Wednesday, September 17, 2008

Playing To & Against Type: Economics and Elites

John McCain and the Republicans have two problems when they address the meltdown on Wall Street, and both of those problems will now be with them through the end of the campaign. Fortunately for them, the Democrats have an uncanny ability to lose an election that should be a walk in the park.

The first problem for the GOP is that they have to play against type and defend it. Republicans are the party of big business, the party of entrepreneurs, the party of businessmen and businesswomen, the Chamber of Commerce party. Except when they’re not. And, yesterday, the Bush administration agreed to nationalizing AIG, the biggest insurance company in America. That’s right. The government bought it and now runs it.

I don’t remember when was the last time I heard someone advocate nationalization of an industry, although anyone who has flown on the government-run airlines of Europe, Air France, Lufthansa and the rest, should know better than to dismiss the idea out of hand. As discussed yesterday, we live in an age that has celebrated the free market’s triumph over the planned economies of former communist states and seen that triumph in eschatological terms: Francis Fukyama’s famous book was called “The End of History” not “Capitalism is Better.” Nationalization was the kind of suggestion that you would expect from Dennis Kucinich, not from the Bush Administration.

Which leads to the second problem the GOP has, and this may prove even more intractable for them. For the next seven weeks, they have to speak about the economy, but all their applause lines are useless. At the GOP convention, McCain promised to get government out of the way and everyone stood and cheered. In that same speech, McCain inaccurately said Obama wants “government-run health care” but now that charge is not only inaccurate but it would sound ridiculous when the government is taking a much more activist posture than anything Obama has suggested. In March, McCain told the Wall Street Journal “I’m always for less regulation,” the kind of sentiment that warms the entrepreneurial hearts, but he has suddenly had to become the champion of more regulation this week.

You would think that the Democrats would know enough to just get out of the way and let the internal contradictions of the GOP’s position take hold in the imagination of the American voter. Instead, there was Obama, playing to type, flying to Hollywood for a star-studded fundraiser that was a caricature of elitism right down to having Barbra Streisand singing. This is how it is done in Hollywood. David Geffen and his pals get together and they go through their rolodex and they raise a lot of money, but they expect the candidate or the cause to pay them homage and attend an event where they can all look fabulous. I’m guessing Babs sang “Send in the Clowns”!

Obama should have been smart enough to send his regrets. The Hollywood folk still would have raised the money. But, on a day when Americans are worried about their finances, attending a glitzy fundraiser that netted $9 million was not the way for Obama to show his down-to-earth credentials. Obama gave away some of his advantage by appearing as out-of-touch personally and the GOP has become fiscally. He partially made up for it, however, with a new ad that was released this morning. Campaigns don't usually take out two minute ads at this stage of the campaign, but this is the best ad he has run all year.

Michael Sean Winters


Jim Belna said...

John McCain, May 25, 2005, addressing the US Senate:

"Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal. . . .I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole. I urge my colleagues to support swift action on this GSE reform legislation."

The bill was killed in committee (by both Democrats and Republicans); Senator Obama was not on the committee, so we won't hold that against him. I will note, however, that the immediate past chairmen of Fannie Mae that were responsible for the accounting scandal, not to mention the eventual failure of Fannie Mae itself - James Johnson(1991-1998) and Franklin Raines (1998-2004) - are both on Obama's staff as economic advisors.

Tom Martis said...

In relation to the idea of proposed federal bailouts, they may be necessary for the sake of preserving our economy and staving off another Great Depression. However, such bailouts create a federalized economy bordering on socialism, which is contradictory to our free market economy. The government is mortgaging the future of generations of taxpayers in order to counteract the greed of politicians and Wall Street, which resulted in the contamination of the markets due to the bundling of mortgage backed securities that resulted from mortgage loans to unqualified buyers who had no means to repay them. As such, these fundamentals created an environment where many executives got rich and many politicians benefited from the existence of these unscrupulous companies.

In order to preserve our entrepreneurial way of life where risk can be greatly rewarded, the federal government should not be overly liberal in issuing bailouts. Such bailouts should only be issued to those companies that are truly vital to our economy. Knowing that sound companies will continue to succeed and flourish, the government must show restraint in issuing economic bailouts and should let corrupt companies fail. Taxpayers should not be called upon to rescue companies that fail due to their own poor management and operation.