Tuesday, September 30, 2008

A history lesson

. . . from the great Thomas Sowell.

If we had a serious press in this country, average citizens would already know this stuff.

Monday, September 29, 2008

I blame Pelosi . . .

for the failure of the mortgage bailout bill to pass the House. Since the crisis began, Republican leaders outside the House -- the President, Secretary Paulson, and John McCain -- went to considerable lengths to avoid partisan finger-pointing. Their emphasis was on the need to work quickly and in a bipartisan fashion to rescue a financial system teetering on disaster. Even House Republicans, who largely opposed the Paulson plan, generally focused their criticisms on whether the plan was really the best option and not on the role of the Democratic leaders in creating the crisis.

The same cannot be said of Nancy Pelosi. Just before the House vote, she took the floor to blast the Bush administration and "Republican policies" for creating the financial crisis. And that would have been fine -- disgraceful, but fine -- except for one thing: Pelosi was counting on Republican votes to get the bill passed. In fact, she reportedly has been angling for 100 Republican votes since the negotiations have been underway. Her own caucus split about 60-40% in favor of the bill. Accordingly, she needed the support of about 40% of the Republicans in order to pass it. Evidently, it failed to occur to her that blaming the Republicans for the crisis would make them less inclined to support it.

Perhaps, she wanted to try to have it both ways. If the bailout worked, she and the Dems would have taken the credit for averting disaster. If it didn't work, or if the cost of the bailout proved too onerous, she would already be on record as pawning the entire problem off on the Republicans. In other words, as far as she was concerned, there wasn't going to be anything bipartisan about it. She wanted the Republican votes, but wasn't going to share any of the credit if it worked out or assume any of the blame if it didn't.

I'm not much for bumper-sticker political cliches, but this really is an example of how "Washington is broken."

Is Obama Reagan?

Things aren't exactly looking up for John McCain right now. He seems to be trailing Barack Obama by somewhere in the 5-10 percentage points range. More disturbing than just the numbers, the mainstream media has succeeded in painting Obama as the winner of Friday's debate, a conclusion I, as an actual viewer of the debate, find difficult to accept, but which non-viewers may find significant.

If I had to guess what's behind the Obama's strengthening numbers, I would say it's his success in presenting an image of himself that is cool-headed, moderate, and completely non-threatening. If it's true that many voters are only now starting to really focus on the candidates, then what those voters are currently seeing in Obama is nothing like the tax-raising, terrorist-befriending, infanticide-supporting, enemy-appeasing extremist they were expecting to see based on the campaign to date.

The situation reminds me of 1980. The conventional wisdom that year held that Ronald Reagan was a dangerous extremist who would set off WWIII and set back domestic social progress a hundred years. To the mainstream media, it was utterly unimaginable Reagan could actually become president of the United States.

What happened, of course, is that Reagan succeeded -- especially in the debates -- in presenting himself to the American people as a credible, non-threatening candidate, practically the opposite of the what the media and Jimmy Carter had been portraying. Once the "true" Reagan image began to take hold, moreover, there was nothing Carter could do to stop it. The more Carter protested that Reagan would destroy America, the more desperate he sounded, and the more reasonable and level-headed Reagan appeared by comparison.

I hate to say it, but John McCain may be in the same box as Carter was in 1980. If a majority of voters has now reached a comfort level with the prospect of Barack Obama as POTUS, it may be difficult with only 5 weeks to go to re-instill doubts about him in a way that doesn't undermine McCain's own credibility. I'm at a loss to figure out what McCain's strategy should be at this point. Fortunately, McCain is a smart guy with a lot of smart people working for him. Perhaps the path to victory is clearer in their eyes than it is to mine.

Of course, McCain has one thing going for him that Carter didn't. Unlike McCain, Carter should never have been allowed to get within 1,000 miles of the Oval Office. McCain is a credible and deserving choice for president even if you don't think Obama would be a complete disaster. That's not something you could say about Jimmy Carter in 1980.

Another way in which the analogy to 1980 fails is the fact that Reagan never tried to hide the fact that he was a conservative "true believer." To the contrary, he was running explicitly against the twin pillars of 1970s liberalism: (a) the notion that America's economic and social well-being depended on higher taxes and bigger government; and (b) the notion that the world had become too dangerous a place for the U.S. to exhibit a strong military and foreign policy.

Obama, by contrast, is not explicitly running as a liberal true believer. While he would undoubtedly pursue a liberal agenda if elected, it is not on that basis that he is seeking to win votes. Mainly, he's running on the symbolic strength of his youth and racial background. I don't think a lot of his supporters give a damn about his qualifications or positions on issues; they just think it would be cool to have a hip black guy who can give a good speech as president. They like him for the same visceral reasons they hate Bush.

Because Obama isn't running on ideology, I think the Dems may get in trouble if they treat his election as an indication that America has suddenly become much more liberal. Whether anyone in the Democratic party has the judgment and maturity to avoid that pitfall remains to be seen.

Friday, September 26, 2008

My debate scorecard

It's not quite over yet, but I wanted to render a judgment not influenced by the cable commentariat.

