John McCain, Bond Market Vigilante

Which Democrat is carrying the torch of Clintonomics (or Rubinomics, if you prefer)? By that I mean which candidate believes economic growth is best served by 1) free trade and 2) lower budget deficits or surpluses leading to lower interest rates?

Sorry, trick question. It's none of them. The last Clintonista is Republican John McCain. While all the Democrats have shown a skeptical eye toward free trade and pushed for pricey fiscal stimulus packages, McCain remains an unabashed free trader (while supporting a radical transformation of unemployment benefits and worker retraining programs) and has clearly expressed a belief in the core tenet of Clinton economic policy: By lowering government deficits, bond yields fall as well. This is because of less competition for savings and lower inflation risk—as perceived by bond traders—due to controlled federal spending.

As McCain stated in the GOP debate before the Michigan primary: "Out-of-control spending is what caused the interest rates to rise. It causes people to be less able to afford to own their own homes. We need to stop the spending. And that way we can get our budget under control, and we can have a—basically a strong, fundamental fiscal underpinning."

When McCain listed his top economic influences at the Florida presidential debate, he named well-known deficit hawks Phil Gramm and Warren Rudman. (To be fair, he also named tax-cutter Jack Kemp, who recently endorsed McCain.).McCain has not pushed a $100 billion-plus fiscal stimulus package. And he just told the New York Times: "I think the time is ripe for spending restraint.... We can make the case more strongly than ever before, particularly to our Republican base, because they're angry and they're upset and they're dispirited."

Yet two favorite McCain budget targets, earmarks and "corporate welfare," together add up to maybe $100 billion or $125 billion a year. Now let's say a President McCain was able to cut that total by about half to $50 billion a year. (Also, remember that there will be a push by Congress for big increases in government spending on energy and climate change.) Saving $50 billion a year vs. an estimated $50 trillion in projected liabilities from Social Security and Medicare doesn't really change the government's long-term budget trajectory.