Economics and the Campaign

Near term developments in Afghanistan and Iran are the key to the security of this country, eclipsing all else. Recent domestic events however have trumped this concern in the collective mind of Americans. So be it. Thus the change in the landscape of Wall St triggers a change in the landscape of the campaign, sculpted for the duration by the scythes of the sub-prime crisis.

The economy is not easy for anyone. "Ex-spurts" abound, all chattering away but of course - after the fact. Some economists understand the economy but very few can close the pattern successfully, that is, predict. McCain admitted that he had trouble fathoming these events. We applaud his candor.

The DNC welcomed the sub prime crisis just as the RNC will welcome buoyancy (if that may be the result of the current rescue effort). For weeks Obama has tried to keep voters focused on the economy betting this was his best chance to pull away. Until yesterday at least, one saw nothing but smiles on the faces of short sellers, vulture buyers and Democratic strategists.

It is true that Obama easily evokes race, changes his mind weekly, often sounds like he is lost and is the world’s foremost gaffe machine. It is also true that he has past associations with shady characters. None of this matters now. For the balance of the campaign it is the economic "crisis". However, Obama’s strength is not crisis management. His instinct is to equivocate and temporize. He is not the strong, virile male figure of say a Hank Paulson; he is not a commander as is McCain.

Nor does his leftist background spawn confidence. As David Frum of the AEI reminds us, "Obama is a classic big-city welfare-state politician. He has lots of ideas about how to share wealth created by others - but very few about how to ensure that wealth is created in the first place."

Thus although the DNC was gifted by the failure of Wall St’s instruments-of-the-cosmos, Obama lacks the skills, the instinct to capitalize on what could have been a bonanza. And key to this failure is his vulnerability. For example, in attributing the sub-prime situation to "Bush-McCain" policies Obama conveniently omits the fact that the key policy change underlying the whole breakdown is one he endorsed enthusiastically - the use of public loan guarantees to stimulate private home construction. As Frum again illustrates, "As a state legislator, Obama famously championed ‘public-private partnerships’ to renovate slum housing. Thus he advocated the same approach that just stuck the American taxpayer with liability with tens or hundreds of billions of dollars of Fannie/Freddie obligations."

McCain for his part must stop with the "greed" bit (there is nothing in the Constitution, nothing on state or national books which makes greed unconstitutional or illegal). Issues of judicial activism, earmarks, energy, education, health care, even national security, all key yes but now to play the cameo role. Tell ‘em what he knows and as before don’t fret party affiliation - the fat Fannie & Freddie, the Democrat’s encouragement of reckless activity through these two conduits and the payback, principally through the person of Barney Frank; the near incestuous relationship between regulator and regulated (Fed / Street). For the near term endorse Democrat Paul Volker’s RTC idea - massive government intervention, yes, but it worked before; take a crash course in credit flows and explain that to the masses. Make it easy, make is simple; we are not launching a satellite for goodness sake (and by the way, fire Phil Gramm). The landscape may be changing too fast for more specific proposals this week or next. Fine, capitalize on that - first the main structure, later the accent.

And McCain - recall and then highlight to your listeners the maxim, for us a golden rule - complexity remains, still, the very last refuge of the scoundrel.

Robert Craven