Since 2000, corporate profits have jumped, but stock prices were down, even before the subprime mess. The fact is most of the gains have gone to private equity funds, hedge funds, investment bankers, executive buyouts and the financial engineers that run the deals.

Obama’s tax and redistribute policies will not resurrect jobs, wages or the price of stocks in American retirement accounts. Ordinary Americans who have to earn their livings outside the cosseted confines of Wall Street will be not much better off two years from now. In fact, Obama’s policies may make economic conditions worse.

However, middle-class distress gives populist promises strong appeal. If Obama wants to make Americans better off, he would serve them better by straightening out the banks and taking substantive action on the trade deficit with China. Also, he would be less politically correct on energy and the environment.

McCain does not offer much more, and in some cases he promises less.

Nancy Pelosi stated last week when the bailout bill passed: The party is over on Wall Street, referring to compensation reforms in the new law. Those reforms are simply too weak.

Come January, the Democrats will likely control both the White House and Congress. Until Pelosi and other Democrats recognize the problem is in the way the banks are run and get serious about fixing it, look for things to get worse before they get better.



Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.