Our guest blogger is Jared Bernstein, the Director of the Living Standards program at the Economic Policy Institute and author of the book “Crunch: Why Do I Feel So Squeezed?“

John McCain spent the day doing something you’d rather not do when you’re running for president in the midst of an economic downturn: trying hard to distance himself from his top economic advisor, former Texas Senator Phil Gramm.

McCain had no choice. In one of a series of deeply dissonant gaffes from the McCain squad this week, Gramm argued that the only recession out there was in people’s heads (“this is a mental recession”) and that everyone should just stop whining. We’ve lost jobs for six months in a row (down over 400,000), paychecks are getting whacked by rising unemployment and soaring gas prices, the federal government is contemplating a takeover of Fannie and Freddie, as financial markets carve out new lows everyday, and this guy — not just any guy, but the top economist for the Republican candidate for president — tells us it’s all in our heads.

The thing is, I find all of this quite reassuring. I know Phil Gramm is a huge economic danger zone, so when he reveals his true colors to the point where McCain has to disavow him, it’s a good day. What scares me is when he’s quiet. It’s in the dead of night, under the cover of deregulatory darkness, where Gramm has successfully struck his most damaging blows.

Driven by that lethal combination of ideological market fundamentalism, or, if you prefer, YOYO economics (“you’re on your own), and the desire to help rich friends in the banking industry, Gramm crafted legislation that helped get us where we are today. Most notably, in 1999, he sponsored the Gramm-Leach-Bliley Act, which essentially took down the regulatory walls between commercial and non-commercial lenders (the latter being investment banks like Bear Stearns or mortgage brokers like Countrywide, to pull a few names out of the air). Read more

Our guest blogger is James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. A former executive director of the Joint Economic Committee, Galbraith teaches at The University of Texas at Austin.

Phil Gramm is not John McCain’s pastor. He’s his closest economic adviser, and according to many reports practically the designated Secretary of the Treasury in a McCain administration. John McCain believes Phil Gramm to be a great economist. To the extent that John McCain has economic ideas, he gets them from Phil Gramm. Or did, until yesterday. So it is perhaps worthwhile to ask, what kind of economist is Phil Gramm?

The public record is clear, and I summarized it a few months ago for The Washington Post: “Phil Gramm’s career was the most aggressive advocate of every predatory and rapacious element that the financial sector has. He’s a sorcerer’s apprentice of instability and disaster in the financial system.” (It is worth noting that when the Post asked Gramm about this, he denied it.)

Back in 1995, when Phil Gramm was politically invincible in Texas, various so-called friends suggested that I should be the sacrificial lamb to run against him. I ducked, as any sensible person would have. But (at their request) I did supply the Dallas Morning News with a referee report on Gramm’s dissertation, along with a few notes on that of his wife. Needless to say, hers was much better.

To inject a note of academic sobriety into this election campaign, my review follows. Read more