No knockout, but I score it a solid win for McCain on points. He is winning nearly every exchange by outshining Obama on experience and depth of knowledge. He also has done a good job, despite the format, of communicating a theme: Obama's naivete and inability to "understand" certain things.

It's also apparent that Obama came into the debate hoping to provoke some kind of intemperate remark from McCain. He didn't succeed in that, nor in zinging McCain with any tough barbs.

Beyond that, Obama's objective seems to be simply to establish his credibility as a potential commander in chief. I think he's succeeded in appearing presidential, so it was a good night for him in that sense. But I think his supporters are going to wonder why he was unable to lay a glove on McCain.

From a purely debate standpoint, Obama erred in failing to get McCain to explain his initial decision to support the war in Iraq. McCain ducked that issue by pointing out that the next president would have to deal with getting troops out of Iraq, not in. But then later he went back and recited his judgment in dealing with military deployment issues in Beirut, Somalia, Bosnia, Kosovo, and other trouble spots. If McCain can cite his judgment in all those other instances, why shouldn't he have been forced to answer for the 2003 Iraq war vote?

Another example: McCain on several occasions went out of his way to separate himself from the Bush administration. Obama, however, didn't do much to tie McCain to Bush in the first instance.

I also think Jim Lehrer was a winner tonight. There were no "gotcha" questions, no attempts to steal the show. He pretty much teed up subjects and let the candidates talk about them. It's a refreshing and logical approach.

Not Obama's finest hour

On September 24, Barack Obama joined John McCain in issuing the following high-minded statement concerning the nation's financial crisis:

The American people are facing a moment of economic crisis. No matter how
this began, we all have a responsibility to work through it and restore
confidence in our economy. The jobs, savings, and prosperity of the American
people are at stake.

Now is a time to come together -- Democrats and Republicans -- in a spirit
of cooperation for the sake of the American people.

The plan that has been submitted to Congress by the Bush Administration
is flawed, but the effort to protect the American economy must not fail.

This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe. Now is our chance to come together to prove that Washington is once again capable of leading this country.

It only took 24 hours for Barack Obama to use John McCain's efforts to "work through it and restore confidence in our economy" as a bludgeon with which to launch a political attack.

It's plain to see that Obama never viewed the effort to rescue the financial markets as anything but a political problem for his campaign. Had the negotiations gone quickly and easily, he would have dismissed McCain's involvement as a "photo op designed to distract from his faltering presidential campaign." Now that the negotiations are proving difficult (if that's possible to say after just one contentious meeting), Obama is blaming McCain for somehow causing an impasse.

The media will largely repeat Obama's talking points on this unless and until events force them to present a different account. Nevertheless, it should be recalled that McCain never said this was going to be easy. To the contrary, the entire premise of his decision to suspend the campaign, delay the debate, and return to Washington was that there was no consensus on the Paulson plan and that there was tough -- and urgent -- work needed in order to resolve the crisis. What part of that didn't Obama understand?

Nothing better illustrates Obama's craven duplicity during this episode than his suggestion after yesterday's White House meeting that it would have been better for the presidential candidates not to have intruded on the ongoing negotiations because "the cameras change things." If that's what he truly believed, then why did he show up in the first place? He should have stayed out on the campaign trail if he thought his presence would only impede progress in finding a solution. But then, of course, he would have risked not being able to share in any of the credit if and when an agreement was reached. Instead, he and his handlers devised a strategy whereby Obama would go along for the ride so long as things appeared to moving in a positive direction, but would be prepared to bail out and turn on John McCain at the first sign of trouble. That's not exactly a profile in courage. Then again, we shouldn't be surprised. This is the same guy who voted "present" 130 times in the Illinois state legislature.

Sadly, Obama could actually win this election. If he does, America will be saddled with a president devoid of even a minimal capacity to lead. Indeed, when has he ever taken a tough stand on something and stuck to it? Being president requires more than simply being black and having the ability to read speeches from a teleprompter. It takes some guts. Obama hasn't exhibited the strength of character to be an effective senator, let alone chief executive and commander in chief in a time of war.

Wednesday, September 24, 2008

McCain suspends McCampaign

My first reaction on hearing this news was that it would be dismissed as a political stunt. On second thought, that might be an overly cynical view.

The fact is, it really makes little sense for the whole political establishment, the media, and the public at large to be focusing on a foreign policy debate at a time when serious decisions need to be made regarding the health of the economy. The public interest would be better served by taking the election campaigns off the agenda for a few days while lawmakers decide what to do. Therefore, putting aside the political ramifications, McCain's announcement makes a great deal of sense.

Because the idea of suspending the campaign has obvious civic merit, I don't think it will be all that easy to dismiss the move as a political stunt. That's especially true if Big Mac can actually insinuate himself into the middle of the negotiations and help midwife a deal to resolve the crisis. In that case, it will appear that it was necessary for him to get off the campaign trail in order to attend to more important work in Washington. If he does that, and the resulting plan appears to resolve the immediate crisis, he's going to come out way ahead on this.

