Archive for October 7th, 2008

The Economy and the Election

This year’s election campaign is historic.  Unfortunately, it’s also taking place as the US experiences an historic economic meltdown, one which may produce real, lasting pain for average Americans.  One would hope that, if our political system is healthy, the two candidates would have a spirited and intense discussion about the economy and the steps which should be taken.  Alas, that doesn’t seem likely to happen.

Senator McCain has stated bluntly that the election has to be made about Barack Obama and NOT the economy.  Sarah Palin has accused Obama of “palling with terrorists” because of a minor political association in Chicago with a man who was involved in domestic terror when Obama was eight years old.  Beyond that Palin has brought up the rhetoric of Rev. Jeremiah Wright, a pastor at Obama’s former church.  Months ago McCain said that Wright’s often abrasive rhetoric should not be used against Obama.   Apparently that was before the polls went south on McCain. “If we talk about the economy we lose,” McCain claims, so they have to move towards hurling as much dirt at Obama as possible.

It is, to be sure, a rational strategy if the idea is that winning is the goal, and one must do whatever necessary to win.  Obama’s opened up a large lead in the national polls, and is winning in virtually all the battleground states.  If the election were held today, it would be an electoral landslide with Obama gaining upwards of 350 electoral votes and over 50% of the popular vote.  The polls are remarkably stable right now, and over the last week and a half Obama seems to have been improving and solidifying his lead.  Ahead of McCain by a margin of 2 to 1 in terms of cash on hand, it’s hard to imagine a McCain comeback.

Obama, to be sure, has also gone negative.  He has brought up the Keating five scandal of the eighties, a scandal which found McCain to have real, but minimal involvement.   It’s clear Obama is bringing this up as a tit for tat response to Palin’s comments about ‘palling with terrorists.’  The Obama camp has learned the lesson that you can’t allow an opponent to go negative without being countered.  The idea here is that if mud is flying on both sides, the public will tune it out, and nobody will be helped.   In this case two other things work in Obama’s favor.  First, old scandals usually don’t come back once put aside, and McCain is trying to recessitate slams on Obama that didn’t work during the primary season.  Second, while this is also true for McCain, the Keating scandal is about the Savings and Loan failure, which speaks to the kind of issues being talked about with the financial breakdown.  For most Americans, this is more likely to mean something than old guilt by association claims.

Also, Sarah Palin’s “palling with terrorists” comment is red meat stuff for the convinced Republican base.  But that kind of talk turns off independents and undecideds as it not only is over the top, but bound to be refuted by media reports that show the comment to be blatantly untrue.   Minor political contact with one former domestic terrorist is singular and not plural, and not “palling around.”

Finally, if they want to really go after Obama they’re doing it in the wrong order.  They need to make the argument that he is “radically liberal” about politics first, and then add the “strangeness factor.”  And, though Obama is vulnerable on the “strangeness” issue (is he really one of us?), the fact he’s gotten this far and has won so much support suggests that he’s probably overcome those concerns for most people.  Moreover, McCain’s handling of the economic crisis — suspending his campaign, vowing not to debate until the issue is “solved,” and then debating anyway — lends him susceptible to the Obama charge that he was erratic in a crisis.  That plays to McCain’s vulnerabilities — he’s old, a gambler, goes from the gut, and may over-react.

So the next month is probably going to be ugly.  The two sides will hit each other hard.   The controversial bailout will not be seriously discussed.  Both voted for it, and so each has incentive to avoid the tough questions being posed by those who think the bailout either economically reckless or morally wrong.  That’s a shame.  I have been reading blogs and other commentary which shows that a lot of thoughtful people have real concerns about the way the bailout was crafted and decided.  Their concerns will not be addressed, only adding to the sense that the political leaders don’t care much about what the public really thinks.

But even if we accept that, the fact the stock market Monday dropped 800 points (and then leaped up to end down only a little over 300), with global markets down considerably shows that the bailout was not a fix.  Some people seemed to think that once the government did something, then credit markets would shore up, and this would only be an expensive fix.  Things would go back to business as usual, only we’d have a debt of $11 trillion rather than $10 trillion.  That’s obviously not the case.

The bailout was a desire to do something to try to stem a credit crisis that the experts still don’t fully understand.  The scope is deep, and global bailouts may not be enough — and could do more harm than good.   It would be fantastic if the two candidates would have an true debate about the nature of this crisis, and what should be done.  Yet they can’t.  Obama simply blames “Republican economic philosophy” and “deregulation” as causing the mess, while McCain talks about the “greed on Wall Street.”   We need real discussion; we get slogans.

Both parties share the blame, both were blindsided by this.  There probably wasn’t enough regulation, and both sides can point to warnings they made in the past.  The fact is that this is a bi-partisan economic crisis, caused in part because we still don’t know how to handle credit markets in an era of globalization.

In one of her last articles, “The Westfailure System,”  pre-eminent political scientist Susan Strange argued that there were three crises the global political economy was unable to handle, one of them being global credit markets.  Credit excess is to blame for numerous panics and depressions over the years; when speculation is fueled by cheap credit, whether buying stocks on the margins in 1929 to subprime mortgages in 2007, it usually is a sign of danger.  The creative way credit markets were handled, with financial games perfected over decades from the time of the stock bubble to the property bubble, all while debt was growing across the globe in public and private sectors, has created an unprecedented level of danger and uncertainty for the world economy.   We should be worried, especially since there are other wildcards out there like oil, terrorism and global warming.

This should be the big issue, the candidates should be seriously engaging in, focusing on substance over the horse race.  Alas, that’s not going to happen.

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