By Dan McCue

The candidates and their political surrogates might be grabbing the headlines in the long march toward January’s South Carolina primaries, but behind the scenes, on both sides of the political divide, economists are already beginning to shape the business, trade and other significant fiscal policies of the next administration.

For instance, Sen. Barack Obama’s lead economist, Austan Goolsbee of the University of Chicago, has been helping the Illinois senator hone his stance that Democratic goals can be achieved through market-oriented policies.

Among the Republican candidates, meanwhile, former New York City Mayor Rudy Giuliani is getting economic policy advice from David Malpass, chief economist at Bear, Stearns & Co. Inc., the global investment bank and brokerage firm, while Arizona Sen. John McCain has been tapping the expertise of John Silvia, chief economist for Wachovia Corp.

The individual candidates’ policies diverge, of course, when it comes to issues of interest to the local business community—issues that range from making affordable health insurance available to small employers to stimulating the growth of an innovation-based economy in the Lowcountry.

All of the economists suggest that when it comes to capturing the voters’ support on Election Day, Bill Clinton’s campaign strategists had it right in 1992—“It’s the economy, stupid.”

And if a candidate wants to stand out, he or she had better convince the voter of his or her soundness on a wide range of bread-and-butter issues.

McCain’s man in North Carolina
Silvia, Wachovia’s chief economist since 2002, previously worked on Capitol Hill as senior economist for the U.S. Congress Joint Economic Committee and chief economist for the U.S. Senate Committee on Banking, Housing and Urban Affairs. That makes him somewhat unique in the world of economists who run in political circles—he’s seen the nexus of business and policy from both the public and the private perspective. 

“I’ve always believed in the importance of education,” said Silvia, who holds degrees from Northeastern and Brown universities. “But I also always felt that if you want to be a really good economist, you had to work in the public sector.

“If you don’t, then you don’t understand how decisions are made.”

One of the first things he learned in Washington, the economist said, is that a handful of senators on the important committees are the real drivers of decision making. The other thing he learned is that there are no easy answers when it comes to policy making.

“You can see that now with ethanol,” he said. “There’s this huge push behind alternative energies, and as a result, corn prices are going up and that’s affecting the price of a whole range of products. As an economist working on the Hill, it was very important to understand all these unanticipated consequences of seemingly simple policy decisions.”

It was also during Silvia’s tenure in Washington that McCain initially caught his attention. It was the Arizona senator’s calls to rein in federal expenses that most impressed him.

Silvia also came to know Douglas Holtz-Eakin, who was then the head of the Congressional Budget Office and is now McCain’s director of economic policy. Holtz-Eakin brought Silvia into McCain’s current campaign fold.

Silvia said the role he plays in the campaign is fairly simple. He’s the person the campaign turns to for a sounding on what the private sector is thinking.

“Essentially that’s the classic question, ‘How is this situation playing in the private sector?’ Or if something breaks, a major story develops that has an economic angle, they might call and ask how the story is being perceived and responded to by the private sector.”