WASHINGTON -- No matter who is elected president, budget experts say Republican nominee John McCain and his Democratic rival, Barack Obama, will have a harder time fulfilling their campaign promises because of the federal government's effort to calm the mortgage and credit markets.
"Both are going to be shocked by the size of the deficit they are going to inherit," said Leon Panetta, a Democrat who headed the House Budget Committee and then served as President Clinton's budget director and chief of staff.
On Monday, both candidates indicated they would support a bailout only with conditions.
"We must work quickly, in a bipartisan fashion, to resolve this crisis and avert an even broader economic catastrophe," Obama told a Green Bay, Wis., audience Monday. Like Senate Majority Leader Harry Reid and Speaker Nancy Pelosi, the top Democratic leaders in Congress, Obama is insisting on an additional economic stimulus bill and relief for homeowners facing foreclosure.
Speaking in Scranton, Pa., McCain said the Bush administration's proposal "makes me deeply uncomfortable" because "so much power" would be in the hands of the Treasury secretary. He proposed a bipartisan oversight board. Both McCain and Obama favor caps on the compensation of executives in bailed-out companies.
Though the federal government could end up making money when it begins to sell assets of the bailed-out companies, the deal will at least temporarily balloon the federal deficit. That will make the first year of the next administration "a very difficult time in terms of starting new programs," said former senator Warren Rudman, a New Hampshire Republican who co-founded the bipartisan Concord Coalition to lobby for deficit reduction.
The White House estimates the deficit will be $482 billion when the next president takes office on Jan. 20. Panetta estimates that figure could jump to $700 billion because of the bailout.
"This is a tough bill of goods, whether it's John McCain or Barack Obama," agreed House Budget Committee Chairman John Spratt, D-S.C.
It could complicate McCain's efforts to sell his plan to make permanent a series of Bush administration tax cuts that are due to expire at the end of next year. Scott Hodge, president of the Tax Foundation, a non-partisan research group, estimates the 10-year cost of extending those tax breaks at $1.5 trillion.
Obama's wish list includes a series of middle-income tax breaks that he estimates would cost $85 billion a year and expanded health care coverage at about $65 billion a year.
Jason Furman, a top economic adviser to Obama, insisted the current financial crisis only "magnifies the importance of a plan to grow the economy."
Thomas "Mack" McLarty, Clinton's first chief of staff, recalled that a larger-than-expected deficit in Clinton's first term caused him "to revise some of the tax cuts he had run on." President George H.W. Bush reneged on his pledge not to raise taxes because of the deficit he inherited from Ronald Reagan.
If Obama and McCain don't think they will have to make adjustments, "they're operating in never-never land," Panetta said.