Arguably, McCain's fortunes depend entirely on whether he can "reach across the aisle" and help put together a package to defuse the crisis. As I said, if he does that, then suspending the campaign will obviously appear to be a wise move. If he can't -- either because no deal is forthcoming or his involvement in producing it appears superfluous -- then suspending the campaign may look like needless grandstanding.

What I think I know about the mortgage mess

Actually, everything I think I know about the mortgage mess may turn out to be wrong. But here, for the record, is my take on the alleged crisis and its political impact.

First, there seems to be something approaching consensus-level agreement as to what went wrong. After the tech bubble exploded, the housing market was, by far, the best thing going in the economy. Washington policymakers decided to ride the housing boom as far as it would take them. The Fed encouraged massive mortgage lending by making money so cheap. The Democrats pursued policies that would enable people (minorities in particular) to qualify for mortgages they couldn't really afford, even as Republicans in Congress sought to rein in such dangerous practices. The Bush Administration failed to take aggressive action to stop the mortgage madness, while continuing to claim success for uninterrupted economic growth and increases in the percentage of the population that owned their own homes. Meanwhile, as Wall Street's portfolio of risky loans became ever more bloated, a bursting of the housing bubble threatened to bring down the entire credit industry.

While even this simplified version of events is probably beyond the ken of the average voter, at least there does not appear to be in currency a competing explanation for the current crisis. The average voter, I believe, will appreciate that the root cause of the crisis was too many bad loans.

The average voter will also perceive (correctly) that there is plenty of blame to go around. This was a problem of "greed" on the part of lenders, stupidity on the part of borrowers, and incredible shortsightedness on the part of the government. The Bush Administration will naturally take the lion's share of the blame for the government's role, but voters won't let Congressional Democrats off the hook and won't necessarily tag John McCain for the administration's failures.

As for the proposed solution -- using $700+ billion in taxpayer dollars to take the bad loans off the hands of the banks that now own them -- I don't think voters are going to feel confident one way or the other as to whether this is the right thing to do. On the one hand, the guys at the top (Bernanke and Paulson) seem genuinely convinced that this is the only way to head off a full-scale economic disaster. One the other hand, voters can't help but be skeptical of the forecasting skills of these men, who arguably should have seen this day coming a long time ago. Meanwhile, since the proposed bailout doesn't have any obvious partisan dimension, most members of Congress are at a complete loss in trying to figure out what to do. The best voters can do is pray that Washington guesses right on the bailout.

Although it will take a long time for the dust to settle, I do think Barack Obama has already made a big mistake in all of this. While he essentially supports the massive bailout, he is at the same time insisting that it be expanded in some way to give relief to homeowners facing foreclosure. I think he is badly misreading public sentiment. The vast majority of voters aren't facing foreclosure, and the reservoir of sympathy for those who are is running low. People who got in over their heads are perceived to share a great deal of the blame for this crisis. The average citizen is worried about how much this bailout will cost and whether it will even work to head off a major recession. The last thing they want to hear is how they now need to bail out low- or middle-income borrowers who had no business buying half-million-dollar homes.

The public reluctantly supports the bailout plan because it may be the only hope of saving the economy. There is no comparable necessity for bailing out individual homeowners having trouble paying their mortgages. Voters who understand this will not appreciate Obama's attempt to condition a bailout of Wall Street on a bailout of Main Street. For those doing the bailing, one bailout is quite enough, thank you.

I think Obama's position also undercuts his credibility with voters in at least a couple of ways. First, the average American understands that the people who are at risk of foreclosure are disproportionately black or Hispanic. According to recent polling, Obama needs to connect better with working class whites, some of whom evidently fear that a black president would be biased in favor of policies that favor minorities. Even ignoring Obama's own race, the fact that he built his career as an advocate for low-income blacks lends support for the view that he would favor minority-friendly policies as president. Obama's desire to include a bailout of borrowers now facing foreclosure only reinforces such concerns.

Obama's position also subtly undermines his image as a different kind of politician from the hacks that ordinarily run Washington. In trying to include "Main Street" in the massive bailout, he is implicitly treating the plan as a pork bill rather than the desperate rescue operation its advocates are claiming. Perhaps the plan is just another D.C. boondoggle. But in that case, Obama should oppose it, not simply try to get his own hand in the cookie jar.

Obama was correct, I think, to tie his support of the measure to restrictions on executive compensation. Although Congress needs to figure out a way to deal with that issue more comprehensively, I see no reason not to start to reform the system right now, when taxpayer's dollars are hanging in the balance. The idea that CEOs are being paid market value for their services sounds good, but assumes that executive compensation is really driven by competitive market forces. I think excessive executive compensation is the result of tacit price-fixing in the executive suite. After all, it's the guys in the boardrooms who are actually doling out the money, and they're doling it out to other corporate bigwigs. They all expect to cash in, and so they all have an incentive to keep executive compensation at absurdly high levels, without any real regard for the economic contributions of the people making the dough. It's the classic case of the wolves guarding the sheep, and conservatives would do well to recognize it rather than assume this is just the "invisible hand" at work.