Ever since Bill Clinton remarked, “It’s the economy, stupid!” the phrase has become a prominent part of the American political lexicon. This time around, we hear it all the time mouthed by pundits, and yet, watching the avalanche of political ads from where I live (in Michigan, a battleground state), it seems to me to be less about the economy and more about the patriotism and personal character of each respective candidate.

Plenty of “stupids” both implied and explicit are being bandied about.

Serious thoughts about the economy? Not so much.

Meanwhile, the U.S. economy has deep, unprecedented problems. Very serious problems. Problems so large that I think it is no exaggeration to say that they threaten to tank the United States politically, eventually relegating us to the world status of, say, Iceland – only without any of the socialized perks like healthcare and forward thinking energy policies.

While voters worry about who is wearing a flag pin and who will or will not raise their personal income taxes, inflation is hitting record levels; levels not seen in 17 years. The inflation rate for July alone was 1.9%. If the Fed raises interest rates (one conventional way to tame inflation), then mortgage rates will rise and lending will freeze up even more than it already has, driving the already catastrophic housing sector into an even deeper downward spiral, with the attendant loss of even more jobs, and yet another increase in foreclosures.

If inflation continues at this rate, the results will be just as toxic. Already there is talk of another economic stimulus rebate package, even though the first one was horrendously expensive and barely caused a blip on the consumer purchases screen. People needed that money to pay bills.

So there are no easy answers, but what strikes me in this campaign is that few are even asking the questions. Right now, Fannie Mae and Freddie Mac stock continues to deteriorate (20% in the past week alone) and the buzz is not about whether the recently passed rescue package will be used, but when and how. Remember, the rescue was tacked onto a foreclosure relief bill that was stuck in Congress for a year while representatives argued about “moral hazard” at an individual homeowner level. Once it turned corporate, boom, that bill was pushed right through, with the caveat, “We will likely never have to use this.”

Did anyone ever believe that?

Nouriel Roubini, the economics professor who correctly predicted the subprime crash and whom a recent New York Times article calls “Dr. Doom,” expects the cost of the Fannie/Freddie bail-out to hit $1.5 trillion before it’s all over. The famously bearish Roubini is quoted as saying, “A good third of the regional banks won’t make it,” and more disturbingly, “Our biggest financiers are China, Russia and the gulf states. These are rivals, not allies.” Roubini expects the worst to come throughout most of 2009, with a gradual recovery toward the end of that year, but he also notes, ominously,

We’re in uncharted territory where standard economic theory isn’t helpful.

He isn’t the first to say so. Henry Paulson of the U.S. Treasury has said as much, and all anyone has to do is look at Ben Bernanke’s face every time he speaks to Congress to understand instantly that we are in deep and confusing trouble. The man constantly looks like he’s about to wet himself.

Anyone who reads my posts for Amateur Economists can guess without any help which direction my personal politics lean, but I want to put it to the voters that, whatever your personal beliefs and political inclinations, now is not the time to indulge in American politics as usual with the chest thumping and flag waving and name calling and Boilermaker contests. Now is a time to listen very hard to policy making statements from both sides, to examine voting records and past behavior, and more than anything to ask yourselves how you will survive the coming hard times if no one who understands them is at the helm.

Thus far, what economic “policy” we have had has been reactive and seat-of-the pants. We’ve been plugging up holes in a leaky dike with wads of chewing gum. I don’t know if we have six months to waste, but it will be at least that long before a new administration is firmly in place and probably longer before that administration is able to formulate anything resembling an active response to the oil problem, the housing problem, the credit crunch, the bank failures, the crumbling infrastructure, the loss of American industry and jobs, declining wages, the healthcare crisis, and so much more.

John McCain owns seven homes, some of them condominiums, and all of them expensive. Barack Obama really was born in the U.S., does have a birth certificate here, and owns a million dollar home (just one though) near the Chicago law school where he used to teach. Both of them wear flag pins.

There. Now can we get serious?

Related posts:

1. Election Issues III: America’s Two Economies
2. Election Issues II: Tax Breaks for the Middle Class
3. Election Issues IV: “The Palin Effect” and Working Moms
4. It’s the Private Corporate Investment, Stupid
5. Where the “Other” Candidates Stand on Economic Issues