Times poll said the country is on the wrong track.
``There's a certain amount of disillusionment with free trade and globalization, and the deregulation movement,'' said Martin Baily, senior fellow at the Brookings Institution in Washington and a former chief White House economist under President Bill Clinton. ``It's a genuine shift in sentiment toward a more active role for government.''
That worries Michael Tanner, a Cato senior fellow. ``Regulation is not cost-free,'' Tanner said. ``It's a form of an indirect tax.''
More Regulation
To be sure, government's reach would probably expand more with Obama in the White House than it would under McCain. The Illinois senator has proposed greater regulation of everything from credit cards, where he has talked of a cardholder bill of rights, to the Internet, where he backs rules to bar broadband providers from giving favorable treatment to some Web content and services.
``If Obama is elected, there will be strong pressures from the Congress and executive to regulate more,'' said Robert Hahn, executive director of the American Enterprise Institute's Center for Regulatory and Market Studies in Washington.
Yet even a President McCain would be more inclined to government intervention than Bush, Hahn said.
``He's clearly more populist than Bush,'' J.D. Foster, senior fellow at the Heritage Foundation in Washington, said of the Arizona senator. ``And often times, that means calling for more regulation.''
Similar Rhetoric
McCain and Obama have responded to voters' concerns with rhetoric that, at times, sounds similar. Both have blamed speculators for driving up oil prices and have promised new regulations of futures trading.
Both candidates have proposed a bigger government role in stemming home foreclosures in the continuing housing bust. McCain, 71, wants the Federal Housing Administration to help subprime borrowers refinance into lower-cost, government-backed mortgages. Obama, 46, would go further, creating a $10 billion government fund to prevent foreclosures.
Obama and McCain say they favor increased regulation of Wall Street in the wake of turmoil that forced the Federal Reserve in March to help arrange JPMorgan Chase & Co.'s proposed takeover of Bear Stearns Cos.
``We saw not enough capital backing loans that were made, not enough capital for people who were involved in investments,'' Douglas Holtz-Eakin, McCain's top economic policy adviser, told Bloomberg Television on June 6. ``We need to establish a regulation system that has those kinds of incentives.''
Watching Wall Street
Americans favor more aggressive regulation of Wall Street by a margin of about 3-2, according to the Bloomberg/Los Angeles Times poll. The survey interviewed 1,233 adults from June 19-23.
On the environment, both McCain and Obama back mandatory limits on greenhouse-gas emissions and proposed a cap-and-trade system to help bring that about.
Eric Toder, of the Urban Institute, said no matter how the cap-and-trade system is set up, it will mean more government bureaucracy. ``One way of the other, it's going to be adding complexity,'' he said. ``There's going to be a lot of special pleading by companies looking for exceptions.''
Obama, with potential backing from a Democratic-led Congress, has proposed programs that would extend the reach of government, including a major revamp of the health-care system and a $10 billion plan to promote early-childhood education.
``For eight long years, our president sacrificed investments in health care, and education, and energy, and infrastructure on the altar of tax breaks for big corporations and wealthy CEOs,'' Obama said in a June 9 speech in Raleigh, North Carolina.
Reversing Reagan
Niskanen, of the Cato Institute, said Obama effectively wants to extend U.S. regulation abroad by insisting that trade agreements contain added protections for workers and the environment. ``It would be exporting regulation,'' he said.
Tom Gallagher, managing director in Washington for ISI Group, a money management and research firm, likens this year's election to a mirror image of the 1980 race. Republican Ronald Reagan's victory that year cemented a swing toward deregulation that began under Democrat Jimmy Carter, who, among other steps, removed most government regulation of airlines.
This year's election may mark a turning point in the opposite direction, building on such regulatory actions as the Sarbanes- Oxley law that increased oversight of corporate governance, according to Gallagher.
``'08 may be the opposite of '80,'' he said.
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